On Friday, Judge Philip S. Figa of the Tenth U.S. District Court issued a harmful ruling (pdf) which, if upheld, will compromise the ability of government employees to file fraud-fighting False Claims Act lawsuits. Today's NY Times and Associated Press have both reported on this development.
Judge Figa’s ruling defies logic and makes a mockery of the Act which allows private citizens – including government employees -- to litigate on behalf of the government to collect fraud against the taxpayer. The ruling is especially damning given that a jury ruled in January that Kerr McGee, the defendant, had defrauded the government of $7.6 million, putting it on the hook for as much as $40 to $50 million including damages and penalties.
In 2003, the Tenth Circuit Court of Appeals issued an en banc ruling that government employees who discover fraud during the course of their job duties can file False Claims Act suits. As part of the process to gain standing, whistleblowers must voluntarily disclose the fraud to the government prior to filing suit.
Judge Figa’s ruling now says that any government employee who discloses the fraud to his or her supervisors does not have standing to file suit since these disclosures are involuntary and done as part of their job duties. Implied in the ruling is a discussion which suggests that if a government employee discloses the fraud to the Justice Department or a U.S. Attorney, but not to a supervisor, the employee would be able to gain standing to file suit.
The outcome of this ruling hinges on ridiculous technicalities which defy the spirit of the False Claims Act’s intent. This ruling is particularly insulting given the conclusive evidence that Kerr McGee bilked the taxpayers while a rogue Department of Interior turned a blind eye to the fraud. What remains to be seen is how the ruling will affect other False Claims Act lawsuits filed by Department of Interior auditors who are fed up with the agency’s failure to bill big oil companies for drilling on federal and Indian lands.
-- Beth Daley
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