Whistleblower Opponents: Money
Money pushes in different directions as a witness considers
whistleblowing. The potentially large,
although rare[1],
rewards obtainable in qui tam suits
under the False Claims Act and the Dodd-Frank Act and from disclosures of tax
fraud to the IRS are thought by some[2]
to encourage whistleblowing. In Europe,
rewards to whistleblowers are less common.
A UK whistleblowing charity recommended against rewards because, among
other reasons, they could undermine the moral stance of a genuine whistleblower
and could result in a negative portrayal of whistleblowers[3].
One study[4]
found that few qui tam plaintiffs
suing pharmaceutical companies considered the reward until it was mentioned by their
attorneys, who often lead with the prospect of awards. In a Google search of “whistleblower” “attorney”,
13 of the first 15 attorney sites referred on their first page to the
possibility of substantial awards for whistleblowers.
My attorney Jaffe,
whose site did not mention awards on its first page, brought up the possibility
of a qui tam suit during our first
meeting, but he did not press the issue.
HomeFirst’s missteps with federal funds were limited to the HUD
overbilling from years earlier and the master
leasing violation which was probably too small to warrant the legal effort
involved and which did not seem to bother the local HUD staff.
The most publicized whistleblower stories – about people
like Snowden,
Manning,
Cooper
(Worldcom), Watkins
(Enron), and more distantly Ellsberg
– do not cite hopes for financial rewards as a reason for initiating their
disclosures. While some writers refer to
a cost-benefit calculation made by the whistleblower[5],
the primary anticipated benefits are intangible rather than possible financial
rewards[6].
The prospect of a financial payoff can be tempting, however,
if only to keep a whistleblower in the game.
After I had initiated most of my whistleblowing at HomeFirst and the
board was planning my termination, I was pleased to read that an attorney had
recommended that board pay me close to $100,000 to go away. That possibility eventually evaporated, and
the much smaller amount HomeFirst offered failed to compensate, I thought, for
the non-disclosure requirements. The
possible monetary payout finally became, for me, an inconsequential
after-thought although HomeFirst claimed
that my motivation was the prospect of a rich retirement by suing HomeFirst.
For many whistleblowers, though, the prospect of a financial
award can encourage hope for eventual relief after a long and expensive fight. The fact or the prospect of losing one’s job
is terrible for most. Getting a fair job
reference from the accused company is unlikely, and other employers are reluctant
to hire someone who has misbehaved. As a
result, unemployment or underemployment can last years, resulting, for some, in
the loss of home and family[7]. The company’s deep pockets, augmented by
their insurance
coverage, and his own limited resources can cause the whistleblower to settle
for less than he deserves or to give up entirely[8].
Even if, as is increasingly done[9],
the whistleblower engages an attorney in exchange for a 30%-40% share of a
settlement – for example, my agreement
with Jaffe – he must still pay other costs for his case, things like mediation
and court costs, expert witnesses, and travel expenses. Once a contingency agreement is signed, he is
effectively bound to that attorney, who will retain a lien on any future
settlement, regardless of the perceived quality of the legal work.
Nondisclosure clauses in employment agreements
and in wrongful termination settlement agreements, such as the one HomeFirst proposed
to me, pose the threat of expensive legal action for the whistleblower if he
discusses the case or settlement. On the
surface, such a threat can seem reasonable because the whistleblower was paid in
exchange for his silence. But HomeFirst’s
proposed language, which my attorney assured me was commonplace, made clear
that it would be inclined to sue me if I said anything that it might consider
disparaging.
In the absence of nondisclosure agreements, companies may
still threaten legal action simply for filing lawsuits[10]. Although I refused HomeFirst’s offer, it threatened
me with legal action when I followed up with authorities concerning the violations
that I had alleged.
The whistleblower’s battle that begins on a high moral
ground slips in time. Each stage of his project
– the disclosure itself, the defense against illegal retaliation, and the
consequences of a settlement – involves risking the whistleblower’s financial
livelihood. Money becomes an opponent that
tempts him with the remote possibility of a large award that will make all the
pain worthwhile – an award that he thinks he deserves – or insults him with the
reality that he could use all of his resources and more in a losing battle.
[1] Eaglesham, Jean and Rachel Louise
Ensign. “Whistleblowers
Find SEC Rewards Slow and Scarce.”
The Wall Street Journal. May 25,
2015.
[3] Public Concern at Work. “Report on the
effectiveness of existing arrangements for workplace whistleblowing in the UK.”
November 2013.
[4] Kesselheim, Aaron
S., David M. Studdert and Michelle M. Mello. “Whistle-Blowers
Experiences in Fraud Litigation against Pharmaceutical Companies.” The New England Journal of Medicine. 362 (May 13, 2010): 1832-1839.
[5] Gino, Francesca, Shahr Ayal and Dan Ariely.
“Contagion and Differentiation in Unethical
Behavior: The Effect of One Bad Apple on the Barrel.” Association for Psychological Science. 20.3 (2009): 393-398
[6] Miceli, Marcia P.,
Janet P. Near, and Terry Morehead Dworkin. Whistle-blowing in Organizations. New
York: Rutledge. 2008 and Alford, C. Fred. Whistleblowers: Broken Lives and
Organizational Power.
Ithaca, NY: Cornell University. 2001
[7]
For example, Carozza, Dick. “Vindication at a High Price.”
Fraud Magazine. July/August 2015
and State of Washington Court of
Appeals. “In the Matter of the Marriage of Gillian
Ben-Artzi and Eric Ben-Artzi.”
August 10, 2015.
[8] For
example, Scott, Brandon. “Former
Jefferson County sheriff’s academy instructor drops whistleblower lawsuit.”
Beaumont enterprise. January 5, 2016.
[9] VanPuymbrouck, Darren and Joshua
Kurtzmann. “The
Rise of Alternative Fee Arrangements.” 28.1 Corporate Counsel (Fall 2013)
[10] Press, Eyal. Beautiful
Souls: Saying No, Breaking Ranks, and Heeding the Voice of Conscience in Dark
Times. New York: Farrar, Straus
and Giroux. 2012 and Salant, Jonathan D. “N.J.
lawmaker fuming after Sandy whistleblower told to leave FEMA contractor alone.”
NJ.com. May 16, 2016.
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