Recovery Act Fraud
The American Recovery and Reinvestment Act of 2009, signed into law by President Barack Obama on February 17, 2009, provided an unprecedented $787 billion federal spending package intended to stimulate the flagging U.S. economy. Congress included important provisions in the bill to ensure oversight and accountability of the package’s $499 billion in spending and disbursement of American tax dollars. Introduced by Senator Claire McCaskill (D-MO), Section 1553 of the Act (the “McCaskill amendment”) provides extensive whistleblower protections to ensure that the employees of private contractors and state and local governments that receive stimulus funds are free to report fraud, waste and other violations of the Act without fear of reprisal.
A. Who Is Covered?
The purpose of the McCaskill amendment is to protect employees who do the right thing by exposing corruption and speaking up about fraud, waste, and the abuse of stimulus funds. Covered employers are non-Federal employers such as private contractors and state and local governments that receive grants, contracts, or other funds made available or appropriated by the Act. Protected employees are any workers who perform services on behalf of covered employers. Unfortunately, whistleblower protections for federal employees and members of the armed services are not covered under the Act.
B. What Activity Is Protected Against Retaliation?
Unlike whistleblower laws that concentrate primarily on complaints of fraud, such as the Sarbanes-Oxley Act and the False Claims Act, the McCaskill amendment includes protections that also address issues of mismanagement and waste. Under the amendment, covered employers may not retaliate against an employee who discloses information to: the Recovery Accountability and Transparency Board; an inspector general; the Comptroller General; a State or Federal regulatory or law enforcement agency; the head of a Federal agency, or their representatives; a court or grand jury; a person with supervisory authority over the employee (or person working for the employer who has the authority to investigate, discover, or terminate misconduct); or a member of Congress that the employee reasonably believes is evidence of:
- Gross mismanagement of an agency contract or grant relating to covered funds;
- Gross waste of covered funds;
- A substantial and specific danger to public health or safety related to the implementation or use of covered funds;
- An abuse of authority related to the implementation or use of covered funds; or
- A violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) or grant, awarded or issued relating to covered funds.
Protected disclosures also include “duty speech,” or disclosures made during the ordinary course of the employee’s job duties.
C. What Retaliation Is Prohibited?
Prohibited retaliation is very broadly defined under the McCaskill amendment, which states that potential whistleblowers cannot be terminated, demoted, or “otherwise discriminated against” by covered employers as reprisal for the employee’s protected disclosures.
D. How Does A Potential Whistleblower Prove Retaliation?
The burden of proof under the McCaskill amendment is quite favorable towards employees, and employees need only demonstrate that their disclosure was a “contributing factor” to their reprisal. The Amendment allows for the use of circumstantial evidence, including evidence that the official behind the reprisal knew about the employee’s disclosure or evidence that the reprisal occurred within such a timeframe after the disclosure that would lead a “reasonable person” to conclude that the disclosure was a “contributing factor” in the reprisal. In contrast, the employer has a higher burden of proof to avoid liability and must demonstrate “clear and convincing” evidence that they would have taken the same alleged reprisal action even if the employee had not made the disclosure.
E. What Are The Available Remedies Under The McCaskill Amendment?
If a potential whistleblower feels s/he has been retaliated against by their employer for making a disclosure protected under the McCaskill amendment, the employee must file a complaint with the appropriate inspector general. Employees may currently obtain whistleblower information and file a Recovery Act whistleblower complaint online through a dedicated federal government website. As written, the McCaskill amendment does not have a statute of limitations to file this complaint. Unless the inspector general determines that the complaint is frivolous, does not relate to covered funds, or another Federal or State judicial or administrative proceeding has previously been invoked to resolve such complaint, the inspector general will investigate the complaint and submit a report of the findings to the employee, the employer, the head of the appropriate agency, and the Recovery Accountability and Transparency Board no later than 180 days after receiving the complaint.
1. Agency Relief
No later than 30 days after receiving the report from the inspector general, the head of the appropriate agency shall determine whether the employer has subjected the complainant to prohibited retaliation. If there is sufficient basis to conclude that the employee did indeed suffer an unlawful reprisal, the agency head can award relief to the complainant that includes: reinstatement to their position with previous seniority and employment benefits, compensatory damages and back pay, and attorneys’ fees and litigation costs.
2. Civil Action
In the event that the agency head issues an order denying relief in whole or in part, or fails to issue a decision within 210 days of the filing of the complaint, the complainant shall be deemed to have “exhausted all administrative remedies.” As such, the complainant will then be allowed to bring a de novo action against the employer in federal court. Either party can request a jury trial, a protection that is not available to whistleblowers in many other contexts.
Under the McCaskill amendment, the rights and remedies provided by the amendment cannot be waived by any agreement, policy, or condition of employment. With the exception of arbitration provisions in collective bargaining agreements, pre-dispute arbitration agreements are neither valid nor enforceable for disputes arising under the McCaskill amendment.
F. How Does A Potential Whistleblower Decide Whether To Report Concerns About Improper Use Of Stimulus Funds?
Whether to report concerns about fraud, waste, abuse or other unlawful violations of theAmerican Recovery and Reinvestment Act of 2009 can be a very difficult decision for an employee, as blowing the whistle on an employer’s unlawful practices can be a career-ending move. However, the McCaskill amendment provides strong whistleblower protections, and employees who raise concerns can look to a number of resources for assistance. If you are blowing the whistle on misconduct, or if you have done so and are now experiencing reprisal, contact the experienced lawyers at Katz Banks Kumin for an evaluation of your case with no further obligation.
- View the federal government’s Recovery Act website
- A PDF of the full American Recovery and Reinvestment Act