The Whistleblower Act

April 1, 2017

 Ben Graham was 25 years old, and thought he had hit the employment jackpot, having landed what he believed was a dream job as a legislative aide in the Michigan House of Representatives, for former Rep. Todd Courser (R-Lapeer). But that job soon turned out to be a nightmare, with Courser having an affair with fellow Rep. Cindy Gamrat (R-Allegan), with whom he shared an office and staff, and having asked his staff, including Graham, to create a rumor that he had had sex with a male prostitute in order to deflect attention from his affair with Gamrat. 

Graham, along with fellow staffer Keith Allard, confidentially went to House leadership, including then-Speaker of the House Kevin Cotter, to inform them of the affair and coverup. It soon appeared as if leadership turned on Graham and Allard, rather than Courser and Gamrat, in an effort to “protect their own.” 

“During the course of the investigation, they released my name, full address, Social Security number, full personnel file – it was released on the internet for 12 to 14 hours before they took it down,” Graham said. 

Eventually fired from their legislative positions, Graham and Allard filed a Whistleblower Protection Act (WPA) lawsuit and a wrongful termination suit against both the state House of Representatives, Cotter and Courser and Gamrat, along with lawsuits citing slander, libel and wrongful termination.

While they ended up dropping their lawsuits against the two former disgraced legislators, who eventually left the House (Courser, by resignation, and Gamrat, by expulsion), Graham and Allard prevailed against the state House in their whistleblower lawsuit, settling for $515,000, which they split between the two of them, less attorney fees.

“I'm pretty young to have gone through something so crazy,” Graham, who just turned 27, said. “It was unpleasant to say the least.”

Graham admits he was nervous, and pretty conflicted about filing a whistleblower lawsuit against his former bosses, much less against a legislative body, “because I'm conservative and I believe in limited government. But I also believe in the courts and tort reform. I don't believe in suing just to sue people all the time. I believe only in suing people when you have to. It shouldn't be taken lightly. I wanted to do the right thing. They were supposed to protect me, and instead they just left me out there. I just wanted to be protected from workplace harassment, and a situation where I shouldn't have to deal with politicians' affairs and coverups.”

“Whistleblowers tend to be morally principled individuals that are seeing wrong at their place of employment,” said Shereef Akeel, a Troy attorney with Akeel & Valentine, who has practiced whistleblower law for 21 years. “They see their family pictures on their desk and know that if they say nothing, they will keep their job and take care of their family. But they see the wrongdoing going on, and can't live with it, so they risk it all. They are constantly trying to balance the repercussions of blowing the whistle versus saying nothing and allowing the wrongs to continue. Then their conscience gets the better of them. Their silence is taut approval of the wrongdoing.”

The WPA of 1989 is a federal law that protects federal employees who work for the government and report misconduct. A federal agency violates the Whistleblower Protection Act if agency authorities take, or threaten to take, retaliatory action against an employee – or an applicant for a job – because of the disclosure of information that the employee or applicant made. In Michigan, the Whistleblower Protection Act is intended to protect employees, public and private, from wrongful termination or retaliation in a protected activity. Protected activities include those employees who have reported a violation of law, regulation or rule to a public body; employees who were about to report a violation; or employees who have participated in hearings, investigations, or legislative inquiries.

While a whistleblower does not have to work for the government or a government agency, and many whistleblowers do work for private companies, in order to file a whistleblower protection lawsuit, they must report the wrongdoing to a government agency, and not just to the human resources department of their company. 

“There's a misconception about WPA, and about working at a private company, like GM or Ford,” said Akeel. “If they report it to the HR department, they think they've blown the whistle and are protected – but they're not. You have to go outside the company to a public agency, like the EPA or DNR.”

Akeel said there is only one exception, which is called the Kilpatrick Rule, after former Detroit Mayor Kwame Kilpatrick. “If you are working for a city or university – if you're a public employee – if you report it up the chain of command, you're protected,” he said. 

In 2007, two former Detroit police officers, Gary Brown and Harold Nelthrope, prevailed in a whistleblower lawsuit against Kilpatrick and the city of Detroit, saying city officials made them suffer after they raised questions about alleged wrongdoing within Kilpatrick's security unit. The two were awarded $6.5 million.

Brown – who today is director for the Detroit Water and Sewerage Department, claimed he was fired in 2003 because he was looking into allegations into drunk driving accidents, falsified overtime records, and claims that two former mayoral bodyguards the mayor used helped facilitate and cover up extramarital affairs. Brown was awarded $3.6 million by a jury. 

In 2013, Kilpatrick was convicted of 24 federal felony counts and sentenced to 28 years in federal prison. Brown did not return phone calls to Downtown newsmagazine.

Steve Shaya was a contract employee for the city of Hamtramck – unlike Brown, who was a full -time employee – working as the director of public services. Shaya didn't like that certain police officers were moonlighting at local garages after work – against a city ordinance that forbid the subcontracting of city employees, especially without disclosure of their extracurricular work to city council. 

“The Hamtramck officers were assigned also to the DEA (Drug Enforcement Agency), and when there were busts, they were taking the seized vehicles and calling DA Auto Restoration Towing (in Hamtramck), where the rates were astronomical. They made money off this, their buddies were working there, and they were billing the city,” Shaya's attorney, Mark Koroi of Plymouth, said. He said Shaya and fellow whistleblower Cathie Graham, who was on the city council at the time, felt the officers should have disclosed the arrangement and that they were working there in their off hours. Since they didn't, Koroi said Shaya and Graham reported it to then-city manager William Cooper, who insisted it must stop due to conflict of interest concerns.

Koroi said he believes the officers did stop. And then Cooper was suddenly fired in March of 2012, after developing a strained relationship with council in the few months prior to his firing. Cooper accused the city of breach of contract and settled with them for $142,000.

But Shaya's travails were not over. “On November 15, 2013, my client was having lunch (at home in Hamtramck), and he goes back to work, and he gets contacted by the same officer he reported (for working at DA Auto),” Koroi said. “He said there's been a report of a hit and run – 'you hit somebody.' Essentially, my client went to the emergency manager and said, 'Look at my vehicle – there's no new damage. There's nothing there. It's BS.' It got turned over to the city manager, because supposedly there was a 911 call reporting it.”

Koroi said the 911 tape actually exonerated Shaya, because the information in the alleged 911 call was different in all ways – from the time of the incident, the supposed intersection, that the person in the hit and run was black (Shaya is Chaldean), and other inconsistencies, including that the caller said the vehicle was struck in the side of the vehicle, while the officer told Shaya the damage was to the hatchback.

“It had to be fabricated,” Koroi said, noting that the officer who called Shaya was caught on tape bent over laughing in the interrogation room. Charges against Shaya were eventually discharged, and Shaya filed a $10 million whistleblower lawsuit against the city of Hamtramck in February 2014. He was terminated from his job with Hamtramck on October 23, 2014, and the city settled with him on March 3, 2017. He is now employed with another Wayne County municipality as director of public services.

“With whistleblower protections, whether at the state or federal level, the purpose is to protect the integrity of the law by removing barriers to employee efforts to report violations of the law,” said Jason Shinn of Shinn Legal of Keego Harbor, who represents employers and individuals in whistleblower compliance. “In other words, whistleblower protections protect the public by protecting employees who report violations of laws and regulations.”

Graham, the state legislative whistleblower, is today a resident of Dryden in Lapeer County, with his wife and baby, and has his own construction company, having left the political arena, disillusioned. As a youth, Graham was homeschooled, and went to a small Baptist Bible college in Ohio, where he majored in public administration. “I got involved with politics at a young age. I would listen to talk radio in the afternoons,” he recalled. “At 16, I volunteered for my first campaign – for Dick DeVos for governor. After that, I got more and more involved in politics, and in 2008 I met Todd Courser and volunteered for his first race, which he lost.”

He went to college, and returned to Lapeer County, and worked on Courser's 2010 state Senate run, which he again lost, as well as a 2013 challenge for the state Republican Party chair, before Courser won his state House seat in 2014, which he also worked on. He admits there was something about Courser that drew him in.

“He has a captivating personality. He is very outgoing and very manipulative,” Graham noted. “I was taken in by his personality. I believed he was a politician who could affect real change, and he was somebody I could really support. And it turns out I was wrong about that.”

While Michigan does not have a central database to determine how many whistleblower lawsuits have been filed or determined in the state, federally there were 3,355 total whistleblower suits in 2016, up from 1,842 in 2006. The Occupational Safety and Health (OSHA) agency receives the most lawsuits each year, as it is the federal agency charged with the enforcement of safety and health legislation. “A key element of WPA is where it can can cause public harm or compromise safety,” Akeel noted, where a company or individual is not following or enforcing important rules, an employee reports it to the state or federal agency and is then fired for that, or suffers retaliation.

Of the number of whistleblower complaints in 2016, out of the 3,402 total cases, 63 were found to have merit, with 441 settled and 376 being settled or having another resolution. There were 712 cases withdrawn, 1,715 dismissed and 95 kicked out of court. In 2015, when there were 3,337 cases filed, 45 were found to have merit, and 485 were settled, with 313 having another positive resolution. There were 1,665 cases dismissed, 106 cases kicked out of court, and 723 withdrawn. 

“To establish a whistleblower claim under Michigan law, an individual must initially show that the individual was engaged in a protected activity, as defined by the WPA; the individual was discharged; and a causal connection existed between the protected activity and discharge,” Shinn explained. 

He said that protected activity under the WPA may consist of reporting to a public body a violation of a law, regulation or rule, or being about to report such a violation to a public body, or being asked by a public body to participate in an investigation.

“In our experience, an employee asserting the second type of claim – an 'about to report' claim – is often the most difficult to establish,” he said. “This is in part because the individual who with 'a clear and convincing evidence that he or she or a person acting on his or her behalf was about to report, verbally or in writing, a violation or suspected violation...to a public body.' Also, to assert a whistleblower claim under Michigan law, the violation or suspected violation must have already occurred or be ongoing. It is not legally enough for an employee to report some conduct or act that might occur. In other words, future, planned, or anticipated acts that would cause a violation or a suspected violation of law are not included.”

While there are a patchwork of numerous protective statutes under state and federal law, a main and comprehensive area of whistleblower law is the False Claims Act, also known as the Lincoln Law, a statute enacted in 1863 to fight widespread fraud when companies were selling rotten food and defective weapons to the Union Army in the Civil War. The False Claims Act imposes a liability on people and companies who defraud government programs. “It's for federal cases where the government has been defrauded, and (we) bring the case on behalf of the government as well as against the companies,” said Philip Brown, an attorney with Constantine Canon, a private New York and Washington D.C. law firm which evaluates claims and lawsuits on behalf of the Department of Justice, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), IRS, and other agencies. 

The law allows private citizens, who are legally known as relators, to bring a lawsuit on the government's behalf, and if the government prevails, they are rewarded with between 15 and 30 percent of the government's recovery. This kind of lawsuit is also referred to as qui tam, and was largely resuscitated in the 1980s, during the Reagan administration, when according to Constantine Canon, “there were widespread reports of shocking abuses by government contractors, including billing $400 for hammers, $1,000 for bolts, and $7,000 for coffee pots...In 2009 and 2010, the law was revised to provide greater protections and incentives for whistleblowers.” 

In fiscal year 2016 (ending September 30, 2016), the Justice Department recovered over $4.7 billion in settlements and judgements from false claims against the government. Of the $4.7 billion recovered, $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and doctors. Many of these cases, the Department of Justice stated, were Medicaid fraud cases from state programs, and experts estimated that up to 10 percent of all healthcare billings are lost to fraud.

State false claims acts in Michigan are limited to health care fraud. The Constantine Cannon law firm stated that the Michigan Medicaid False Claim Act applies to false claims presented under the state's social welfare act, and a successful whistleblower can receive between 15 and 25 percent of the proceeds in cases where the state intervenes; if the state doesn't intervene, a successful whistleblower can receive between 25 and 30 percent of the proceeds – unless the whistleblower was involved in the violation.

The next largest recoveries came from the financial industry, from the housing and mortgage fraud crisis, were the ripples are still being felt, with $1.7 billion being recovered in fiscal year 2016. Looking forward to fiscal year 2017, $48 million will have come from a settlement agreement on December 16, 2016, from United Shore Financial Services LLC of Troy, which agreed to pay the United States the amount to resolve allegations it violated the False Claims Act in a whistleblower suit, by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development (HUD) Federal Housing Administration (FHA), that did not meet applicable requirements. 

In announcing the settlement, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division, said, “The settlement holds United Shore accountable for its endorsement of ineligible loans for FHA mortgage insurance. Over the past several years, the civil division, in collaboration with numerous U.S. Attorneys' Offices, HUD, and its Office of Inspector General, has diligently worked to hold FHA-approved lenders accountable for actions that deprived homeowners of their homes, wasted taxpayer funds, and contributed to the financial crisis.” United Shore did not respond.

Quicken Loans of Detroit has been targeted with similar lawsuits, and in early March 2017, U.S. District Judge Mark Goldsmith ruled that a lawsuit over questionable loan practices filed by the federal government can proceed, although the timeline was narrowed.

Another recent example of a large settlement due to the False Claims Act is the diesel emissions scandal that forced Volkswagen to plead guilty to fraud, obstruction of justice, and falsifying statements as part of a $4.3 billion settlement with the U.S. Justice Department in January 2017, over a scandal that the automaker had intentionally cheated on emissions tests. In total, VW agreed to spend up to $25 billion in the U.S. to address the claims from owners, environmental regulators, states and dealers, as well as offering to buy back about a half-million polluting vehicles in the U.S.

Brown said in recent years, the SEC, CFTC and IRS have been ramping up their whistleblower programs, “bringing in bigger and bigger rewards.” The cornerstone of a whistleblower claim under the False Claims Act is proof that fraud or misconduct on the part of the company caused the government to suffer a financial loss. 

According to the Department of Justice, whistleblowers filed 702 qui tam, or False Claims Act, cases in fiscal year 2016, and “the department recovered $2.9 billion in these and earlier filed suits this past year. The government awarded the whistleblowers $519 million during the same period,” Mizer said.

Brown explained that an individual can bring in a complaint, and it will be filed in federal court, sealed under the suit, and then the Department of Justice investigates the complaint. While the suit is under seal, the whistleblower is protected and stays anonymous. “Usually the case can be under seal for a while, anywhere from 60 days to a few years,” he said, depending on the agency. 

Brown and his colleagues at Constantine Canon, where there are 22 attorneys dedicated just to whistleblower law, “A lot of lawyers get into this field because we want to do good,” he explained, interview the complainant, “and if the agency decides to pursue the (whistleblower) suit, it's their show. If they decline, there are other remedies.”

For an employee who has in essence tattled on their employer, why is it so important to be shielded by the Whistleblower Protection Act? 

“Retaliation can be through the silent treatment (at work), being iced out, not being invited to meetings you normally would be,” said Shereef Akeel. “Some employers are very clever, and they lawyer up and cover it. They'll give the employee (who blew the whistle) less desirable jobs, or move them to the night shift. Maybe they're not given their customary Christmas bonus, or are not put on the Christmas list. They could be ostracized. You're living through this gut-wrenching experience, and then you're ostracized. It's very difficult for the whistleblower. And it's even more difficult because they're usually such black-and-white, right-and-wrong type of a person.”

Jason Shinn concurred. “Many forms of retaliation stem beyond termination: threats or discrimination against you regarding your compensation; terms, conditions, location or privileges of employment.” 

An individual can also experience layoffs, blacklisting, demotion, the denial of overtime or of promotion, being disciplined, loss of benefits, failure to hire or rehire, being intimidated or harassed, the making of threats, reduction of pay or hours, and a reassignment that affects an employee's prospects for promotion.

The False Claim Act is but one of several fraud laws that assist whistleblowers, from the Sarbanes-Oxley Act of 2002, which protects employees, contractors and agents of publicly traded companies who report fraud by the company against its shareholders. Employees who are able to win under this statute may be able to be reinstated to their prior position, receive back pay and seniority level, special damages, and whistleblower attorney's fees.

Within various industries, there are specific laws and acts that tackle fraud and whistleblower suits pertaining to those fields, with all of the statutes focused on either public health or safety; the environment; employee rights; or the integrity of the public securities and financial markets. They include such statutes as Crop Insurance Fraud for farmer's and the agricultural industry; flood insurance; the Consumer Financial Protection Act of 2010 that was passed as part of the Dodd-Frank legislations, which protects whistleblowers for reporting violations on numerous federal laws governing consumer financial products and services, including mortgages, credit cards and loans. There is also the Consumer Product Safety Act of 2008, protecting whistleblowers for reporting on violations on safety standards for consumer products, and the Food Safety Modernization Act of 2010, for violations of food safety standards. The EPA has seven federal environmental laws protecting government and private employees reporting environmental violations, including the Clean Air Act, Clean Water Act, Safe Drinking Water Act, Solid Waste Disposal Act, and Toxic Substances Control Act, among others.

The newest, Brown said, enacted in December of 2015, is the Motor Vehicle Safety Whistleblower Act. “It's modeled after the SEC program. Essentially, a whistleblower who brings safety concerns about a motor vehicle receives an award as well as receiving whistleblower protection,” he said, noting the huge settlements in the last few years over major automotive safety issues, from Takata with air bags to General Motors with their key fobs. 

“We're seeing a lot of people reaching out. We've had clients come to us that are reaching out because they've been retaliated and their employment has drastically changed, and they're reaching out to find out what they could do,” Brown said. “They literally are just trying to keep their job, or be compensated if they just lost their job.”

For someone filing under the national Whistleblower Act, under the False Claims Act, Brown said they have 10 years to file their suit. In state situations, it's a little different. The Michigan Whistleblower Protection Act, enacted in 1980, requires that an action be filed within 90 days of the occurrence that is the basis of the claim, which many attorneys assert is the major shortfall in Michigan's law.

“In Michigan, it's too strict. Ninety days is a huge impediment,” said attorney Akeel. “While the statute protects the employees who blow the whistle, the weakness of the WPA statute is that it has the shortest statute of any law. 

In Michigan's WPA, relief includes reinstatement, back pay, fringe benefits, seniority rights, injunctive relief, actual damages, and costs and attorney's fees. A violator is liable for a civil fine of not more than $500.

“They've just been fired and that is very tragic. When someone gets fired, it takes them a month to just realize what happened,” Akeel continued. “They have to figure it out, why they've been fired. Then maybe they learn there's the whistleblower act. They come to my office and it's too late. That's the biggest reason why whistleblower suits fail. Look, with personal injury suits, they have three years to bring a lawsuit. Breach of contract, six years. Fraud, ten years. We see one to three a week, and it's an unknown act – why they often don't prevail, because they don't know about it in time.”

Mark Koroi also thinks that Michigan's WPA does not adequately protect as many whistleblowers as it could, “because with only 90 days to file, you can't do a full background check and complete all the research, find the facts and interview the witnesses you need to. You need a couple of years. With WPA, there is no temporal proximity.”

Jason Shinn asserted that Michigan's whistleblower statute “is similar to the federal and other state laws regarding the protected activity, types of retaliation, and burden of proof variations. The most significant difference between Michigan whistleblower protection and other states concerns notice. Certain states first require the employee bring the issue to the attention of a supervisor or the employer, who is then given a 'reasonable opportunity' to correct the violation, but under Michigan law, no such advance notice is required before an employee is entitled to whistleblower protection.”

To Shinn, the reason many challengers in whistleblower lawsuits do not prevail has to do with competing story lines – while the fired employee claims retaliation, the employer counters the employee was a poorly performing employee who is disgruntled after being fired.

“Against that backdrop, if an individual sues within the statute of limitations and meets the evidentiary framework, a presumption of retaliation arises,” Shinn explained. “However, the employer can rebut that presumption by offering a legitimate reason or reasons for making the adverse employment decision. For a whistleblower case to be valid, the employee must prove there is a causal connection between the act of retaliation and discrimination and the activity protected under the whistleblower statute.”

Akeel agrees. “Courts have been mixed – did the employe get fired because of the whistleblower or because of poor performance? It's 50-50 in my experience. The attorney lives and dies by the credibility of the witness. If the person is moral and upstanding, with excellent performance reviews, and is only fired once the whistle is blown, the court goes their way.”

Brown, who works on a federal level, said if the government intervenes in a whistleblower case, “there a high likelihood it's going to lead to a settlement,” noting cases rarely go to a trial. “We'll see it more and more (of settlements), because the incentives are there. If the government does not intervene, and it goes to trial, you're entitled to a higher percentage.”

While the Michigan Accountability Index Report card rated the Michigan Whistleblower Protection Act as being below par, and having a ranking of 42nd out of 51 states, plus the District of Columbia, for its lack of breadth of coverage and that it doesn't include collective bargaining rights, Brown disagrees. 

“I definitely don't think so. Michigan seems like an active office. New York may have a bigger office, but Michigan brings plenty of good cases, and has good statutes,” he said, noting cases brought by former U.S. Attorney Barbara McQuade included successful prosecutions of Dr. Farid Fata, the Rochester Hills oncologist who convinced hundreds of patients they had cancer in order to bilk Medicaid for chemotherapy treatments. “That was a False Claims Act whistleblower case. That's the kind of case where maybe it's not the most profitable, but it's the right thing to do.”

He also pointed out the Kilpatrick prosecution, which initially stemmed from whistleblower complaints, and “I give Michigan credit for auto cases. I think the attorney general's office is quite active and does a good job. Some states don't have any Medicaid whistleblower statutes.”

In Michigan, he pointed out, there are state statutes which mirror the federal level, and there is the ability to file under federal statutes.

“It's a very, very stressful process. You really want people to know what they're getting into,” Brown emphasized. “We have their best interests at heart. We tell them they can't just be in it for the money. They have to know we keep everything confidential.” ­

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