An imbroglio involving an alleged kickback scheme perpetrated by employees of a San Francisco-based garbage collection company has shone a spotlight on the perils faced by individuals who go public with information concerning potential fraud committed against the government, and the importance of robust protections at all levels of government for whistleblowers.
Brian McVeigh was initially hired by the garbage collector, Recology, in 2000, and received positive performance evaluations. He was later transferred to a sorting facility to oversee a California Redemption Value (CRV) Buyback Center operated by the company. Recology has a monopoly with the City of San Francisco, and receives millions of dollars in diversion incentive bonuses from the State of California to participate in the buyback program. As a manager at the CRV Buyback Center facility, McVeigh’s responsibilities included preventing fraud and theft of CRV recyclable materials. In that capacity, he became aware of a fraudulent scheme in which Recology employees were inflating CRV weights, manipulating the figures in order to qualify for the bonuses from the state. McVeigh was summarily terminated in 2008 after bringing the fraud to the attention of Recology management and the local authorities.
McVeigh has filed a civil claim against his former employer under California’s False Claims Act (“FCA”), alleging that Recology management was likely involved in the scheme and that the termination was retaliation for his reporting of the wrongful conduct to the authorities. Both the fraudulent scheme on the part of the garbage collection company, a contractor which generates $220 million in annual revenues from local San Francisco ratepayers as an unregulated monopoly, and the retaliation are actionable under California’s False Claims Act.
The California law is similar to and largely based on its federal analog, the False Claims Act, a statute initially passed in 1863 to prevent war profiteering during the Civil War. The False Claims Act, and similar laws in states which have passed such legislation, confers standing upon private whistleblowers (also known as qui-tam relators) to sue contractors and individuals who have perpetrated fraud against the government in exchange for payment for goods and services, or to avoid payment of a liability owed to the government. While the government may elect to intervene in a case filed under the False Claims Act, it does not always do so, and relators may proceed with their legal claims independently of a government prosecution or intervention in the civil suit. A whistleblower who prevails under the federal law may recover 15% to 30% of a final judgment or settlement. In addition, and critically for cases like that of McVeigh, both the federal and some state-level FCAs provide protections to employees against retaliation.
If McVeigh prevails, he will be entitled to compensatory damages, injunctive relief, attorney’s fees, and economic damages, a judgment which could cost his former employer tens of millions of dollars. Notwithstanding, McVeigh’s story is a case-in-point on the need for FCAs at the municipal and state levels in addition to the federal law. While 29 states and the District of Columbia have an FCA statute on the books (along with New York City, Chicago, and Allegheny County, PA), ten of those states only allow for recovery in cases of Medicaid fraud. Moreover, 20 states have no FCA whatsoever.
Absent the protections of the California law, whistleblowers like McVeigh would be left without recourse in the face of retaliatory terminations by their employers for bringing fraud to light.