Verizon Whistleblower Who Earned Millions May Have Lost His Chance For More Millions

The Canary™: Qui Tam Whistleblower Blog

Ian Ball
Wednesday, 20 July 2016

In 2011, Verizon and the Department of Justice entered into a settlement agreement where Verizon paid $93.5 million but denied any wrongdoing in their billing practices. Allegedly, Verizon’s subsidiaries included improper surcharges on invoices submitted to the federal government under telecommunications contracts. This alleged fraud was not uncovered through an expensive government probe but rather through the actions of a whistleblower. Whistleblowing can be quite lucrative.

Under the False Claims Act a Whistleblower Stands to Receive a Portion of the Recovered Damages

Stephen Shea, a telecommunications consult, blew the whistle on Verizon. In turn, Shea received nearly $19 million of the settlement between the Department of Justice and Verizon under the qui tam provisions of the False Claims Act. The Act allows permits whistleblowers to file a suit against federal contractors if they can show that the contractor committed fraud against the government. The Act also allows the whistleblower to receive a portion of any recovered damages in exchange for their whistleblowing. Providing whistleblowers with a portion of the damages is a great incentive for whistleblowers to act on behalf of the government.

Currently, Shea and Verizon are back in court. Shea alleges to have another valid qui tam claim against Verizon’s subsidiaries concerning billing practices under telecommunications contracts with the federal government. Thus, Shea could receive another large payday, provided that he overcomes some procedural missteps.

The False Claims Act’s First-to-File Rule

The current case was filed in 2009 and alleges Verizon’s subsidiaries overcharged other governmental agencies. Shea turned to the D.C. Circuit to revive this lawsuit, arguing that a federal judge incorrectly determined that his suit was barred by the Act’s first-to-file rule. Originally, the case was dismissed in 2012, where a court determined that it was too similar to Shea’s original lawsuit. In May, the Supreme Court revived the case on appeal, and when it was remanded back to the lower court it was dismissed without prejudice because the suit was brought when the initial suit was still pending. This procedural misstep is fatal.

The first-to-file rule bars subsequent allegations of fraud if the allegation states all the essential facts of a previously filed whistleblower claim. The goal of the rule is to encourage whistleblowers to act as soon as possible but discourages additional suits that would only tie up the justice system with no possibility of recovery by the government or the individual bringing the suit. Shea must distinguish this suit with the previously filed case and show that this suit will result in a separate recovery for the government.

Shea’s ongoing saga with the False Claims Act highlights how important it is for a whistleblower to hire experienced counsel when filing a qui tam suit in order to ensure that the suit is made promptly and accurately. The whistleblower’s actions must be carefully planned and strategically executed because large financial incentives are at stake. If you are an employee of a government contractor, federal, state, or local, and have knowledge of fraud on the government, please Contact Us.



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