Whistleblower/Qui Tam

Exposing Madoff’s Ponzi Scheme — Our Chicago Fraud and Whistle Blower Lawyers Help Businesses Who Have Suffered From Fraud Recover Their Losses

October 11, 2012 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

https://www.youtube.com/watch?v=4xYkQnCUl5E

To learn more about our qui tam, blower, fraud, partnership and business dispute practice click here. Lubin Austermuehle’s Chicago business trial lawyers have more than two and half decades of experience helping business clients on unraveling complex business fraud and breach of fiduciary duty cases. We work with skilled forensic accountants and certified fraud examiners to help recover monies missappropriated from our clients and from government. Our Chicago litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and sucessfully as possible, helping business clients protect their investements and get back to business as usual. From offices in Oak Brook, near Lake Forest, and Evanston, we serve clients throughout Illinois and the Midwest.

If you know about fraud on the government and are prepared to blow the whistle, and you’d like to discuss how the experienced Illinois qui tam and whistle blower attorneys at Lubin Austermuehle can help, we would like to hear from you. To set up a consultation with one of our Chicago qui tam and whistle blower lawyers, please call us toll-free at 630-333-0333 or contact us through the Internet.

IRS Awards Whistleblower a Record $104 Million

September 29, 2012 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

It was announced on September 11, 2012 that the Internal Revenue Service awarded $104 million to whistleblower Bradley C. Birkenfeld for his role in providing information regarding an illegal offshore banking scheme by his employer, UBS. Not only is this the first major award by the IRS since its whistleblower program went into effect in 2006, it is believed to be the largest award given to an individual under any U.S. whistleblower program.

Birkenfeld learned in 2005 that UBS was providing illegal tax avoidance advice to its clients, and reported it to the bank’s compliance office. When UBS failed to alter its practices, in 2007 Birkenfeld informed U.S. authorities of the bank’s activities, which led to an enforcement action. In February 2009, UBS entered into an agreement with the government, pursuant to which it paid $780 million in fines and provided the names of more than 4,500 American clients who had participated in scheme. The government implemented a tax amnesty program that year, in which more than 14,000 Americans participated, leading to the recovery of more than $5 billion in unpaid taxes.

Prior to the adoption of the current whistleblower program, the IRS had discretion whether to pay an award to a whistleblower. IRS guidelines set awards at 1 percent, 10 percent, or 15 percent, and awards were not appealable. Under changes that were adopted in 2006, the IRS is required to pay whistleblowers 15 percent to 30 percent or recoveries which exceed $2 million. Moreover, whistleblowers now have the right to appeal an award to the Tax Court.

SEC’s First Whistleblower Award is for Maximum Amount

September 26, 2012 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

The Securities and Exchange Commission announced its first award under the SEC’s Whistleblower Program on August 21, 2012. The whistleblower will receive nearly $50,000, which represents 30 percent of the amount collected thus far in an SEC enforcement action.

The SEC Whistleblower Program, which has been in effect for one year, has its roots in the Dodd-Frank Wall Street Reform and Consumer Protection Act, and is designed to provide monetary incentives to individuals to report possible violations of the federal securities laws to the SEC.

In order to qualify for an award under the program, a person must:
• voluntarily provide “original information” about a possible violation; and
• the information must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million.

If these conditions are met, the Dodd-Frank Act authorizes the SEC to award individuals providing the information from 10 percent to 30 percent of any money collected in an enforcement proceeding. In the instant action, the SEC obtained an order of more than $1 million in sanctions, but has only collected $150,000 to date. If the SEC is successful in collecting more, the amount awarded to the whistleblower should be increased.

The identity of the whistleblower who received the award was not disclosed by the SEC. This is consistent with several provisions of the SEC program designed to protect individuals with pertinent information of potential securities violations. When an individual supplies information to the SEC, they can do so anonymously through an attorney. Even when information is not submitted anonymously, the SEC will endeavor to protect the identity of the whistleblower as much as possible. Moreover, provisions exist which provide redress to whistleblowers who are subjected to retaliation by an employer.

SEC Opens New Whistle Blower Office

August 14, 2011 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

The New York Times reports that the SEC has now opened for business its new whistblower office as required by the Dodd-Frank financial reform bill. The office will respond to consumer tips regarding securities fraud. If a consumer tip leads to a successful prosecution and recovery, the consumer and the federal goverment will benefit (and, securities fraud will be deterred). Under the whistle blower program, corporate insider tipsters could receive up to 30 percent of the money the SEC collects from the corporate wrong doer and its officers or directors. To qualify for the fraud tip bounty, an employee needs to provide new information that leads to successful enforcement achieving more than $1,000,000 in fines. The SEC will tap into the $450 million Investor Protection Fund to hand out the rewards. The S.E.C. says the program will help it save money as insider tipsters provide a road map to the financially strapped SEC investigators and attorneys.

Video — The Federal Goverment Loses Hundreds of Billions of Dollars Each Year to Fraud — Our Chicago Business Trial and Fraud Lawyers Bring Qui Tam and Whistle Blower Claims to Assist in Recovering Some of Those Monies

July 21, 2011 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

New York Times Reports That Nation’s Second Largest For Profit University is the Target of a Whistle Blower Suit for Allegedly Defrauding Government into Funding Student Loans

May 29, 2011 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Questions Follow Leader of For-Profit Colleges
By TAMAR LEWIN
Published: May 26, 2011
A whistle-blower case charges that an education company encouraged aggressive recruitment of unqualified students for their federal student aid.

Our law firm is pursuing class actions and putative class actions against for profit vocational schools in the Chicago area. We have interviewed many students of for profit universities, colleges and vocational schools who believe that various for profit colleges and Universities have cheated them along with the government in getting the students to borrow money with government backed loans for essentially a worthless education.. We have been looking into whistle blower allegations similar to those reported in a recent New York Times article and are interested in speaking to employee/whistle blowers at for profit colleges, universities and vocational schools who know about similar frauds to that reported by the New York Times engaged in by other for profit colleges, universities and vocational schools.

The New York Times reports:

[T]he Justice Department and two state attorneys general are intervening in a whistle-blower lawsuit charging that EDMC also violated the ban on what is known as incentive compensation. That practice encourages aggressive recruitment of unqualified students for their federal student aid.

Given the cast of characters — … a half dozen former Phoenix executives are now at EDMC — the complaint against EDMC says that “senior management knows that the compensation system it administers violates the incentive compensation ban.”
This is the first time that prosecutors have joined a suit like the EDMC whistle-blower case, and the government’s unprecedented intervention in such a compensation case comes amid escalating controversy over for-profit colleges. Enrolling about 12 percent of the nation’s higher-education students, the colleges get a quarter of all federal student aid and account for nearly half of all student loan defaults. Last Friday, the Department of Education released new data showing that more than 15 percent of those who had attended for-profit colleges defaulted within two years — twice the rate of those who attended public institutions, and three times as many as those who went to private not-for-profit colleges.

You can view the full New York Times article by clicking here.

Settlement Agreements With Former Employees Containing Broad Release Language May Prevent Subsequent Qui Tam Actions

May 25, 2011 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

No matter what kind of business you own and operate, an unfortunate part of running a company is the inevitable employment disputes with employees. Whether it is an action over wages, job duties, or other issues, many business owners will find themselves in court opposite a current or former employee at some point. Lubin Austermuehle’s Naperville business attorneys know the legal challenges that business owners face, and are always mindful of new case law that affects our clients.

Enterprise Recovery Systems, Inc. v. Salmeron is a decision handed down by the Appellate Court of Illinois earlier this year regarding an employer/employee dispute filed in the circuit court of Cook County. Plaintiff Enterprise Recovery Systems hired Defendant Salmeron as general manager and director of operations for their recovery and resolution of delinquent student loans business. Defendant worked for Plaintiff for four years before being terminated, and she sued Plaintiff for sexual harassment. This case settled, and Defendant signed a broadly worded release containing language that discharged Plaintiff from any other claims arising out of Defendant’s employment with Plaintiff in exchange for $300,000. After this settlement, Defendant Salmeron filed a qui tam action against Plaintiff Enterprise on behalf of the federal government alleging that Enterprise had defrauded the government. The federal government declined to intervene in the qui tam action, and the lawsuit was eventually dismissed with prejudice due to the misconduct of Salmeron’s lawyer, according to the court. Because of issues brought to light in the qui tam action, Plaintiff filed suit against Defendant alleging fraud in the inducement and breach of Defendant’s duty of loyalty to Plaintiff. After the court found repeated misconduct by Defendant’s attorney (which included multiple violations of court orders), the trial court banned Defendant from presenting evidence in her defense of the fraud and breach of fiduciary duty action. Plaintiff then moved for summary judgment on both claims.

Plaintiff’s motion showed that Defendant produced company log reports in the qui tam suit and those reports were stolen from the Plaintiff. Furthermore, Plaintiff alleged that Defendant failed to alert Plaintiff about the supposed illegal conduct of Plaintiff’s employees prior to notifying the government and filing the qui tam lawsuit. Additionally, Plaintiffs contended that Defendant planned to file the qui tam action before signing the release that was a part of the sexual harassment suit settlement. Defendant failed to file a response to the motion for summary judgment, so the court granted the motion. Plaintiff appealed, and the matter was reviewed de novo by the Appellate Court.

The Appellate Court upheld the trial court’s grant of summary judgment as to the fraud in the inducement claim because the court found that Defendant knew she had information for the qui tam case against Plaintiff at the time she negotiated the sexual harassment claim’s settlement and release. Furthermore, the court found that Defendant waited until she had received her last settlement payment before filing the qui tam lawsuit and signed the settlement agreement with no intention of honoring it. The Court upheld summary judgment as to Plaintiff’s breach of the duty of loyalty cause of action because Defendant was a high-level member of Plaintiff’s management team and owed a duty of loyalty to the company. This duty was breached when Defendant sought to profit from information harmful to the company that was obtained through her position of trust within the company. The Court also explained that it was reasonable for Plaintiffs to expect Defendant to neither exploit her position for personal gain nor hinder the business operations of the company

New York Times Reports: Landis Files Whistle Blower Suit Against Armstrong

September 11, 2010 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Landis Said to File Suit Against Cycling Team
By JULIET MACUR
Published: September 3, 2010
Floyd Landis, who was stripped of the 2006 Tour de France title for doping, is claiming that Lance Armstrong’s former team defrauded the government. This article in the New York Times describes the entire scandal and the lawsuit Landis has filed.

The New York Times article states in part:

Landis is claiming that team management was aware of the team’s widespread doping when the contract with the Postal Service clearly stated that any doping would constitute default of their agreement, the people said. They did not want their names published because the suit is still under seal.

The Wall Street Journal Reports: Larger Bounties Spur Surge in Fraud Tips

September 7, 2010 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

Larger Bounties Spur Surge in Fraud Tips according to a recent Wall Street Journal article. The article can be read in full by clicking on the link to it at the start of this post. It describes that large bounties are now available to whistle blowers who report financial fraud. This should help uncover and stop financial fraud like the Madoff scandal and others that have harmed investors and the financial system. The article states in part:

New awards for informants who help the Securities and Exchange Commission uncover fraud are already prompting a surge in tips, the agency says.

The Dodd-Frank financial law passed in July provides for the larger bounties, with the hope of fingering wrongdoers such as Bernard Madoff before they swindle thousands of people.

People who supply “original information” about large frauds could net as much as 30% of the penalties and recovered funds collected by the SEC, which could add up to a multimillion-dollar payout.

Lawyers who represent whistle-blowers have been spreading the word about the new incentives.

“We’ve gotten some very high-quality tips,” said SEC official Stephen Cohen.

Fourth District Court of Appeal Finds Company May Be Liable For Causing Another Company’s False Claim to Be Presented

May 22, 2009 | Peter S. Lubin, Patrick Austermuehle and James V. DiTommaso

In an Illinois state qui tam lawsuit, the Fourth District Court of Appeal has ruled that an accounting company may be held liable for knowingly allowing another company to submit a fraudulent claim to the state. In Illinois Health Facilities Authority ex rel. Scachitti v. Morgan Stanley, 887 N.E.2d 601 (April 2, 2008), three individual plaintiffs brought suit against financial services company Morgan Stanley Dean Witter and accounting firm Ernst & Young for an alleged scheme to defraud the Illinois Health Facilities Authority under the Illinois Whistleblower Reward and Protection Act.

The case arose out of a bond refinancing attempt by the Authority. In order to pay off revenue bonds, it issued “advance refunding” bonds, which are normally tax-exempt. However, if the proceeds of these bonds are reinvested in securities with a higher yield, they lose their tax-exempt status unless the profits go to the U.S. Treasury. To ensure they did not lose the tax exemption, the Authority hired Morgan Stanley as an underwriter for the advance refunding bonds and Ernst & Young to verify Morgan Stanley’s work.

Defendants accuse Morgan Stanley of fraudulently “yield burning” by charging abovemarket rates for the bonds — ensuring that they would not become taxable — and pocketing the $21,000 difference. They also accuse Ernst of abetting this behavior by knowingly hiding it in its audit. They both companies for violating the Whistleblower Act, and Ernst for aiding and abetting Morgan Stanley’s violations. The Cook County trial court dismissed the claims against Ernst for failure to state a sufficient cause of action. The plaintiffs appealed.