On November 19, 1979, a twenty-seven-year-old Justice Department attorney appeared on a panel of witnesses before the Senate Judiciary Committee. The issue was how to modernize the False Claims Act to make it an effective tool to fight fraud against the government. Over forty years later, that same attorney would appear again before the Senate Judiciary Committee to explain his vision for the Department of Justice and why he should be confirmed as the Attorney General of the United States. That attorney is Judge Merrick Garland.
Looking back, Judge Garland's early advocacy for modernizing the False Claims Act seems prophetic. Seven years after that testimony, Senator Charles Grassley, the current Ranking Member of the Senate Judiciary Committee, led a bi-partisan effort that succeeded in modernizing the False Claims Act. Many of the proposals made in 1979 were incorporated into the Grassley-led 1986 amendments, including increasing penalties, lowering the burden of proof, and holding government contractors who acted with "reckless disregard" accountable for mischarging the government. Today, the False Claims Act is the most effective civil anti-fraud law administered by the Justice Department and the most successful whistleblower law in history.
Justice Department officials correctly praised the role of the 1986 amendments in increasing the ability of the taxpayers to recover fines and penalties from fraudsters: "Those amendments have played a critical role in transforming the False Claims Act into what it is today – the most powerful tool the American people have to protect the government from fraud."
Since the False Claims Act was modernized in 1986, taxpayers have recovered over $64 billion from civil lawsuits filed against fraudsters. 71% of these recoveries came from cases filed by whistleblowers. Moreover, the whistleblower protection provisions in the False Claims Act have provided more relief and compensation for whistleblowers than any other law in history. As of September 30, 2020, whistleblowers have received over $7.8 billion in compensation under the False Claims Act. All of this compensation was paid directly from fraudsters found guilty in whistleblower-generated cases. Taxpayers were never billed for these rewards. Instead, based on the risks and hardships faced by whistleblowers, taxpayers recovered billions in damages, fraudsters were sent to prison, and dangerous products sold to the government were withdrawn from the market.
If his nomination for Attorney General is approved, Merrick Garland will be the first leader of the Justice Department not only to have participated in the origins of the modern False Claims Act but also to have decided, as a judge, complex and highly significant cases interpreting that law. These cases are a window into Judge Garland's viewpoint about whistleblower protections and the importance of enforcing anti-fraud laws.
As a judge on the U.S. Court of Appeals for the District of Columbia Circuit, his first major False Claims Act decision was issued in U.S. ex rel. Yesudian v. Howard University. The case concerned the scope of the FCA's anti-retaliation provision and resulted in a divided 2-1 decision. Judge Garland wrote for the majority opinion in favor of the whistleblower. The whistleblower had raised fraud concerns to management at Howard University but had never contacted the government. Courts were divided on the issue concerning whether purely internal whistleblowing was a protected activity. Judge Garland explained that the 1986 amendments were designed to "provide for whistleblower protection" in order to "assure" "those who may be considering exposing fraud that they were legally protected." Thus, despite the fact that the whistleblower did not file a False Claims action, the university was still prohibited from retaliating. In his detailed analysis of the law and facts related to the Yesudian cases, Judge Garland demonstrated an in-depth knowledge of the False Claims Act and the real-life issues that face employees when they decide to report frauds.
The second major False Claims Act case was United States ex. rel. Totten v. Bombardier Corp. In Totten, the D.C. Circuit once again divided 2-1 on a highly controversial matter. The majority decision was written by now Chief Justice John Roberts, who, at the time, was a judge on the federal appeals court in Washington. Judge Garland wrote the dissent. At issue was the liability of subcontractors under the False Claims Act. Judge Roberts' decision in Totten created a massive loophole in the FCA. Fraudsters who presented false claims for payment to government grantees or contractors could escape liability simply because they did not directly bill the government. Thus, if you willfully ripped off the taxpayers by overcharging on a contract, you could escape liability simply because you submitted your bill for payment to a prime contractor on a government grant. The majority decision created a loophole in the law with potentially devastating consequences.
Judge Garland wrote an extensive and stinging dissent. He explained how the False Claims Act was "signed into law by President Abraham Lincoln in order to combat rampant fraud in Civil War defense contracts" and had become the "Government's primary litigative tool for combating fraud." He then warned that the majority's ruling in Totten "leaves vast sums of federal monies without False Claims Act protection," because "under the court's interpretation, the government cannot recover against a contractor that obtains money by presenting a false claim to a federal grantee — even if every penny paid to the contractor comes out of an account comprised wholly of federal funds." He warned that the court's decision was "a dramatic cutback in the federal government's ability to protect itself against false claims on federal grant money."
Although Judge Garland was not summoned to testify before the Senate Judiciary Committee about the Totten decision, his dissenting opinion clearly had a major impact on Congress. The Judiciary Committee issued a unanimous report condemning the majority decision in Totten and unanimously approved amendments to the FCA that affirmed the logic and wisdom of Judge Garland's dissent. In its report recommending that Congress overturn the Totton decision, the Judiciary Committee was clear: The proposed amendment "improves one of the most potent civil tools for rooting out waste and fraud in Government—the False Claims Act. The effectiveness of the False Claims Act has recently been undermined by court decisions that limit the scope of the law and, in some cases, allow subcontractors paid with Government money to escape responsibility for proven frauds. The False Claims Act must be corrected and clarified."
Today the Justice Department has a mixed record on whistleblowing. Many of its attorneys have aggressively helped whistleblowers, while others have criminally prosecuted whistleblowers. More recently, the Department's strong record supporting the False Claims Act has eroded. For example, fraud recoveries under the False Claims Act fell to a twelve-year low in 2020, while the Department advocated a number of anti-whistleblower interpretations of the law. Most notably, the Justice Department argued in court that it has the complete power to dismiss False Claims Act cases filed by whistleblowers, regardless of the evidence of misconduct or the harm such dismissals would cause to the public fisc.
A new Attorney General will also be called upon to manage the Justice Department's role in numerous whistleblower cases far beyond the False Claims Act. The Justice Department often plays a critical role in the prosecution of whistleblower-initiated cases under the Securities Exchange Act, the Foreign Corrupt Practices Act, the Act to Prevent Pollution from Ships, and the IRS tax evasion whistleblower laws. The Justice Department also has the authority to prosecute corporations that retaliate against whistleblowers under a special Obstruction of Justice law enacted as part of the Sarbanes-Oxley Act. Likewise, it falls upon the Justice Department to prosecute "leakers" and enforce censorship laws like those used by the Trump administration to sue officials like John Bolton, who publish books critical of the President,
The next Attorney General will also play a critical role in the enforcement of a new anti-money laundering (AML) whistleblower law that was passed by Congress on January 1, 2021. The new AML whistleblower law has numerous loopholes and weaknesses. Although administered by the Treasury Department, Congress required the Justice Department to participate in the proceedings to establish the rules governing this new program. The next Attorney General will have an opportunity to work with Treasury in order to provide maximum protection for whistleblowers and also can support legislative reforms that will close the dangerous loopholes in the AML law.
Judge Garland's record indicates that he has a firm understanding of the importance of whistleblowers and the role they play in helping enforce anti-fraud laws, such as the False Claims Act. Congress should question Judge Garland on his prior record and stress the importance of the Attorney General taking the lead in transforming the Justice Department into an effective and consistent advocate for whistleblowers. Judge Garland should be pushed to follow the example of the U.S. Securities and Exchange Commission and the radical change in its attitude toward whistleblowers that followed the passage of the Dodd-Frank Act.
Like the Justice Department, before 2010, the SEC also had a mixed record on whistleblowing. But the Commission took Congress' intent to protect whistleblowers to heart and immediately commenced changing its culture in light of the Dodd-Frank Act. The SEC created a highly effective Whistleblower Office and approved rules designed to protect and compensate whistleblowers in accordance with the law. The Commission's staff sanctioned corporations that required whistleblowers to sign restrictive nondisclosure agreements, enacted rules broadly protecting whistleblowers from retaliation (and defended those rules in court), and fully protected the confidentiality of whistleblowers who entered its program. In its short history implementing the Dodd-Frank Act, the SEC rejected placing limits on the amount of rewards paid to whistleblowers, and in 2020 paid an individual whistleblower a larger reward than the Justice Department has ever paid in the nearly 35-year history of the False Claims Act.
In a historic speech entitled "The SEC as the Whistleblower's Advocate," the then-Chairman of the SEC, Mary Jo White explained the new relationship between the Commission and whistleblowers: "It is past time to stop wringing our hands about whistleblowers. They provide an invaluable public service, and they should be supported. And, we at the SEC increasingly see ourselves as the whistleblower's advocate."
Congress should demand that the new Attorney General follow this example. Judge Garland has the background and experience to transform the Justice Department's whistleblower programs. Congress must ensure that this transformation is not delayed. It is time for the next Attorney General to make the Department of Justice the "Whistleblower's Advocate."