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Whistleblowers

When employees turn referee

Attorney John Saxon (left) and whistleblower Edward Lane won a major point before the U.S. Supreme Court, but Lane still hopes to win back his job. Photo by Joe De Sciose

Attorney John Saxon (left) and whistleblower Edward Lane won a major point before the U.S. Supreme Court, but Lane still hopes to win back his job. Photo by Joe De Sciose

In 2011, Blake Percival of Montgomery made a difficult choice. He sued his former employer. 

Percival had worked more than a decade at U.S. Investigations Services (USIS) Inc., the federal government’s largest provider of security background checks, when the company promoted him to director of fieldwork services. But he says he soon discovered that the company had implemented a process called “dumping,” sending case files to the federal Office of Personnel Management before completing the background checks. Percival says he told his employees to perform thorough investigations, resisting the policy. USIS terminated him.

“To have worked for them all this time and to finally get into the upper ranks of management and find out that profit was their number one goal blew me away,” Percival says. 

Percival consulted with Larry Golston, an attorney at Beasley, Allen, Crow, Methvin, Portis and Miles PC, in Montgomery, filed a lawsuit and became a whistleblower, someone who reports the illegal or unethical activities of public or private companies or organizations. 

“I realized that this was a huge case,” says Golston. “In my mind, they had terminated Mr. Percival because he wouldn’t go along with the fraudulent scheme and to prevent him from telling anybody about the scheme. So, we filed a complaint.” 

While whistleblowers are often celebrated in popular culture, in reality, many experience ostracism, harassment, verbal threats and even job loss for speaking up. 

The Whistleblower Protection Act of 1989 protects federal workers from retaliation. Since then, Congress has passed other whistleblower protections for the private sector with statutes like the Sarbanes-Oxley Act and Dodd-Frank Wall Street Reform. 

States offer legal protections for whistleblowers too, but they vary in strength and scope. 

Alabama is an at-will employment state, so employers can fire employees at any time and for any reason, but it allows for statutory exceptions for workers who report unlawful age discrimination, child labor violations, for filing a worker’s compensation claim or reporting in writing safety violations. 

Attorney Larry Golston worked with Blake Percival when he blew the whistle on U.S. Investigations Services Inc. over shoddy background checks.

 

Golston and fellow attorney Daniel Miles III filed suit against USIS in 2011, claiming the company violated the federal False Claims Act, which prohibits anyone from knowingly submitting false claims to the government. The U.S. Department of Justice joined the suit in 2013. 

USIS later admitted that it had been hired to conduct background checks on the National Security Agency subcontractor Edward Snowden, who leaked top secret documents, and on Aaron Alexis, the military contractor who killed 12 people in a 2013 shooting spree at the Washington Navy Yard before he was killed by authorities.

For some federal contractors, the prospect of earning millions of dollars can tempt some to cheat, Golston says. 

“But what they don’t realize is that if someone is courageous enough to do what Mr. Percival did, comes forward and lets the government know about it, not only do they have to pay back all of the money they defrauded the government on, the False Claim Act permits a fine for each fraudulent submission to the government of anywhere from $5,500 to $11,000 per submission.”

The False Claims Act also entitles whistleblowers up to 30 percent of the monies recovered. To settle the case, USIS agreed to forgo $30 million in payments it was due from the government, of which Percival received $6 million. 

Another whistleblower, Jay Palmer, of Montgomery, spoke up after learning about his employer’s scheme to get around the federal government’s H-1B visa program. Palmer worked for Infosys Inc., an information technology firm headquartered in Bangalore, India. 

H-1B visas are for workers with special expertise or talents that are not available in the United States. But when the government began limiting H-1B visas, Palmer alleged that Infosys began sending workers on B-1 visas that are only for temporary business visitors. Palmer later spoke about the experience before a U.S. Senate congressional committee
last March.

“I am the displaced American worker who can’t speak out due to being harassed, black balled or possibly sued — the employee that my company chose not to invest in in order to replace me with cheaper labor.”

Palmer said in his 2011 civil lawsuit that when he refused to write “welcome letters” for prospective B-1 workers, managers chastised him. U.S. District Judge Myron Thompson, however, dismissed his case, ruling that Palmer failed to prove the harassment reached the state standard of being outrageous or negligent.

“Today’s decision confirms what we have been saying from the beginning,” said Infosys in a press statement. “Mr. Palmer’s claims of retaliation were completely unfounded.”

But after a federal investigation, Infosys in 2013 paid $34 million in fines to settle the U.S. Justice Department case. Palmer filed a new federal lawsuit in 2014, this time citing the Sarbanes–Oxley Act. His attorney, Kenneth Mendelsohn of Montgomery, did not return phone calls for comment. 

Jay Palmer and his lengthy legal battle with Infosys Inc. have made whistleblower headlines for five years. This photo was taken for The New York Times in 2011 by regular Business Alabama contributor Cary Norton
 

Landmark Whistleblower Case 

Fellow whistleblower Edward Lane, of Ashville, became director of Central Alabama Community College’s Community Intensive Training for Youth (CITY) program in 2006 and learned that a Huntsville staffer, state Rep. Susan Schmitz, had not reported for work. Lane says that after repeated requests to report for work, Schmitz’ absenteeism continued, so he fired her. 

Meanwhile, an FBI investigation of corruption in Alabama’s two-year college system led to Schmitz’ indictment. The government subpoenaed Lane to testify before a grand jury and at two trials as to why he fired her. The first trial ended in a hung jury. After the second trial, Schmitz was sentenced to 30 months in prison. 

“All along I’m being told by several high-level officials with the system that, ‘You need to be careful,’” Lane says. “‘You’re putting your livelihood in jeopardy by doing this.’”

By 2009, CITY experienced budget shortfalls. Lane says he submitted a plan to lay off probationary workers, but the president, Steve Franks, laid off Lane along with 28 other CITY employees. Franks later rescinded the layoffs but did not rehire Lane. Lane sued.

“Our theory, plain and simple, was that when Edward testified to the grand jury, in response to a subpoena, that in doing that, he was exercising his First Amendment rights and that got him terminated,” says Birmingham attorney John Saxon. “So there was a retaliation claim under the First Amendment.” 

Lane’s case eventually reached the U.S. Supreme Court in 2014, which, in a 9-0 decision, found that the First Amendment “protects a public employee who provided truthful sworn testimony, compelled by a subpoena, outside the course of his ordinary job responsibilities.”

The ruling overturned two lower court decisions that argued Lane had acted in his official capacity when he fired Schmitz and when he testified against her in court and, therefore, could not claim First Amendment protections. 

The U.S. Supreme Court, however, ruled that Franks had “qualified immunity” under state law and sent the case back to the 11th Circuit Court of Appeals to determine if Susan Burrow, who became president after Franks retired, has immunity in her official capacity. 

Lane says he is waiting for his day in court and says he wants his job back. He now works as a security guard at the Anniston Army Depot, making $41,000, well below his nearly $100,000 CITY salary. 

“I would do it again without even thinking about it,” says Lane, “because I did what was right.”

Meanwhile, Kim King, in Selma, filed a whistleblower complaint in 2014 with the Occupational Safety and Health Administration’s Mobile Office against non-union Hyundai auto supplier Lear Corp. — doing business as Renosol Seating LLC. King and other workers at the Selma plant have alleged that health problems they’ve experienced were caused by chemicals used to produce foam cushions. 

Renosol fired King last March and sued her for defamation, after she attempted to deliver a letter to Hyundai in Montgomery, asking the company to require its suppliers to provide higher wages and better working conditions. 

On March 7, 2016, the U.S. Department of Labor publicly announced that it was suing Lear Corp., and three company managers for violating the Occupational Safety and Health Act’s whistleblower protection provision. 

Mel Stephens, Lear’s senior vice president for communications, responded in a March 8 e-mail:

“The complaint is nothing new, but just a rehash of old arguments. We believe the government’s allegations are false and will continue to defend them vigorously. The truth of the matter is that OSHA’s own tests confirm what Lear’s independent tests show — the air quality at Lear’s Selma plant is well within allowable limits. Any ‘recommendation’ by OSHA to the contrary is neither supported by the scientific test results nor within the agency’s jurisdiction.”

But in a March 7 press release from the United Auto Workers union that had been organizing with King, she said: “This action by the federal government should send a signal not just to Lear, but to companies across the country that they have to respect the rights of workers to fight for a safe workplace.” 

Butler Snow attorney Katie Powell counsels firms to take employee complaints seriously and prevent the circumstances that trigger whistleblower actions.
 

How to Avoid Whistleblower Blunders

Instead of trying to discourage whistleblowers, companies should attempt to make sure the noise never emits beyond the walls of their business, according to attorney Katie Powell, with the Birmingham-based law firm Butler Snow.

“Before a public complaint has been made, companies can create programs that encourage internal complaints and foster an environment and culture that takes them seriously,” says Powell, who specializes in labor and employment law at Butler Snow.

“Employers — particularly those in highly regulated industries such as health care, banking and securities — should have a written policy and program requiring employees to report their concerns of illegal or unethical conduct. This policy should set forth a specific procedure for reporting and be done in a way that encourages honest, candid feedback, free from concerns of retaliation.”

Companies need to create an atmosphere that’s receptive to grievances, Powell says. Moreover, they must take such accusations seriously, rather than immediately labeling the complainer as a troublemaker.

Employees usually take their criticisms public only after they have been rebuked by the company internally and fear harsh reprisals for their actions.

“The employer should include in their normal annual training process programs that address both the need to report such concerns, and the company’s position prohibiting retaliation for good-faith reports of legitimate concerns,” Powell says. “A best practice for most companies is to institute a compliance or whistleblower hotline. It is helpful for these reports to be in writing and given to persons outside the direct chain of command for the reporting employee.

“Through this approach, a company can attempt to identify issues before they become more problematic. Many times, this allows the company to address and resolve these issues early on. However, these type programs are wholly dependent on the perception that they are confidential and effective.”

Options become limited for a company once a whistleblower goes public, though legal action is still a possibility. That was the case last year when Montgomery County Circuit Judge William Shashy allowed Lear Corp. to sue whistleblowing employee Kim King, claiming defamation and intentional interference with business relations.

“When a company feels the allegations made by the whistleblower are false and in bad faith, pursuing legal action against the whistleblower can be an option, but only in the most extreme cases,” Powell says. “This is usually seen as an extraordinary remedy.”

Gail Allyn Short, Joe De Sciose, Cary Estes and Cary Norton are freelance contributors to Business Alabama. All are based in Birmingham.

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