Employees of government contractors working on classified projects can blow the whistle in certain instances of wrongdoing without violating the law — despite the impression left by the actions of Edward Snowden, a former National Security Agency (NSA) contractor.
When a government contractor is defrauding the government and making false claims that it is meeting the terms of its contract, employees can stop the fraud and help the government recover funds using a law known as the False Claims Act. Employees can do this even when classified materials are involved.
However, whistleblowers and their attorneys must proceed carefully to ensure that all precautions are taken to avoid any release of classified information.
A whistleblower case alleging fraud by a government contractor that was doing classified work has been successful in at least one instance. My law firm represented a scientist who determined that TRW was selling the government faulty electronic componentsthat were being used in military and intelligence-gathering satellites. The company refused to alert the government to those problems. We filed a “qui tam” (whistleblower) lawsuit on the scientist’s behalf, which started a government investigation.
Initially, it was a challenge for our client to discuss the case with us, because he was well aware, and appropriately respectful, of his secrecy obligations. He was careful not to disclose to us any information that might be classified. He was well-trained, as part of the security clearance process, to recognize which information was restricted, and to treat it accordingly. Working around those parts of the story required care, but did not prevent him from giving us enough information to realize he had learned about a serious and disturbing issue. He was also able to provide us with enough unclassified documents to confirm his claims.
Once we filed the case, the Justice Department began its investigation. Because much of the evidence it uncovered was highly classified, the Justice Department utilized portions of high-tech secure facilities, known as “SCIFs” (Sensitive Compartmented Information Facility), devoted solely to the case. I had received an appropriate security clearance that enabled me to discuss many parts of the case with the government lawyers, but only in one of those facilities. None of the classified details about the operation of the satellites was ever released.
Northrop Grumman Corp., which had acquired TRW, paid the government $325 million in 2009, to settle the whistleblower case. It is the largest settlement by a defense contractor in a qui tam case, and the second largest settlement involving defense contractor fraud.
The False Claims Act applies in instances when the government is being defrauded and loses money through false claims by a contractor, whether on a classified or unclassified contract. The statute has become the government’s most powerful law to stop defense contractor fraud and other types of fraud against the government. Last year, the government recovered more than $9 billion from civil settlements and criminal fines stemming from qui tam cases.
The False Claims Act allows private citizens to file “qui tam” (whistleblower) lawsuits against companies and individuals that are defrauding the government and recover funds on the government’s behalf. The lawsuit is filed “under seal,” meaning it’s not made public, to give the government time to investigate the allegations and decide whether to join the case.
Defendants found liable under the False Claims Act must pay three times the government’s losses plus penalties. If the government joins the qui tam lawsuit and recovers funds as a result of the case, the whistleblower is rewarded with 15 percent to 25 percent of the recovery.
The law also provides job protection for whistleblowers. If employees are discriminated against or retaliated against because they have filed, or are considering filing a qui tam lawsuit, they are entitled to reinstatement, two times the amount of back pay, compensation for special damages and other relief under the False Claims Act.
Several important points to keep in mind when a whistleblower case involves classified information:
- 1) Whistleblowers may not disclose any classified information to their lawyers. They can’t give classified documents to their attorneys, but their attorneys may discuss with Justice Department lawyers the proper procedures to provide the government with access to such evidence.
- 2) A whistleblower’s attorney may seek a security clearance to see certain classified documents if allowed by the government, although such access is only granted in exceptional circumstances
- 3) The non-classified evidence about the fraud has to be strong enough to bring a qui tam lawsuit without using any classified information. If the unclassified information provides enough of an indication that fraud may exist, the government will obtain classified evidence through secure procedures.
The federal government annually loses an estimated 7 percent — about $261 billion — of total spending to fraud and waste. Contractor employees who are aware of fraud may feel they can’t report the fraud if a project or the work is classified or involves classified material, particularly following the actions of Snowden, who released thousands of classified documents and exposed major NSA classified programs.
Instead, those whistleblowers would be helping their country by stopping the loss of millions, and perhaps billions, of dollars to fraud and recovering at least a portion of those losses. As long as proper care is taken, they can protect national security and do the right thing.
Eric R. Havian is a partner at Phillips & Cohen LLP, whose practice focuses on representing whistleblowers in False Claims Act cases and other government whistleblower programs.