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Turning Your CEO Into a Whistleblower

February 1, 2016

We wish we didn’t see this kind of story all the time, but we do: a high level executive gets sacked for trying to do the right thing.

In this case, the Chief Executive Officer of a health care company recommended to his Board of Directors that the company self-report about $10 million in improper payments he says the company received.  The Board sacked him, and this whistleblower retaliation suit ensued.

Now of course we don’t know all the details about who’s right and who’s wrong.  Those are the kinds of things that will be shown as the case now winds its way through the court system in what undoubtedly will be a messy, mud-slinging affair.

What if the Board had taken a different course?  What if they had followed his advice?  Could they have been acting without legal advice?  If they did get legal advice, how sound could it have been if the CEO stood his ground and said no we have to report this?  The imagination runs loose wondering how bad it must have been for the Board to invite this kind of public airing of the company’s internal affairs–which apparently include not only alleged False Claims Act violations but also violations of the government prohibitions against self-dealing under the so-called “Stark” laws.  Potentially quite smelly indeed.

This will be a full employment scenario for litigators, as the Board members themselves will now all be witnesses and drawn into discovery about their reasoning for terminating a person who says he was simply trying to follow the law–protected ground under the False Claims Act.

If the Board of Directors thought the problem would quietly go away, they miscalculated badly.  Now it will live on for months or years.  And the government–those folks with badges and guns–can simply sit back, see how it all unfolds, and decide whether to weigh in at some point about the company’s conduct.

Could it be that the Board took this seemingly ill-advised approach because they have their own personal interests to protect?  The suggestion of possible Stark violations certainly raises this question.  Why else would they expose the company to an obvious whistleblower retaliation suit?