Fraud Case Probes Limits of Whistleblowing ; High Court Today Takes Up a Vermont Case Examining When a Person Can

Article excerpt

In 1863, at the height of the Civil War, Congress passed a law aimed at punishing corrupt defense contractors who were overcharging the Union Army for its supplies.

The False Claims Act empowered ordinary citizens to sue such profiteers and recover a portion of the fraud as a reward. The law survives today and has won whistleblowers more than $200 million in the past 30 years.

But what happens when the alleged profiteer is a state government? That is the latest federalism question to emerge at the US Supreme Court, where the conservative wing is trying to restore what it views as the proper constitutional balance between the federal and state governments.

At issue in today's case is whether a private citizen can sue a state under the federal act, or whether such a suit violates state sovereign immunity guaranteed by the 11th Amendment.

At its core is a fundamental choice between federal or state power.

The case may also raise the broader issue of whether ordinary citizens who have not been the immediate victim of a fraud against the government have the legal authority to bring such a suit even when the defendant isn't a state government. In the past, the courts have said they do. But recently a federal appeals court in New Orleans threw out a whistleblower case on those grounds.

If the court decides the case on this broad basis, legal analysts say it would mark a major shift in the law and represent a significant setback to whistleblowers.

This "is probably the most important whistleblower case ever argued before the Supreme Court because it goes to the ability of the federal government to call upon its citizenry to defend the law - and whether that fundamental act of patriotism is legal," says Stephen Kohn of the National Whistleblower Legal Defense and Education Fund in Washington.

There is no question that states accused of bilking the federal government should be held accountable. But states-rights advocates say more is at stake than recovery of monetary damages.

Taking sides

Friend-of-the-court briefs were filed by 44 states, four cities, and various educational and social-service organizations. All warn that private false-claims suits against state and local governments, if allowed, would not only threaten the constitutional balance, but also the financial survival of some government groups.

On the other side are the US solicitor general and watchdog groups who argue that when the states ratified the Constitution, they consented to suits by the federal government.

They say citizen-initiated suits under the False Claims Act are the equivalent of suits brought by the federal government because the victim is the federal government. By filing such a suit, they argue, a private plaintiff becomes a kind of government lawyer. …