Beware the federal government bearing gifts: how the American Recovery and Reinvestment Act of 2009 could become a whistleblowing trojan horse.

AuthorPrior, Ian D.

According to legend, it was Odysseus of Ithaca who devised the plan to end the ten-year trojan War by presenting to the trojans a gift in the form of a giant wooden horse. the Greeks left the horse at the gates of troy and apparently sailed away in an act of surrender. the trojans accepted the gift and brought the horse through the gates and into the city. Unbeknownst to the Trojans, a Greek strike force was hidden in the horse. Late that evening, as the Trojans slept, the concealed Greeks slipped out of the horse and opened the gates to the returning Greek army, who torched Troy and ended the devastating war. The lesson, of course, is to be wary of seemingly generous gifts left at your doorstep because, like the Trojan Horse, those gifts may contain the seeds of the recipient's destruction.

The lesson of the Trojan Horse is nowhere more apparent than in the American Recovery and Reinvestment Act of 2009 (the ARRA or the Act), the federal government's $789 billion economic stimulus plan; (1) an apparent "gift" that could have Trojan Horse-like ramifications for its recipients. The reason for this is the ARRA's whistle-blower protection provision. The provision is designed to prevent state and local governments, as well as their contractors (collectively referred to as "covered employers"), from retaliating against employees who disclose gross mismanagement related to stimulus funds; (2) misuse of stimulus funds; (3) substantial and specific dangers to the public related to the implementation of stimulus funds; (4) abuse of authority related to the implementation of stimulus funds; (5) or use of stimulus funds to violate a law, rule or regulation. (6) The ARRA's whistle-blower protection places a very low burden of proof on the employee-plaintiff, (7) a high burden of rebuttal on the employer-defendant, (8) and does not impose a statute of limitations on the claims of employees. Perhaps most critically, the provision does not require that an employee internally report any perceived wrongdoing. (9) Simply put, given the already alarming trends concerning retaliation claims, (10) the ARRA threatens state and local governments with a flood of bad press and potential litigation relating to the use of ARRA funds. ARRA litigation also creates a paradox because state and local governments will be forced to use already scarce resources to defend litigation engendered by an act designed to assist those governments in the height of financial distress.

At first glance, the ARRA offers a windfall for plaintiffs and their attorneys. Because the underlying cause of any lawsuit under the ARRA--disclosure of prohibited conduct--is so broad, nearly anything a goverment employee discloses could be categorized as prohibited conduct. "Gross mismanagement" could presumably encompass any number of ordinarily innocuous actions, especially considering that an employee need only have a reasonable belief that gross mismanagement has occurred. (11) What constitutes a "substantial and specific danger to public health or safety" is unclear. Furthermore, it is left to speculation whether an employee must have an objective reasonable belief or a subjective reasonable belief that an employer has engaged in wrongdoing.

Such issues are just a few of those employers will face as they try to deal with potential ARRA disclosures, whether those disclosures are made internally or externally. Fortunately, the ARRA's whistle-blower provision is written almost identically to the Federal Whistleblower Protection Act (WPA), which protects federal employees who disclose the prohibited practices of "gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety." (12) It is a well-settled maxim of statutory interpretation that courts "interpret similar language in different statutes in a like manner when the two statutes address a similar subject matter." (13) Therefore, case law interpreting WPA provides a potential blueprint for interpreting the ARRA that may give employers a roadmap in defending potential ARRA lawsuits.

Of course, successfully defending an ARRA lawsuit is a far cry from a triumph for an employer. Rather, success is avoiding litigation altogether, as well as the bad press that comes with allegations of wrongdoing in relation to gross mismanagement of ARRA funds. Therefore, employers that receive stimulus funds should take all necessary precautions to proactively prevent ARRA suits from emerging in the first place. Employers can do so by approaching the problem before it escalates to a situation where retaliation is an issue; namely, by creating an internal system for addressing concerns of prohibited conduct, whether those concerns are valid or not, so that employees are encouraged to choose the internal disclosure option over the external one.

This Article seeks to provide covered employers with guidance in interpreting the ARRA by analyzing case decisions under the WPA and to suggest methods for covered employers to best deal with those disclosures in order to prevent ARRA funds from turning into a Trojan Horse-like gift. Part I details the whistle-blower protection provision contained in the ARRA and lists the prohibited practices which trigger whistle-blower protection when an employee discloses them. Parts II, III, and IV focus on a three-part analysis of "protected disclosures" that trigger whistle-blower protection under the ARRA. Part II addresses what qualifies as a "disclosure." Part III answers the question of whether the employee's belief that he is disclosing a prohibited practice must be subjective or objective. Part IV addresses what actions actually constitute a prohibited practice so as to make the "disclosure" one that is "protected." Finally, Part V concludes by offering insight on future problems the ARRA poses and provides suggestions as to what steps state and local governments, as well as their contractors, can take to limit exposure to ARRA lawsuits.

  1. AN OVERVIEW OF THE ARRA'S WHISTLE-BLOWER PROTECTION PROVISION

    1. Acquiring Whistle-Blower Status

      Included in the ARRA are momentous whistle-blower protections. Section 1553(a) of the ARRA prohibits any non-federal employer receiving federal stimulus funds from firing, demoting, or otherwise discriminating against an employee who undertakes protected action under the ARRA. (14) Protected actions under the ARRA include disclosure by an aggrieved employee of certain information in the ordinary course of an employee's duties to a person with supervisory authority over the employee, to a state or federal regulatory or law enforcement agency, to the Recovery Accountability and Transparency Board (the Board), to a member of Congress, to a court or grand jury, to the head of a federal agency, or to an inspector general. (15)

      To receive protection under the Act, the employee must reasonably believe that the disclosed information is evidence of one or more of the following: gross mismanagement of an agency contract or grant relating to stimulus funds, (16) a gross waste of stimulus funds, (17) a substantial and specific danger to public health or safety related to the implementation or use of stimulus funds, (18) an abuse of authority related to the implementation or use of stimulus funds, (19) or a violation of a rule or regulation that governs an agency contract or grant related to stimulus funds. (20) of these five, Congress only defined "abuse of authority," as "an arbitrary and capricious exercise of authority by a contracting official or employee that adversely affects the rights of any person, or that results in personal gain or advantage to the official or employee or to preferred other persons." (21)

    2. Remedies for Whistle-Blowers Subjected to Adverse Action

      An individual who believes that he has suffered a reprisal for undertaking a protected action has a right to bring a lawsuit in federal court only after exhausting the administrative remedies provided in the ARRA. (22) Specifically, those administrative remedies require that an action must be filed with the appropriate inspector general's (IG) office. (23) So long as the IG determines that the action is not frivolous, does not relate to covered funds, or has not been resolved in another proceeding, the IG then has 180 days, absent an extension, to conduct an investigation into the claim, determine whether there is a violation, and submit a report of that investigation to the employee, the employer, the head of the appropriate agency, and the Recovery Accountability and Transparency Board. (24) The absence of any time limitations on filing a complaint with the IG is noteworthy.

      Within thirty days of receiving the IG's report, the head of the applicable agency must determine whether the employer has subjected the employee to unlawful retaliation. once the agency makes that determination, its head can order the employer to reinstate the employee, as well as award back pay, compensatory damages, and attorney fees. (25) The complainant-employee also has the right to de novo review of his complaint in federal court if any of the following occurs: the IG elects not to investigate the complaint, (26) the IG elects to discontinue investigation of the complaint, (27) the agency head issues an order denying relief, (28) the agency head fails to issue an order within 210 days of submission of the complaint to the IG, (29) or the agency head fails to issue an order within thirty days of the expiration of an extension between the complainant and the IG. (30) once again, there is no time limit with respect to a complainant's ability to initiate suit in federal court.

    3. Burdens of Proof for Employee and Employer

      To succeed in a Section 1553 claim, an employee need not show that the protected conduct was a significant factor in the retaliation, but rather was a "contributing factor." (31) An employee may prove this either by establishing temporal...

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