U.S. District Judge Amy Totenberg recently fined two whistleblowers $1.6 million for sending e-mails to two reporters in Atlanta about their pending False Claims Act case while it was under seal. The case at issue was filed under the qui tam provisions of the False Claims Act in 2006 by Victor Bibby and Brian Donnelly against numerous lending institutions including JPMorgan Chase & Co., Bank of America, Wells Fargo Bank, Wells Fargo Home Mortgage and Mortgage Investors Corporation.
The whistleblowers, employees of Georgia mortgage broker U.S. Financial Services, Inc., filed the complaint alleging that multiple mortgage lenders defrauded military veterans and the federal government in connection with a Veterans Affairs loan refinancing program. As with all cases filed under the False Claims Act, the case was initially sealed for a period of 60 days while the government investigated and decided whether or not to intervene. As is the norm in qui tam cases, the government obtained several extensions of the statutory seal period.
According to the Daily Report newspaper, almost four years after the case was initially filed, but while it was still under seal, the whistleblowers engaged in confidential correspondence with an investigative reporter and producer at a Fox affiliate television station in Atlanta. Nothing was published by the press, however, until after the case became unsealed approximately one year later.
After five years of investigation, the government ultimately declined to intervene in the False Claims Act case, the case became unsealed, and the whistleblowers proceeded on their own. Subsequently, the whistleblowers settled with all of the defendants except Wells Fargo and Mortgage Investors Corporation. The government recovered approximately $161 million in the settlement. The two whistleblowers shared in around $43 million as their reward under the qui tam provisions of the False Claims Act. Sometime after the settlement, Wells Fargo learned of the whistleblowers’ communications with the news media while the case was under seal. Wells Fargo then moved to dismiss the False Claims Act case citing the whistleblowers’ violation of the seal, despite the fact that news of the lawsuit was not disclosed until after the seal was lifted.
In her January 5, 2015 order, Judge Totenberg denied the dismissal, instead imposing a sanction of $1.6 million against the whistleblowers to be paid to the government within 75 days. The judge stated that, by contacting the media while the case was sealed by law, the whistleblowers “tarnished and jeopardized their ‘whistleblower’ representative role on behalf of the government.” Wells Fargo has since appealed the denial of its dismissal motion.