When Handing Out $800 Billion, Be Wary of Cheats

Published on February 11, 2009

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When Handing Out $800 Billion, Be Wary of Cheats

Commentary by Ann Woolner
Feb. 11 (Bloomberg) — As Congress opens up the federal spigot to pour hundreds of billions of tax dollars into the withering economy, a thought intrudes.

Considering the astounding size of the economic stimulant, how much of it will stimulate crooks?

We know from Pentagon spending that the bigger and more urgent the government program, the more plentiful the opportunities for those who take more than they are due.

The Senate yesterday approved more than $500 billion in new spending which, along with tax cuts, amounts to an $838 billion stimulus package. Before the week ends, congressional negotiators hope to reconcile it with the $819 billion House version.

This huge new store will be minded by many, the bills say. Inspectors general all over the government get an influx of cash to cover more internal investigations, and a new accountability board will take shape.

The best guard against profligate spending is located deep inside the massive stimulus package. It’s a little, largely unnoticed provision that can put sleuths to work detecting waste, fraud and abuse throughout the country at a cost of precisely zero.

“It’s the only thing that’s going to cost nothing to the taxpayers and will pay out dividends throughout the history of the bill,” says Michael Kohn, general counsel for the National Whistleblowers Center in Washington.

Spotting Fraud

It turns out the most effective way to spot fraud is to reward whistleblowers for pointing it out and protect them from reprisal. Of the $1.3 billion retrieved from alleged government fraudsters during the last fiscal year, $1.1 billion began with whistleblower complaints, according to the Justice Department.

In the 18 years since Congress strengthened its main weapon against fraud, the false claims law, the government has retrieved $21 billion, attributing 78 percent of it to whistleblowers.

Last year’s big fish was Merck & Co., which handed over more than $650 million to federal and state agencies to resolve accusations leveled seven years earlier by H. Dean Steinke, a Merck regional sales manager in Michigan.

He accused the company of paying kickbacks to doctors and hospitals for prescribing its drugs and overcharging states and the federal government. Under federal law, he got a cut of the proceeds: $68 million.

Steinke left the company shortly after he sued it, long before the case finally ended. But for whistleblowers who want to keep their jobs, they need protection, especially if they work for the government.

No-Bid Contracts

Whether it is complaining about billion-dollar no-bid contracts connected to the war in Iraq, reporting glossed-over aircraft safety problems to the Federal Aviation Administration or pointing out that air marshals can’t keep their cover and still follow the rules, insiders have been demoted, humiliated and sometimes fired for speaking out.

The appeals system for them is almost worthless, so pro- government is the special court handling them. When whistleblowers claim retaliation, the court has backed them 1 percent of the time.

Last year whistleblower advocates won approval in both houses of Congress to extend more protection, in part by letting them appeal in different federal courts. But the last Congress ended without reconciling the two bills, so advocates are pressing for it to become part of the stimulus package.

The House stimulus bill carries a provision making those improvements permanent for all whistleblower complaints.

‘Landmark Amendment’

“It’s a landmark amendment to overhaul protections for federal employees,” says Adam Miles, legislative representative for the Government Accountability Project, a whistleblower advocacy group unconnected to the National Whistleblowers Center.

Both versions of the congressional bill contain new protections for state and local government workers, as well as for company insiders. Still, the protections are “a primitive, almost dinosaur version of whistleblower rights,” according to Tom Devine, legal director for the Government Accountability Project. The bills say nothing about such basic matters as burden of proof, for example.

And in letting state and local government workers appeal to federal courts if inspectors general find their whistle blowing frivolous, the bills don’t yet speak to the critical matter of whether state actions are immune from federal oversight.

“Unless they do, it will be false advertising to claim state and local government whistleblowers will be protected” Devine says.

Serious Senate Work

“There’s been real serious work in the Senate to clean up the language,” he says, which he expects to see in the reconciled version.

President Barack Obama and Treasury Secretary Tim Geithner are warning that some aspects of the stimulus package probably won’t work exactly as expected.

But once Congress sharpens the new whistleblower protections, a few billion dollars wasted here or stolen there just might wind up back in the treasury.

(Ann Woolner is a Bloomberg news columnist. The opinions expressed are her own.)

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