Will Still Have To Pay, But Only The Feds Will Collect

It's a big court win for the government... and a significant loss for those who may go public with reports of corporate fraud. On Tuesday, the US Supreme Court issued its decision regarding the ability for 'whistleblowers' to collect damages in lawsuits in which the federal government is a plaintiff.

Bloomberg News reports in a 6-2 vote, the Supreme Court ruled retired engineer James Stone is not entitled to a share of the $4.2 million award that he -- and the US government -- won in a 2004 lawsuit against Boeing's Rockwell unit. The ruling reversed a lower court ruling... and may even keep Stone from collecting legal fees.

Stone had filed suit under the US False Claims Act, which allows whistleblowers to sue on behalf of the government when fraud is suspected -- and, to share in any damages recouped. In Stone's case, he accused Rockwell of making false statements about various health and safety activities at the Rocky Flats nuclear weapons facility outside Denver, CO. The government joined the suit after Stone had already filed, reports Bloomberg.

While it may have been Stone who tipped the Feds off to wrongful acts at Rocky Flats, the high court ruled information he provided was not the required "original source" of information concerning the wrongdoing. While Stone may have attracted attention to the problems... those issues weren't what the government ultimately went after Rockwell for, and Stone didn't have access to information on those concerns.

"Stone did not have direct and independent knowledge of the information upon which his allegations were based," Justice Antonin Scalia wrote for the majority, which also included Chief Justice John Roberts and Justices Anthony Kennedy, David Souter, Clarence Thomas and Samuel Alito.

Justices John Paul Stevens and Ruth Bader Ginsburg represented the minority opinion, stating the other justices misinterpreted the False Claims Act. Justice Stephen Breyer did not vote in the case.

Boeing will still have to pay the $4.2 million... but it isn't difficult to see the implications of the ruling, which was sought by business interests looking to quell whistleblower false-claims lawsuits. The logic goes, if there isn't a potential financial incentive to their claim... many whistleblowers will likely opt to steer clear of the ensuing hassle.

The Senior vice president of the US Chamber of Commerce National Chamber Litigation Center, Robin Conrad, called the decision "a very important victory for every government contractor."

"The principal thing the court did is essentially try to preclude [whistle-blowers] from engaging in fishing expeditions," said false claims expert Peter B. Hutt II.

On the other side of the argument, Iowa Senator Charles Grassley, a supporter of whistleblower claims, said the Supreme Court decision should encourage changes to the False Claims Act -- to make sure those who go against their employer with rightful claims receive some compensation.

"The Supreme Court has made it even more difficult to get to the bottom of waste, fraud and abuse of taxpayer money," Grassley said.

FMI: www.boeing.com