DOJ Announces $24.9 million Settlement with Guild Mortgage Company

San Diego based Guild Mortgage Company, participant in the Federal Housing Administration insurance program, has agreed to pay $24.9 million to resolve allegations that it caused the submission of false claims for recovery of defaulted home loans. Guild was accused of violating the False Claims Act by knowingly approving ineligible home ownership loans then recovering the insurance payments when the loans defaulted. Prior to underwriting a federally insured loan, mortgage companies participating in the FHA mortgage insurance program must review it for compliance with FHA rules and loan quality control.

The suit was brought under the qui tam provision of the False Claims Act. The whistleblower, former head of quality control at Guild, will receive nearly $5 million for his role in the case.

Read more here: https://www.justice.gov/opa/pr/guild-mortgage-company-pay-249-million-resolve-allegations-it-knowingly-caused-false-claims

Free Virtual Seminar by Online Courtroom Project and NITA

As courts around the country have struggled to continue operations in the face of the unprecedented coronavirus pandemic, each state and the federal courts have issued their own set of guidelines to try and resume trials. However, each jurisdiction, and each judge has also implemented their own set of practices, given their resources, staffing, budget, and judgement. While most of these national, regional, and individual practices have been conducted on a trial and error basis, the goal of this conference is to provide practical recommendations on procedures, resources, and skills for both courts and attorneys who are looking to conduct jury trials in this challenging time.

Dates: November 13, and 20th, 2020

This conference is free of charge. Attendees are encouraged to donate to a designated charity to assist underserved communities gain greater access to technology and the internet.

CLE credit will not be provided for this summit.

Reuben Guttman, from Guttman, Buschner & Brooks, PLLC, will be presenting a panel discussion on Implication for Post-Covid Litigation and Trials.

For Agenda information for this two-day free seminar, visit https://www.nita.org/summit-about?mkt_tok=eyJpIjoiTURreE56bG1OV1ZtTldOaiIsInQiOiJHait4UTcyR1VsNkZwR2M5cWNEMlEwYVwvS25XSTE2dUtsMGNpZmlYdE44aERFQUZudCtFWEIxQUNPXC9ocjJpZHlWa2JKOWZ2OGt4bWxjY2NwVUNyaktXU1BQZ2pUNEZmdmp1c0s1MUN3NXV1c0lnMHQ4ZVwvRFNtRFJtbzhcL3BLZmcifQ%3D%3D

Whistleblowers Beware

By Reuben Guttman

For fraudsters, government expenditures are a license to steal. One thing fraudsters know is that with trillions of dollars in expenditures from federal and state governments in healthcare dollars and bucks for battle tanks and fighter jets, there are not enough eyes watching the till to keep cheaters in line.

Now, in response to a pandemic, the government has pushed over $2 trillion out the door in stimulus money. Government dollars will be earmarked for grants, loans, and for the procurement necessary to battle the COVID-19 pandemic and mitigate the economic consequences of the consequent quarantine.

With government investigators already stretched too thin in enforcing compliance, there will be a need for whistleblowers to pick up the slack. Whistleblowers are no more than everyday honest citizens with an inherent litmus test fabricated from common sense and integrity which causes them to raise questions when they see impropriety. Though the current President has through his words and conducted attempted to cast a pall over the conduct of whistleblowers — particularly as they have lent transparency to his conduct — the truth is that we are a nation whose rule of law was tempered for the better by the work of whistleblowers. Those challenging the statute quo eradicated the evil of slavery, brought voting rights to women, worked to eradicate discrimination in our educational systems, and have challenged workplace harassment and discrimination based on race, gender, religion and sexual orientation. Whistleblowers have exposed unlawful pharmaceutical marketing practices and scams by fraudsters selling college and graduate degrees.

Whistleblowers now have a new challenge. In the provision of healthcare supplies and healthcare itself, they will have an opportunity to be the watchful eyes who can protect government expenditures and the quality of healthcare. In businesses — large and small — across the country they can monitor applications for government grants and loans and make their voices heard when they see impropriety.

For those who step forward and seek to bring transparency to wrongdoing, there is in existence a law dating back to 1864 that provides individuals the right to step into the shoes of the government, report fraud, and bring litigation in the name of the government to seek economic redress on behalf of the government. That statute is called the False Claims Act allowing redress against those who cheat the Federal Government. More than 20 states — including California, New York, Illinois and Florida — have their own False Claims Acts allowing whistleblowers to bring litigation when the fraud involves sate dollars.

There has been over the past several weeks clamor about the importance of this statute and perhaps a need to amend it to make it more effective in batting the fraud that will arise out of the misuse of stimulus dollars. Those who litigate under the False Claims Act know that the law was thoughtfully drafted and is effective. It needs no amendment. What is needed is an administration that fully respects the importance of whistleblowers. Americans need an administration that will fully staff — at the agency level — the ability to investigate and analyze the information and complaints brought forward by whistleblowers. We need an administration committed to imposing the full panoply of damages — treble actual damages and civil penalties — on wrongdoers. And we need an administration that goes after individuals and not merely the corporate shells that provide cover for their misconduct.

Whistleblowers are our heritage; they are an American tradition. Honoring them and protecting our stimulus dollars means aggressive enforcement compliance under a law that is on the books and works.

COVID-19 Will Lead to New False Claims Cases

The COVID-19 virus is inspiring new private-public relationships that will lead to a new generation of whistleblower cases under the Federal False Claims Act.

Government is injecting billions of dollars into the private sector for medical devices and necessary healthcare equipment. The private sector is now supplying everything from tests to masks and ventilators. In the massive purchase of products and services there is not a corresponding gearing-up in oversight. Whistleblowers will be essential in documenting defective products, and false billing for services or products not supplied or rendered.

The fraud will not just be limited to medical products; state and federal governments are spending billions to build temporary medical facilities and there is no doubt that there will be fraud, waste and abuse in their construction.

To keep the economy from collapsing, the government has made grants and loans worth billions of dollars. Recipients of government funds must make truthful representations on their loan or grant applications and they must continue to meet the requirements of the loan or grant for an extended period of time. The conditions of receipt of government funds are as detailed as the requirement that a recipient remain neutral in a union organizing campaign; in other words, ripe for misuse.

The bottom line; COVID-19 has created a new role for whistleblowers.

Shadowboxer: Dan Guttman, a lifetime investigating the government’s “shadow workforce” of contractors

Federal procurement is not a subject that makes for compelling television, but procurement scandals can be good drama, which is why on Nov. 30, 1980, the CBS newsmagazine 60 Minutes aired a story that suggested private contractors were running the Energy Department. Outside consultants, intoned correspondent Morley Safer, seemed to do everything for Energy. They assembled the department budget. They wrote congressional testimony for Energy officials. They were the “bureaucrats’ bureaucrats,” Safer said.

On the 1980 videotape, you see a parade of lawmakers press the case against Energy, including Sen. David Pryor, D-Ark. Then you meet Dan Guttman, a fast-talking investigator who works for Pryor. Guttman says Energy’s use of consultants portends a great shift in how government works. “The public is not aware who is making decisions in this country,” he tells Safer. “We find agencies delegating large chunks of [themselves] to one or more firms over a number of years and, in effect, saying, ‘Run this portion of the agency.’ “

The camera clearly likes Guttman. He tells jokes, he gestures wildly with his arms, he gets more airtime than his boss. At one point, Safer even turns the microphone over to Guttman and lets him interrogate John Hewitt, Energy’s chief financial officer. Guttman also gets the last word: “You name what government does and we have found contractors doing it,” he says. “You get up close, it looks like a conspiracy, but really it’s chaos.”

Guttman has spent his career in the middle of this chaos. In the early 1970s, fresh out of law school, he co-wrote The Shadow Government (Random House, 1976), an exposé of the federal consulting industry. Since 1980, he has been part of nearly every congressional effort to scrutinize the government’s use of contractors. Along the way, he became convinced that the government’s increasing reliance on private companies raises basic, even constitutional, questions of accountability. He believes that most agencies can no longer effectively oversee their contractors and that existing oversight tools-such as setting performance standards in contracts-often don’t work.

“There are two sets of tools that we have for [contractor] accountability,” Guttman says. “One is legal-the presumption that only governmental officials can do certain work. That tool isn’t working. And then we have management tools, such as performance contracting. My observation is that those tools aren’t working either. Neither one of them is working in prime time.”

Needless to say, not everyone agrees. “Look, this is not some kind of Wild West show where everyone is just running amok,” says Stan Soloway, president of the Professional Services Council, an Arlington, Va.-based association that represents contractors. “I don’t believe there are very many examples of government procurement that raise the issues Guttman worries about,” says Steven Kelman, a professor at Harvard University’s Kennedy School of Government and former federal procurement administrator.

Although Guttman is not opposed to contracting in principle, he is associated with efforts to curb the use of contractors. Pryor cut agency budgets for consultants and waged an unsuccessful campaign to make federal contractors register all of their clients with Congress, just as lobbyists must do. Rick Goodman, a former Pryor staffer who worked with Guttman, remembers their icy relations with industry during a 1989 investigation. “The consulting industry thought we were a bunch of bomb throwers,” he says.

Professionally, Guttman defies easy description. A practicing attorney, he still represents whistleblowers and teaches graduate level courses in government at Johns Hopkins University. He is part lawyer, part historian, part gumshoe investigator. “We don’t have a discipline in law that [covers] what Dan does,” says Sallyanne Payton, a professor at the University of Michigan Law School, who met Guttman through the National Academy of Public Administration. “I think he’s more of an activist,” offers Jody Freeman, a professor at the UCLA Law School. In an e-mail, Guttman notes that many of his friends have started think tanks, and playfully wonders whether his interests could fit that mold: “How does the ‘Center for the Study of Public Functions by Nongovernmental Entities’ grab you?”

Guttman the person leaves a clear impression. With his unkempt hair and dark, darting eyes, he radiates intellectual intensity. When he wears his raincoat, he resembles television’s rumpled detective, Columbo. He is an incessant talker, the master of the marathon conversation. Spend some time with him and you realize he treats life as if it were a never-ending college seminar; every topic holds interest, every issue, no matter how obscure, must be wrestled to the ground. “Obscure and arcane is where Dan lives,” says Nancy Bekavec, a law school friend who is now president of Scripps College in Claremont, Calif. “If you gave him the choice of going to see a Mongolian rap artist, or Britney Spears, he would assume all the cool people were going to see the Mongolian rap artist.”

Guttman devours information. As staff director for the Presidential Commission on Human Radiation Experiments in the mid-1990s, he would literally wade into archival agency documents. “Every day we got a shipment of documents, and Dan would not wait for them to be processed. He would go in and start opening the cases and rifling through them,” remembers Gregg Herken, a Cold War historian who served on the commission.

Guttman’s investigations have made him a walking encyclopedia of government arcana, which he generously shares. “He helped me realize that the Library of Congress was basically run by contractors,” says 60 Minutes correspondent Andy Rooney. “It was a shocking revelation to me.” Rooney hired Guttman to do research for Mr. Rooney Goes to Washington, an award-winning CBS program broadcast in 1975.

Guttman seems genuinely indifferent to material things. In 1997, he left a job as a commissioner of the Occupational Safety and Health Review Commission partly because he felt guilty making a six-figure salary for a job that required little work. “It was an easy job, a good solid salary, and Dan was miserable,” says a friend.

Guttman has never held a management position in an agency, nor had any official authority over procurement rules. Yet he has found a way to influence contracting policy-or at least to be a thorn in the side of those making it-through his investigations and lawsuits. His work has helped set the parameters of the current debate over outsourcing federal operations. For example, the idea that certain jobs are “inherently governmental,” and must be performed by civil servants, dates to 1960s-era policies. But it only got legs-and a place in the 1998 Federal Activities Inventory Reform (FAIR) Act-after a 1989 investigation of federal contracting in which Pryor and Guttman pressed the General Accounting Office to define the limits of inherently governmental work: Should contractors be allowed to write official testimony? Or interpret regulations?

Now, in a new era, with no big lawsuits or congressional investigations on the horizon, Guttman is trying to focus attention on the government’s haphazard approach to outsourcing, which in his view raises constitutional questions. The framers sought to protect citizens from an overzealous government by enacting a Bill of Rights; the same concern led later generations to enact laws such as the 1887 Hatch Act and the 1974 Freedom of Information Act, which seek to control the behavior of federal officials. “The Constitution and all these statutes are directed at protecting us against the abuse of power by government actors,” Guttman says. “Well, what happens when private contractors, who aren’t covered by these laws, do much of the government’s work?”

Guttman’s arguments confound some procurement experts. Larry Wright, a senior vice president at consulting firm Booz Allen Hamilton, doesn’t see the constitutional link. “I’ve never heard these oversight issues characterized as constitutional issues before,” he says. “It’s the legal view,” says Chip Mather, a senior vice president with Acquisition Solutions Inc., a procurement firm based in Chantilly, Va.

Guttman carries a staggering amount of information in his head, and it can be overwhelming when unleashed on the uninitiated. His most recent congressional testimony included 49 endnotes in 15 pages. “Part of the challenge for Dan is for the world to know what he knows,” says Charles Lewis, director of the Center for Public Integrity, a Washington-based network of investigative journalists.

Guttman approaches contracting from the fields of history and law; his arguments hinge on a certain understanding of how contracting changed with the Cold War. They also grow out of his experience doing something very few other people have ever done-studying actual contracts.

CRACKING THE CODE

In the summer of 1971, Guttman walked into a contracts office at the old Health, Education and Welfare Department. He was searching for a report. “Help yourself,” said the man at the desk, and, over the next few weeks, he did. Poring over contract files, he discovered that most HEW contracts went to a few well-connected firms, often without competition. He read scathing letters from Lois Ellin Datta, head of evaluation for the Head Start program, to her contractor, the Stanford Research Institute. In its final report, Stanford had plagiarized papers she had published. “Can’t your staff think for itself?” she demanded. He found few contracts with performance standards. For example, a contract with RAND, a research organization, for an analysis of the distribution of doctors in rural areas simply declared, “As to the essential features of the performance, the best that can be bargained for is the contractor’s best effort.”

At the time, Guttman was one of “Nader’s Raiders,” the young progressives who churned out exposés of government and corporate America for consumer advocate Ralph Nader. This didn’t stop him from making friends with HEW staff. He joined them for coffee breaks. He answered the phone when they went to lunch. By the time someone questioned his presence in the office, he had already read through all the files. Guttman would have better moments as an investigator, but none that so vividly showed how contracting worked behind the scenes.

“It was like cracking the code,” he remembers. “When you get to the inside documents, you find too many cases where the light is on but nobody is home.”

Guttman was fascinated by the role of think tanks in setting public policy, not an unusual concern in the circles he traveled in. He grew up in White Plains, N.Y., the eldest of three brothers. A mediocre student in high school, he went to the University of Rochester, where he was a big fish in a small pond. Guttman was student body president, editor of the student newspaper, and an intramural wrestling champion. In 1968, his senior year, he helped lead student protests against Dow Chemical, the manufacturer of napalm, when the company came to recruit on campus.

In 1969, Guttman enrolled at Yale Law School-where it seemed that almost everyone was studying something besides law. Guttman’s friend Robert Peck studied architectural history; one student spent most of his time writing poetry. Guttman was no exception, quickly immersing himself in research on federal consultants.

Guttman loved to tell stories about the scandals he found. Peck remembers Guttman stopping him in the hall of their dorm. “‘Listen to this, isn’t it outrageous?'” he would say. But Peck and others wondered what the stories really proved. “I said, ‘Dan, it’s a lot of anecdotes, but what does it add up to?’ ” says Peck, a former commissioner of the General Services Administration’s Public Buildings Service, who is now president of the Greater Washington Board of Trade.

While still in law school, Guttman and Barry Willner, a fellow Nader researcher, decided to write a book about the consulting industry that had grown up around agencies, and to discuss the policy issues it raised. The result was The Shadow Government. “Barry and I could have easily shown that procurement rules weren’t followed,” says Guttman. “But we wanted to know how well the system was performing-whether it was providing successful results.”

They showed how the spread of management fads, such as the Defense Department’s Planning-Programming- Budgeting System, gave contractors entry into agencies. They also showed the role contractors played in bureaucratic turf wars. The book highlights the experience of Donald Rumsfeld, the young director of the Office of Economic Opportunity, who used contractors to gain leverage over a defiant career workforce. “Don found himself with a bureaucracy that hated him,” said Dick Cheney, then Rumsfeld’s assistant, now vice president, in an interview with Willner. In 1969, shortly after being appointed by President Nixon, Rumsfeld tapped Booz Allen Hamilton and Arthur Andersen to reorganize the agency. The new organization chart had no positions for 108 civil servants, who were left to wander the halls.

The book takes a stab at explaining the influx of contractors into government, a theme Guttman expanded on in later writings. He attributes the rise of the federal consulting industry-or the “contract bureaucracy,” as he calls it-to a group of mid-century reformers who believed government had to tap business and academia in order to carry out new missions given Americans’ aversion to big government. A pivotal text for him is The Scientific Estate (Harvard University Press, 1965) by Don Price, the first dean of Harvard’s Kennedy School of Government. Price argued that the then-emerging network of think tanks, universities and government created a “diffusion of sovereignty.” Guttman also points to Business in the Humane Society (McGraw-Hill, 1971), by John Corson, an influential McKinsey & Company executive, which heralds contracting out as a “new form of federalism” that enables the government to accomplish new tasks with help from industry.

The new approach came to life in organizations such as RAND, Aerospace Corp., and Mitre, nonprofits created during the Cold War to run Air Force weapons programs. It also took root in NASA and Energy, two agencies designed to be heavily dependent on contractors. Guttman believes government has not yet come to terms with the implications of these reforms.

THE WORK OF GOVERNMENT

Guttman doesn’t lose much sleep over the procurement of goods-the purchase of “ketchup and paper plates,” as he puts it. His interest lies in the government’s use of contractors to provide policy advice and management services, which he calls “the work of government.” The Shadow Government purports to reveal “the government’s multibillion-dollar giveaway of its decision-making powers to private management consultants, ‘experts,’ and think tanks.” Today, Guttman is less inclined to see wholesale contracting out as a scandal, but he is more critical of a federal culture that presumes agencies have the capacity to oversee contractors, despite evidence to the contrary.

Guttman says he’d prefer it if Office of Management and Budget Circular A-76, which governs federal outsourcing efforts, simply said, “If you want to contract out everything in the Defense Department, be our guest, but that may mean there’s no one left inside government who can monitor the contractors. Before you outsource, you should have to attest that there is adequate oversight capacity in place, or explain why it isn’t needed.”

That oversight, Guttman says, involves more than simply auditing to control cost overruns. His chief worry is that outsourcing will make government less accountable to the public. Contract employees are not listed in agency employee directories, and some contractors do not publicize their federal clients, making it hard to gauge their influence. Openness laws such as the Freedom of Information Act apply to civil servants, but not to for-profit contractors. Federal employees and contractors are both prohibited from acting in areas in which they would have conflicts of interest, but the rules for civil servants are much stricter and include criminal penalties.

Guttman believes these differences are anything but academic. He loves to cite a 1998 dispute in which the electric power industry came face to face with the rules governing the contractor workforce. Concerned about new clean air rules proposed by the Environmental Protection Agency, power companies tried to obtain the data underlying the rules. The EPA refused, noting the data was maintained by Harvard University, which had developed it under an EPA grant. So the companies took their concerns to Congress, which, over howls from nonprofit organizations and universities, amended FOIA to allow public access to their federally sponsored research. “Regulated industries urged openness in government, while nonprofits complained that the application of FOIA to them would be chilling to their activities,” says Guttman.

Because contractors and civil servants are governed by different rules, efforts to blur the boundaries between the two workforces are extremely troubling to Guttman. The notion that civil servants and contractors are interchangeable, except where “inherently governmental” work is involved, is a central premise of President Bush’s competitive sourcing initiative. It animated the Clinton administration’s “reinventing government” campaign as well. To Guttman, this argument ignores the essential differences between the public and private sectors. “Both the Clinton/Gore reinventing government [initiative] and the Bush management agenda aim to render civil servants more ‘contractor-like,’ but do so with little or no reflection on the fact that our long-standing laws do not now provide for the blurring of the boundaries between official and contractor status,” he says.

Critics reply that laws such as the Freedom of Information Act and the Hatch Act have little bearing on the kinds of jobs at stake in the push to subject federal work to competition in both the Bush and Clinton administrations. “By no stretch of the imagination does the question of contracting for laundry services at Veterans Health Administration hospitals raise any of the issues that [Guttman] most strongly worries about,” says Kelman. In theory, jobs that do raise these issues are protected from outsourcing by the principle of “inherently governmental” work.

But in practice, Guttman notes personnel ceilings often force agencies to hire contractors to perform new work, whether it is inherently governmental or not. And the principle says little about whether outsourcing will help an agency’s mission. The Defense Department now uses the concept of “core” and “noncore” jobs to guide its outsourcing decisions.

“People in Defense know ‘inherently governmental’ is not an adequate concept,” says Guttman. He notes that the principle has not stopped agencies from contracting out procurement oversight or military logistics work in Iraq-both tasks Guttman considers to be “the work of government.”

Guttman’s legal cases have left him deeply skeptical of government’s oversight ability. In 1993, Energy proudly unveiled a new strategy for the cleanup of nuclear weapons plants: The contractors running the plants would subcontract the cleanup to other private firms, bringing new expertise to the cleanup effort. Subcontracting allowed the firms to replace the longtime federal workforce at the plants, which was represented by the Oil, Chemical & Atomic Workers Union and its attorney, Guttman. When a subcontractor took control of the cleanup at Fernald, Ohio, the union filed suit in U.S. District Court to prevent layoffs.

During the discovery process, Guttman obtained contract documents suggesting Energy had little idea what its new subcontractors were up to. In its health and safety plan, the Fernald subcontractor instructed workers not to tell Energy inspectors about possible problems at the plant. These revelations grabbed Congress’ attention, and the subcontractor quickly settled the case with the union, retaining its workforce.

But some of Guttman’s adversaries say the world of federal procurement is different now than when he did the bulk of his research. Agencies today prefer to do business with a single integrator that oversees many firms, each of which has a specific role, making conflicts of interest easier to prevent, they argue. “It’s absolutely true that in the last 20 years, government has tightened up on a lot of things,” says Booz Allen Hamilton’s Wright.

When Peck went to the Public Buildings Service in 1995, he had few plans to hire outside contractors. But then he realized that his leasing staff lacked in-depth knowledge of the real estate market. And Congress was pressuring the agency to outsource. So Peck hired real estate firms to provide leasing advice to PBS offices in each region of the country. “That’s a pretty good way to use contractors,” he says. “If Dan had the chance to run a big agency, I think it would be really interesting to see where he would draw the line on contractors.”

GETTING AT THE TRUTH

It’s not easy to picture Guttman as an agency head. He is too iconoclastic to follow party orthodoxy, and seems physically unable to speak in sound bites. “You could never quite be sure what he might say or do,” says Bekavec. “Dan fiercely wants to get to the truth and he’s going to get there no matter what.”

When asked what he would do if he had a top management position-Kelman’s federal procurement administrator job, for instance-Guttman hesitates. “I wouldn’t know where to start,” he says. He imagines many of his ideas would face resistance from contractors, an assessment shared by his friends. “If my job is to contract out, do I really want to do less of it or do it more carefully?” asks a colleague.

Guttman believes he can have more of an effect on the outsourcing debate from his perch in academia. When he left government in 1997, he hoped to draw attention to the basic questions of accountability posed by outsourcing. He and an eclectic group of friends in academia and at nonprofit groups are studying how contractor accountability affects everything from warfare to Medicare.

He explores the same issues in the classroom. On Wednesday evenings, Guttman teaches a seminar at Johns Hopkins’ center in Washington. Its purpose is to explore the American tradition of harnessing private interests to serve the public interest, a theme that hopscotches from The Federalist Papers to present-day outsourcing arrangements. In the seminar’s second meeting this fall, Guttman paced across the front of the room, discussing Alexander Hamilton’s proposal for a national bank. The bank was designed to give the federal government a role in the nation’s economic development, while also helping the merchant class. “Today, we would call it a public-private partnership!” he exclaimed.

Guttman believes the time is right for another top-to-bottom look at the government’s use of contractors. “It’s a good time for someone to say, here are the bigger questions that aren’t getting attention,” he says. “And then you’ll see some congressmen asking questions. And once they do, they’ll see that federal officials are not completely in control of contractors.”

This is a remarkably timeless article from 2003 by JASON PECKENPAUGH, for Govexec.com, about Dan Guttman, of counsel, Guttman, Buschner & Brooks, PLLC.

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