Free Virtual Seminar by Online Courtroom Project and NITA

Reuben Guttman Articles, Whistleblower Articles, Whistleblower Resources

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

Reuben Guttman Articles, Whistleblower Articles, Whistleblower News, Whistleblowers Blog

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

Reuben Guttman Articles, Whistleblower Articles, Whistleblowers Blog

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

Dan Guttman Articles, Whistleblower Articles

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.

Corporate Crime Reporter: Reuben Guttman on the Failure of Corporate Compliance

Reuben Guttman Articles, Whistleblower Articles

Corporate Crime Reporter, Volume 34, Number 3, Monday, January 20, 2020

REUBEN GUTTMAN ON THE FAILURE OF CORPORATE COMPLIANCE

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says.

“WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model,” Guttman told Corporate Crime Reporter in an interview last week.

“Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it,” Guttman said. “I have litigated against Abbott Labs. The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. It resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.”

“What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I s_aw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill.”

“Compliance programs in part are being used to assuage people and not make them second guess because they believe someone else is taking care of it.”

“When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal.”

“But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.”

“And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?”

“Our niche as a law finn is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice.”

“Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance? Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015. It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance.”

“I come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful. If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act.”

“In many respects you have compliance programs that are analogous to company dominated unions. Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do
with it.”

“Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation. For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.”

If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose? “I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.”

“I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?”

“The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not. At the least, you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.”

“Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?”

A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharnrnceutical industry – “Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing.

These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say – we have to take the 73 7 M AXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.”

“In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.”

Is there any evidence that the government corporate criminal enforcement program is deterring wrongdoing? “Based on the wrongdoing I’ve seen, no.”

“Each of the big phannaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.”

“The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact. What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.”

INTERVIEW WITH REUBEN GUTTMAN, GUTTMAN, BUSCHNER & BROOKS, WASHINGTON, D.C.

Internal corporate compliance programs do nothing to address pervasive wrongdoing central to a company’s business model.

That’s the take of Reuben Guttman of Guttman, Buschner & Brooks in Washington, D.C.

“This I know from 30 years plus of litigation against corporate wrongdoers,” Guttman says. We interviewed Guttman on January 13, 2020.

CCR: You graduated from Emory Law School in 1985. What have you been doing since?

GUTTMAN: I have been doing litigation against large corporations. Between 1985 and 1990, I was counsel to the Service Employees International Union.

I was the chief outside counsel to the Oil Chemical and Atomic Workers Union (OCA W). l represented OCA W in the nuclear weapons sector. I brought significant cases against the Department of Energy and environmental and safety and health issues.

I have had a corporate fraud practice under the False Claims Act and other statutes. I have been involved in cases against the major pharmaceutical companies – Pfizer, GlaxoSmithKline, Wyeth, Celgene, Abbott Labs. And collectively these cases have resulted in recoveries totaling $6 billion.

I have done lots of litigation under the Fair Labor Standards Act against the meatpacking industry involving meatpackers in the midwest.

Primarily my expertise is corporate fraud and mismanagement. I bring securities class actions based on breaches of fiduciary duties. I have litigated the issue of whether the Hershey Corporation had to make disclosures about records regarding its use of child labor in the Ivory Coast and Ghana.

I have had a pretty broad practice over 35 years. I have reinforced that through teaching at various law schools – including Rutgers and Emory.

I’m writing a book on pre-trial litigation which will be published by Walters Kluwer hopefully in the fall. My co-author is Jason Lore at Rutgers.

I do a regular blog for the National Institute of Trial Advocacy called The Rule of Law blog. I was on the board of directors of the American Constitution Society for six years – I’m now on the advisory board. It’s been 35 years of an eclectic practice.

CCR: What is the primary practice of your law firm?

GUTTMAN: It is complex litigation involving corporations.

CCR: Is your practice exclusively plaintiffs’ side?

GUTTMAN: Yes.

CCR: What percentage of your practice is False Claims Act?

GUTTMAN: Seventy percent.

CCR: Other than False Claims Act, what kind of cases do you bring?

GUTTMAN: We have a large class action under ERISA against the mortgage servicers. It’s a novel theory. The court has sustained our complaint. I’m sitting in South Carolina now.

We are settling a civil rights class action against the South Carolina prison system. The settlement will require the treatment of thousands of prisoners for Hepatitis C. It has partially settled already. It requires the state to test prisoners.

We are involved in derivative litigation in Delaware.

CCR: You are primarily a False Claims Act firm.

GUTTMAN: We actually litigate non-intervene cases. For Celgene, we settled on the eve of trial. We took tons of depositions. We are trial lawyers. We are not lawyers who put the case in play hoping the government will settle.

Right now we are suing Massachusetts General Hospital in a non intervene case. We are litigating against a urologist in New York City in a nonintervene case. We settled the intervene portion of it for $12.3 million in November.

We are always in discovery, we are always taking depositions.

CCR: Are you saying that the majority of your False Claims Act cases are non-intervene cases?

GUTTMAN: A decent percentage of them. We litigate more False Claims Act cases than anybody else in the country. That’s just my perspective.

CCR: How many False Claims Act cases do you have going at any one time?

GUTTMAN: We get anywhere between 500 and 1,000 knocks on the door a year. We will cull that down to four, five or six False Claims Act cases that we take a year.

We vet these cases so heavily that by the time they get to the government, the government is looking at a case that is strong on the merits.

CCR: You have a strong filter. Do you know pretty much know within the first couple of minutes of talking with a whistleblower whether or not it’s going to be a case for your or not?

GUTTMAN: We can tell from the first twenty or thirty minutes. Let me give you an anecdote. A number of years ago I had a case against Abbott Labs.

The case settled for $1.6 billion. 1 asked the government lawyer a little while after the case settled – when did you realize it was a good case? And the government lawyer said – about 30 minutes into the client interview. We can pretty much tell up front whether it has some heft, whether it’s a case that we are going to dig into and investigate. There are ways to eliminate cases quickly.

CCR: How many cases are you carrying at any one time?

GUTTMAN: Dozens.

CCR: How many cases do you settle a year?

GUTTMAN: In the last five years, we have been resolving four or five cases a year.

CCR: We posted a story on Twitter from the Wall Street Journal about an interview with a Justice Department official, Matt Miner. He was talking about how internal compliance programs can help prevent corporate crimes. You went onto our Twitter feed and wrote – “Internal compliance programs do nothing to address pervasive wrongdoing central to a company’s business model, as in Enron, Tyco and WorldCom. This I know from 30 years plus of litigation against corporate wrongdoers.”

I read that to Duke Law Professor Sam Buell. He told us this – “This guy is saying – I’ve seen companies spend lots of money on compliance and it didn’t make a difference because they were thoroughly corrupt and everyone in the company didn’t care about compliance. But other people will say- I’ve seen companies with good compliance who generally stayed away from enforcement actions. Or I’ve seen companies with bad compliance but they got better; and their problems with the government decreased. Everyone is talking anecdotes. Companies are enormously complex. They are the most complicated things we have in our society. They become extremely difficult to study empirically.”

GUTTMAN: I was at Milberg Weiss and Grant & Eisenhofer. At Milberg, we were part of the Enron litigation. Milberg was also part of the Worldcom litigation.

When I was at Grant & Eisenhofer, they were part of the Tyco litigation. WorldCom, Enron and Tyco all had on paper compliance programs that would impress the lay person and might impress somebody teaching at a law school. But the misconduct was ingrained into the business model.

Where the conduct is pervasive and part of the business model, the internal compliance program is not going to correct it. I have litigated against Abbott Labs.

The company engaged in pervasive misconduct with regard to the marketing of the anti-epileptic drug Depakote. lt resulted in both civil and criminal sanctions against the company. It was a total $1.6 billion settlement.

What we found in the Depakote case was that the existence of the corporate compliance program assuaged insiders in the corporation so that they thought there could be no wrongdoing going on. It is like – I saw the doctor last week so I can’t possibly be sick when in fact you could be terminally ill. Compliance programs in part are being used to 14 CORPORATE CRIME REPORTER MONDAY JANUARY 20, 2020 assuage people and not make them second guess because they believe someone else is taking care of it.

When we first interviewed our original client in the Depakote case – is your company off label marketing the drug? And the answer was – no, we are not off label marketing the drug. We have an internal compliance program. Everything we do is legal. We are told everything we do has to be legal. But when we started getting into the actual facts of how the drug was being marketed, we saw major problems. Internal compliance programs have the ability to convince people that there can be no wrong. We saw the same situation in GlaxoSmithKline involving a number of drugs. I think the False Claims Act settlement was $1 billion. We settled on the eve of trial against Celgene for $280 million.

And the sales people say – we do no wrong, we are a terrific company. I have written an article about this for the Safra Center for Ethics at Harvard Law School. It’s titled – Internal Compliance – Is It Really About Compliance?

Our niche as a law firm is challenging corporate conduct that is pervasive and intertwined with the business model of a corporation. The conduct is so central to the business model that if you take out the conduct, it will materially impact the value of the company. It’s shareholders will take notice. Where you have conduct that is central to the business model, the compliance program won’t do much. Will it make people think more about compliance?

Maybe it couldn’t hurt. But what makes people sit up and notice is the Sally Yates memo of September 2015.

It says, when corporations get into trouble, we are going to be looking at individual liability. The reality is that corporations can’t do what they do absent the conduct of individuals. That is going to be the best way to enforce compliance. 1 come from a labor background. Statutory labor law has been around for about 80 years. One of the things that is central to labor law is that company dominated unions are unlawful.

If a company says – you don’t need a union, we have our own union, go join our union – that’s a violation of the National Labor Relations Act. In many respects you have compliance programs that are analogous to company dominated unions.

Instead of an outside entity doing the investigation and making transparent the wrongdoing, the internal compliance department is the first vacuum that sweeps up the information. And the corporation decides what they want to do with it.

Sometimes the information that the whistleblower is reporting has significant impact not just within the corporation but to parties outside the corporation.

For example, let’s say you have a drug that is being marketed for the wrong purposes, or a drug that has been adulterated, or a medical product that is problematic and the company doesn’t resolve the full results of tests.

We are now suing Massachusetts General Hospital for overlapping surgeries. The allegations are that they completely overlapped.

CCR: What do you mean by overlapped?

GUTTMAN: In the orthopedic area, you book patients whose~urgeries overlap. The surgeon is running from one surgery to another. We just settled such a case against another hospital in New York City. It’s a Medicare fraud case.

CCR: If compliance programs are not working, if it’s an internal police force controlled by the corporation, what do you propose?

GUTTMAN: I’m not suggesting eliminating internal corporate compliance. I’m suggesting you not rely on it as the panacea. Maybe it doesn’t hurt. But don’t count it as the solution. Recognize that it has a serious potential to be a mechanism to conceal wrongdoing.

I debated somebody a number of years ago on Bloomberg. We were discussing the SEC whistleblower program. And the question was – must you go to internal corporate compliance first before you go to the SEC?

The corporations, the Chamber of Commerce was saying – you must go to corporate internal compliance first before you go to the SEC. My perspective was – absolutely not.

At the least you should have a choice. You don’t know whether the corporation is going to make transparent the problems that may not only impact the bottom line for the shareholders, but may involve life saving devices for consumers or devices like automobiles that cause injury.

Look at the GM ignition switch case. Look at Boeing. Boeing is classic. Do you really want the 737 MAX to be something that is investigated by internal compliance, remains in internal compliance and never sees the light of day?

CCR: A strong internal compliance program would find the problem, resolve the problem and report it to the government. But from your experience within the pharmaceutical industry –

GUTTMAN: Not just the pharmaceutical industry. But look at GM and the ignition switch. Look at Boeing. These programs just don’t work. If these programs were working, we wouldn’t be seeing the pervasive wrongdoing we are seeing. Internal compliance is not going to have the leverage within a corporation to say- we have to take the 737 MAXs out of the air. That’s a really tough call for a corporation to make. That’s why you need outside regulators. You shouldn’t be cutting the company slack because it has an internal compliance program.

In fact, if the company has an internal compliance program and you found that the company engaged in wrongdoing, it is worse, because it means the internal compliance program wasn’t working. It means it was worthless.

CCR: Is there any evidence that the government corporate criminal enforcement program is detening wrongdoing?

GUTTMAN: Based on the wrongdoing I’ve seen, no.

Each of the big pharmaceutical frauds I have seen, the companies are paying amounts of money that cause the public to take notice. But in fact, what is going on is much of the litigation across the board is effectively setting a fee for a license to break the law.

The litigation is not having an impact. I don’t think the corporate compliance programs are having an impact.

What will have an impact is sticking to the letter of the Sally Yates memo of September 2015.

CCR: Of your practice, what part of the False Claims Act cases are FCPA or Medicare fraud or other?

GUTTMAN: There is overlap. You could have a situation where a company is unlawfully marketing a drug. And they are not making that disclosure to the public. In a large pharmaceutical fraud case, you are going to have a securities component. We have been involved in a number ofFCPA cases.

CCR: Has the plaintiffs bar moved over the years from primarily class actions to primarily False Claims Act cases now?

GUTTMAN: It’s a complicated question. Elizabeth Burch is a professor of law at the University of Georgia. She has just published a book titled Mass Torts. It would be worth interviewing her on this.

In 1965, Ralph Nader published Unsafe at Any Speed. Before that book, people thought – if you got into a car accident, it was your fault. Nader made people think – it could be a defect in the automobile. He was the impetus for plaintiffs’ class
actions.

In 1968, Congress passed the multi-district litigation (MDL) statute. The courts needed to figure out how to address the 3,000 price fixing cases in the electrical transmission industry. There was an informal mechanism to do that. And that was codified in 1968.

With the rise of the class actions, the defense bar organized and made it harder to certify a class action. I’m actually arguing a class action certification case tomorrow, so it’s on my mind.

By the 1990s, you had two Supreme Court asbestos cases. And with those cases, the Supreme Court made it more difficult to certify class actions. Because cases were not being certified, you had all of these mass tort cases being brought as individual cases. Lawyers on both sides sought to use the MDL process.

It’s not that people are moving into false claims as much as people are moving into these MDL mass tort cases.

Of course, some product liability attorneys want to get into the false claims area. But the reality is that the false claims bar, to some degree, is the impetus for a lot of these cases. We bring the big pharma false claims cases and other cases follow.

Another thing that has been happening is that the courts have been cracking down on access to the courts. The pleading standards have been toughened.

When I got out of law school, there was something called notice pleading. As long as you put the other side on notice about what the case was about, that was enough.

In 2007 or 2008, the Supreme Court came down with a couple of cases requiring the pleading of facts. You can’t just plead conclusions. If you plead conclusions, the court will strip out the conclusion. And then the court will apply a plausibility standard.

And a judge will look at a case and say – is this case plausible? In a false claims case, you have to plead fraud with particularity or specificity. These cases are front loaded in the sense that you have to do the investigation up front. You have to prove a case that the government thinks is a good case – not a case you think is a good case. All of those are filters that whittle down access.

CCR: There is a public debate over the role of the trial lawyer in society. A case can be made that big business has defeated the trial lawyers in the court of public opinion. Why did that happen?

GUTTMAN: I don’t think they have won the debate. Everything we have in this country that makes us safer is the result of transparency in the court system – the trial lawyers.

The trial lawyers brought us Brown v. Board of Education. The trial lawyers brought us Loving v. Virginia – the right to marry who you want to marry without regard to race.

The trial lawyers brought us safer automobiles, seat belts. They exposed the dangers of lead paint. The trial lawyers brought us safer food. We can live safer healthier lives because of trial lawyers.

CCR: You are making the argument. But regular people don’t like trial lawyers.

GUTTMAN: I haven’t done polling. I’m going to court tomorrow morning. I try cases. I have a comfort level because I know I’m saving people’s lives tomorrow morning when I am going to get Hepatitis treatment for thousands of pnsoners.

The state of South Carolina prison system is going to be testing 20,000 people and treating them. I know I’m having an impact.

I have brought cases that have saved people from drugs that are harmful to them. Maybe trial lawyers are not getting the message out. I teach and have a broader public policy perspective.

I try to take cases that have a broader impact. I want to leave the world a better place. I went to law school so that I could do things that make the world a better place.

Contact: Reuben Guttman, Guttman, Buschner & Brooks, Embassy Row District, 1509 22nd Street NW, Washington, D.C. 20037. Phone: 202.800.3001. Email: rguttman@gbblegal.com

1 2 3 4 5 … 8