Last Thursday, Northrop Grumman Corporation agreed to pay the United States government $325 million to settle a whistleblower case, reported in the Wall Street Journal to be the largest case ever alleging military-procurement fraud. Robert Ferro, the whistleblower, and his lawyers will share $48.7 million dollars of the settlement. Here's the story.
TRW, which was acquired by Northrop in 2002, made parts for spy satellites that malfunctioned which resulted in:
- satellites failing in orbit
- expensive fixes
- launch delays
Robert Ferro, an Aerospace Corporation engneer who worked with TRW, discovered the problem with defective microelectronic parts. Ferro claimed that TRW pressured him against publishing his findings.
According to the Wall Street Journal, even after TRW tests confirmed Ferro's conclusions, TRW continued to tell the government "it did not know and could not have been expected to know" about the problems.
The case was brought under the False Claims Act also known as Qui Tam. Under the Act, it is illegal to knowingly present a false or fraudulent claim for payment to the federal government or use a false or fraudulent record to get paid. The way it works is:
- individuals and entities with evidence of fraud involving the United States or its programs or contracts can sue the wrongdoer on behalf of the government.
- The government has the right to intervene and join the action
- If the government declines, the private plaintiff may proceed on his or her own behalf
Those who violate the Act are liable for three times the dollar amount of the fraud and additional civil penalties. As far as the whistleblower goes, the Whistelblowers Protection Blog explains it this way:
A qui tam plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the Act, you must file a qui tam lawsuit. Merely informing the government about the violation is not enough. You only receive an award if, and after, the government recovers money from the defendant as a result of your suit.
So that's how Robert Ferro got the 48 million.
The author of the Wall Street JournalLaw Blog reported on the story. He wrote that he keeps a journal of "all those people he'd like to be in his next life" and Ferro has made the list -- understandably so considering the size of the award.
I don't know Mr. Ferro's personal story. All I know is what has been reported.
But I have represented many whistleblowers through the years and I feel compelled to add that it's not always a bright and rosy picture.
Individuals who "blow the whistle" go through enormous stress, often lose their jobs, and suffer enormous guilt because of the harm imposed upon their families. They are ridden with conflict: Did I do the right thing or should I have kept my mouth shut? With regularity, they are blackballed from their professions. Bankruptcy and depression are common.
I congratulate Mr. Ferro. He is a courageous man and deserves credit and our thanks for sticking his neck out and doing the right thing.
The bottom line is that this is one important story that had a happy ending, but unfortunately, that is not always the case. That's why so many are fighting very hard to get broader and uniform whistleblower protection which is both needed and deserved.