The Obama Administration is asking too much of corporate America in terms of transparency, setting it up for more whistleblower lawsuits and more regulation.
That's what a new online poll of more than 1,500 executives, released on Monday, concluded, as more than half of the respondents claimed that it's impossible to meet the transparency demands required in exchange for bailout funds.
The poll was conducted during a March Web cast sponsored by Deloitte Financial Advisory Services, which questioned executives about the strings attached to receiving Financial Stimulus Bill/Troubled Assets Relief Program funding -- among them being more open about how bailout money is actually used, and why it's needed.
The poll sensed both fear and confusion among executives, finding:
• 58.2 percent said the level of transparency the Obama administration promises to attach to bailout spending is not possible.
• 80 percent indicated that the emphasis on transparency and accountability in government spending will translate into wider regulations for all businesses.
• 79.8 percent of respondents admitted they were unfamiliar with the False Claims Act, which empowers individuals to "blow the whistle" on companies that defraud the government and receive a "finders fee" if the government collects fines or retribution.
• 40.5 percent said that -- regardless of whether their companies will benefit from stimulus funding -- the government emphasis on transparency and ethics will lead them to address their companies' anti-fraud programs and controls.
"The group gets why they need that level of that transparency, and they'll do what they can do to get it, but they don't want to be hung out to dry in terms of False Claims Act and whistleblower claims," said David Williams, leader of Deloitte's Financial Advisory Services practice. "Folks are just concerned here about the ability to comply [with the requirements]."
With more federal bailout funds expected to be injected into the economy, Williams anticipates more employees will be more apt to blow the whistle on improper or questionable company practices, using the False Claims Act to do so.
"Generally, when there is more volume of government spending, there's more whistleblower activity," Williams said.
But businesses get that, he stressed.
"They understand the requirements associated, the strings that are attached ... and that there will be a very, very low level of tolerance for any sort of noncompliance associated with expectations of how these funds were given, versus how they were actually used," said Williams, who also stressed that executives and boards need to gain a better understanding of the False Claims Act.
Rick Shackelford, a partner in King & Spalding's Atlanta office who defends health care companies in False Claims Act, agreed.
"I think one would certainly anticipate the possibility of more cases filed under the False Claims Act, but not simply because of the level of transparency that the Obama Administration is requesting, but because of the large amount of dollars that will be making their way into new industries not familiar with the False Claims Act."
Shackelford said the defense industry, and more recently the health care industry, are very familiar with the False Claims Act, as both industries have been hit with many whistleblower claims in recent years. "But other industries are not nearly so familiar," Shackelford said, adding, "there's a lot of education that probably needs to take place."
If companies are more nervous about more whistleblower claims, they should be, said Reuben Guttman, who represents whistleblowers and heads the False Claims Practice at Washington's Grant & Eisenhofer.
"We anticipate that this is an area where whistleblowers are goign to enforce the government's rights," Guttman said.
Those rights, he explained, are knowing what companies do with taxpayer-funded, bailout money. He balked at complaints that transparency requirements are overly burdensome, saying "that's a standard outcry ... When you're asking taxpayers to dig into their pockets to bail out entities that have a history of wrongdoing, asking those entities to be more transparent in their conduct should be acceptable. It's not unreasonable," Guttman said, adding, "That's that's what got us into this mess -- the lack of transparency."
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Executives: Obama Administration's Transparency Demands Linked Will Trigger More Litigation
The National Law Journal
April 21, 2009
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