As testament to South Carolina’s governmental philosophy of putting off tough decisions for as long as possible, state senators on Wednesday deferred a bipartisan whistleblower protection bill that’s being targeted by at least two powerful South Carolina lobbying groups.
The South Carolina False Claims Act, sponsored by state senators Vincent Sheheen (D-Kershaw), Jake Knotts (R-Lexington) and Gerald Malloy (D-Darlington), protects employees who blow the whistle on workplace wrongdoing from being retaliated against by their employer. As an incentive, the bill would also allow whistleblowers to keep 10 percent of any monetary damages recovered from the employer.
The Free Times’ Corey Hutchins in December outlined the tremendous amount of embezzlement and fraud which occurs in South Carolina, writing that 73 state officials and employees were convicted of public corruption between 1998 and 2007. In 2009, the former finance director of the Department of Social Services was convicted of organizing a fraud ring which stole over $5.5 million from the agency.
One of the reasons that number is so astronomical, according to Knotts, is employees’ reluctance to come forward. “They don’t want to put their job in jeopardy out of fear of retribution,” Knotts said, and in the meantime “people’s tax dollars are being stolen and misused.”
While Common Cause of South Carolina Director John Crangle has no illusions that the legislation will completely end the culture of corruption in South Carolina, Crangle tells Palmetto Public Record it will at least incentivize whistleblowers to speak up about wrongdoing in their workplace. “It would have a very powerful deterrent effect,” commented Crangle.
Subcommittee chair Larry Martin (R-Pickens) spoke out against the incentive included in the bill, apparently trusting that employees will be compelled to report fraud out of a sense of altruism or public duty. But as Hutchins’ story in December and Knotts’ testimony on Wednesday clearly showed, that just hasn’t been happening.
“The people that are cheating the taxpayers need to get weeded out,” Malloy told his fellow senators. “Who would endorse people stealing from the government?”
Crangle says the bill’s opposition includes the South Carolina Chamber of Commerce and the South Carolina Manufacturer’s Alliance, two powerful lobbying groups that represent big business in the Palmetto State. “They don’t want to give employees any more rights than they absolutely have to,” Crangle added.
But as one supporter of the bill put it, honest businesses should be demanding a law that strongly protects the state’s tax dollars. And given South Carolina’s history of businesses fleecing the taxpayers, it makes you wonder what they have to hide.
Knotts said further discussion of the bill could continue as soon as next week. As usual, count on Palmetto Public Record to let you know what happens.
I support your efforts to protect whistleblowers, who are powerful tools against public corruption.
I submit for your consideration my letter recently published in the Free Times.
Issue #25.04 :: 01/25/2012 – 01/31/2012
Attorneys Would Benefit from Whistleblower Laws
In his letter to the editor (Sound Off, “South Carolina Needs Whistleblower Law,” Jan. 18) parsing the last sentence of my own comments (Sound Off, “Beware of Leeching Lawyers,” Jan. 4), Mr. Crangle failed to address the issue of compensation of attorneys by both the government and whistleblowers. The current system encourages both parties to act in a somewhat reasonable and responsible manner to settle a dispute concerning the mistreatment of a whistleblower by placing limits on rewards and fees.
First, let’s put “the massive amount of embezzlement and fraud” Mr. Crangle refers to in perspective. According to a Dec. 7 story in The State, Sen. Jake Knotts, R-Lexington, a sponsor of proposed whistleblower legislation, estimated that South Carolina has lost $24 million because of fraud since 2000. That $2.5 million yearly estimated cost of fraud represents approximately one-tenth of 1 percent of South Carolina’s $22 billion annual expenditures.
Two examples of wrongdoing Crangle cited were not results of actions by a government whistleblower. The Columbia parks official was outed by an independent contractor. And regarding the discovery of embezzlement by a former clerk in the Lexington County treasurer’s office, Treasurer Jim Eckstrom told The State, “We were upgrading some internal procedures and discovered it.”
Currently a whistleblower receives up to a $2,000 reward. The proposed Senate bill would raise that to 10 percent of any recovered tax dollars. That increased reward comes directly from taxpayer funds.
Actual damages are now limited to $15,000. Proposed legislation would remove the cap completely allowing for unlimited damages. That money, shared by the attorney and the whistleblower, comes from taxpayer funds.
Fees for attorneys now are capped at $10,000 for a trial or $5,000 for an appeal. Proposed legislation would raise those attorney fees to a “reasonable” amount. The increased reward would go straight to the attorney, right from the taxpayer.
Speaking to The Nerve, longtime Columbia attorney Lewis Cromer says he knows why the current law was watered down. “You’re referring to the Cromer Amendment,” he told The Nerve. Cromer said lawmakers changed the law in 1993 because certain state agencies didn’t like the fact that he and some other lawyers were winning big whistleblower cases. “We settled a whole lot of big ones that you never read about,” Cromer said. “I can think of five or six cases that we settled for six figures.”
The proposed whistleblower legislation would bring the Wild West back to the courtroom. In a wrongful termination case, the government would need only to reach deeper into taxpayer funds to extend the process and continue to compensate its attorneys. The alleged wronged whistleblower, on the other hand, would need only to find an attorney willing to wait for fees and a percent of the damages — again to be paid by the taxpayer.
Any overhaul of whistleblower statutes should mandate binding arbitration. That would go a long way to, as Mr. Crangle says, “prevent or at least cut short stealing of taxpayers’ money in the future.”
Frank Mancuso
Columbia
In reading Mr. Mancuso’s epistle—first, in the Free Times and, second, here—I find it interesting that he turns the issue of properly protecting those who act to report wrongdoing and malfeasance by state officials and state employees (or, for that matter, by persons in the private sector) into little more than a personal screed against those whom he characterizes as, let’s see, “Leeching Lawyers.”
Indeed, in his world, the issues of governmental and/or public sector malfeasance in the use of taxpayer funds, the reporting of such malfeasance, and the offering of well-deserved protections to those who do such reporting seem relatively irrelevant save the extent to which conversation about them serves as a launching pad for what one supposes (or, for what one hopes) is a cathartic conversation about the real burr in his saddle—those whom he characterizes as, let’s see, “Leeching Lawyers.”
I cannot speak for anyone else, but I personally consider governmental and/or public sector wrongdoing in the use of taxpayer funds, the reporting of that wrongdoing, and the offering of protections to those who do such reporting to be of enormous significance. My perspective on fraudulent use of government funds does not, as does Mr. Mancuso’s, change relative to the amount of money involved—fraud is fraud. That two examples of outed wrongdoing cited by Mr. Crangle did not, according to Mr. Mancuso, involve “whistleblowers,” so to speak, is less evidence that the aforementioned issues are “relatively irrelevant” than evidence that we perhaps need stronger incentives for persons to report malfeasance and greater protections for them once they do. And, that those facing retributive justice for nothing more than a willingness to do their civic duty would be promised, in Mr. Mancuso’s scenario, nothing more than binding arbitration tells me that he is less interested in those stronger incentives and greater protections than in locking his, let’s see, “Leeching Lawyers” out of the process.
He thinks that the latter “would go a long way to,” quoting Mr. Crangle, “prevent or at least cut short stealing of taxpayers’ money in the future.”
Given that “whistleblowers,” so to speak, would be left without the protections offered by the advocacy of counsel and the promise of due process, I sincerely doubt that he is right.