Last week (February 25, 2015), in United States, et al. v. Whipple, et al.,No. 13-6645, 2015 WL 774887(6th Cir.), the federal Sixth Circuit Court of Appeals denied such a defense, and in doing so, issued an opinion that construes the meaning of “public disclosure” in a manner that is favorable to whistleblowers.
In Whipple, the defendant alleged that the whistleblower’s FCA claims were barred because the defendant’s fraudulent conduct was previously disclosed to the public as a result of two separate yet related audits/investigations. One audit/investigation was conducted by a private government contractor on the government’s behalf, and the other audit was conducted at the defendant’s request by the private consulting firm Deloitte Financial Advisory Services, LLP (“Deloitte”). Both audits were conducted prior to the whistleblower’s disclosure of the fraudulent conduct to the government.
Ultimately, the Sixth Circuit found that no public disclosure occurred because: (1) the private government contractor conducted the audit/investigation on the government’s behalf and was obligated to keep the information confidential; and (2) Deloitte was hired by the defendant to assist them in responding to the government’s audit/investigation and was also obligated to keep the information confidential. Whipple at 7-8. Accordingly, the court found that the information was never released into the “public domain.” Id. Instead, the court found that the information was only released to the government, and privately by the defendant to Deloitte—neither of which constitute a “public disclosure.” Id.
The court noted that its interpretation of what constitutes a “public disclosure” is consistent with the majority of federal circuit courts that have addressed the issue. Id. at 6. Specifically, the court noted that, with the exception of the Seventh Circuit, all other circuits to have addressed the issue have held that a “public disclosure” “requires some affirmative act of disclosure to the public outside the government.” Id. The Court further noted that, “[i]f a disclosure to the government in an audit or investigation would be sufficient to trigger the [public disclosure] bar, the term ‘public’ would be superfluous.” Id.
Regarding the defendant’s disclosures to Deloitte, the court noted that Deloitte’s obligation to keep the results of its audit/investigation confidential and the fact that Deloitte was hired to assist the defendant in complying with the government’s audit/investigation rendered the disclosure “akin to [a] ‘private’ disclosure to the defendant’s employees.” Id. at 8.
Simply put, the Whipple decision stands for the proposition that information disclosed to an entity investigating a defendant’s fraudulent behavior on the government’s behalf, and information disclosed by a defendant to a private entity bound to keep the information confidential, does not constitute public disclosure.
*This article was written with the assistance of law clerk Emanuel B. Townsend.