Following Lance Armstrong’s shocking confession about the amount and duration of doping to win top cycling honors, the US Justice Department is now reportedly planning to join a Federal whistle-blower lawsuit against Armstrong which seeks to get back federal funds paid to him and his management team to sponsor the US Postal Service (USPS) cycling team.
3 Lessons about Whistle-blower Lawsuits
For grant professionals who want to spend federal funds responsibly, this sad situation can teach us three valuable lessons about whistle-blowers and grant management:
Lesson #1: Whistleblowers lawsuits do not have to be initiated by the Federal Government
Whistleblower lawsuits are just one of the tools used by the Federal government to bring waste, fraud and abuse to light. These lawsuits are often initiated by former “insiders” with knowledge of the inner workings of the organization. In the case of Lance Armstrong, the whistle-blower lawsuit was reportedly started by Floyd Landis, Armstrong’s former teammate on the USPS team.
Lesson #2: It’s Horribly Expensive to Lose
If a violation of the Federal False Claims Act is found, Armstrong and others could be liable for triple the amount of the contract with the USPS- or nearly $100 million dollars in damages. Attorneys familiar with whistle-blower cases say that the federal government only has to prove that Armstrong and others “knowingly misrepresented” themselves in the agreement with the USPS, not that federal government lost money on the sponsorship.
And it pays to tell: The former teammate bringing the lawsuit is eligible for 30% of whatever the Federal government recovers from the claim. (However, it doesn’t always turn out to be a windfall-check out the shocking truth about what happens to whistle-blowers.)
Lesson #3: Know your Terms and Conditions
The terms and conditions that you sign on Federal Grants, Cooperative Agreements and other Federal Contracts really do matter.
The terms and conditions of the sponsorship agreement with the USPS required the team to not use performance-enhancing drugs. The suit alleges that Armstrong was knowingly at the center of violating the terms of the contract. The contract with the USPS states that even “negative publicity” or a “failure to take action” could be considered a default of the sponsorship agreement.
Grant Management Matters
Unfortunately, the news is too full of allegations of waste, fraud and abuse committed by non-profit organizations, state, local and tribal governments, and institutions of higher learning. Many of these situations could be avoided by better internal controls, improved training and increase monitoring of the federal grants.
Don’t ignore the real risk that a whistle-blower lawsuit could happen at your organization. Make sure that employees know how to manage their grants correctly, and what to do if they suspect grant funds are being mis-managed, or mis-appropriated.
Lucy Morgan CPA, MBA
CEO, Compliance Warrior