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Whistleblower Valves – Did Confidentiality Crush OceanGate – Can Whistleblowers Stop Implosions

June 28, 2023

The experimental costly craft that allowed the unfortunate ultra-wealthy to tour the tattered Titanic tragically imploded killing all five guys on board allegedly because of an issue with the stability of the experimental carbon based materials that an insider complained about, but whose complaints were stifled based on confidentiality and lack of a cognizable whistleblower statute to invoke.  There’s no worse type of implosion than one that’s both preventable and when not avoided like an iceberg, results in a loss of life like what happened with OceanGate or what happens with Defense Contractor Fraud whistleblower cases when our solider and sailors are given inferior equipment to enrich the rich or with Pharmaceutical Fraud when a pharmaceutical product falsified an NDA or CGMP to put people at risk and cause actual harm. Financial ponzi schemes like Bernie Madoff’s greed, FTX’s thievery and Celsius’s meltdown all created loss of quality of life for those that invested in their scams, but enriched the upper echelon’s of the pyramid, compared to the destruction of the depths of Oceangate, but every single one of these implosions was preventable had insiders had the mechanisms to promptly expose the wrongdoings and the desire to do what was right instead of what was expedient.

One must tread cautiously fresh off a disaster that impacted lives, but as the head of a whistleblower law firm that has had a role in unearthing sophisticated schemes, I have to comment on the tension between confidentiality agreements and people afraid to come forward because of strong language in the agreements, versus the outlet valves in whistleblower statutes.

HIPAA vs the False Claims Act

HIPAA has a specific exception that enables whistleblowers to cooperate under the False Claims Act.  PERIOD.  You must cooperate the right way and that’s why individuals are strongly advised to retain whistleblower counsel and the exception to HIPAA even articulates the files making into the hands of the False Claims Act law firm, but its right there in the language of the statute.

Each year the taxpayers are scammed out of hundreds of billions of dollars through health care fraud with schemes involving Medicare Fraud, Medicaid Fraud, and to a lesser extent Tricare Fraud.  Insiders who are aware of the schemes sometimes confidentially report it through the False Claims Act and are eligible for up to 30% of what the government recovers.  But sometimes, health care companies make employees sign confidentiality agreements and rightfully train them on the importance of HIPAA and that their license may be in jeopardy if they disclose patient privacy information to third parties.  However, HIPPAA has a precise exception to allow private patient information to go to the government and a qui tam attorney when reporting a fraud under the False Claims Act.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that protects sensitive patient health information from being disclosed without the patient’s consent or knowledge.  There’s a “carve out” in HIPAA that specifically allows a whistleblower to share protected health information (PHI) with their attorneys and/or the authorities when the purpose for doing so is to report and try to stop fraud or a crime:

45 CFR 164.502(j)(1): Disclosures by whistleblowers and workforce member crime victims—

(1) Disclosures by whistleblowers. A covered entity is not considered to have violated the requirements of this subpart if a member of its workforce or a business associate discloses protected health information, provided that:

(i) The workforce member or business associate believes in good faith that the covered entity has engaged in conduct that is unlawful or otherwise violates professional or clinical standards, or that the care, services, or conditions provided by the covered entity potentially endangers one or more patients, workers, or the public; and

(ii) The disclosure is to:

(A) A health oversight agency or public health authority authorized by law to investigate or otherwise oversee the relevant conduct or conditions of the covered entity or to an appropriate health care accreditation organization for the purpose of reporting the allegation of failure to meet professional standards or misconduct by the covered entity; or

(B) An attorney retained by or on behalf of the workforce member or business associate for the purpose of determining the legal options of the workforce member or business associate with regard to the conduct described in paragraph (j)(1)(i) of this section.

Thus, the statute itself conclusively allows the use of the information if presented in the right way and HIPAA is not a mechanism to stymie whistleblowers from coming forward, which thereby could actual cause actual patient harm as well as economic.

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SEC Whistleblowers vs. Confidentiality Clauses

The SEC has taken an aggressive attitude towards confidentiality clauses or even releases that interfere with the ability for the SEC to investigate and/or dissuade in any way potential securities law insiders from filing an SEC Whistleblower Claim with the use of an SEC whistleblower attorney.  Even if there’s no underlying violation, the SEC may take action against the company if language in a severance and/or confidentiality agreement violates these principles and economically sanction the company.

False Claims Act vs. Confidentiality Clauses

In a False Claims Act the true party in interest is the United States government which is shown in the caption of the case and reaffirmed by the recent Supreme Court Polansky opinion.  Companies that seek to compel silence and frustrate cooperation with the government may find themselves still sued under the FCA if they are defrauding the taxpayers.  Where it becomes trickier is the rights of a whistleblower to recover a qui tam whistleblower award if they accept a severance package with a general release.  There’s a split of authority amongst the circuits regarding the timing of the release and the timing of the knowledge of the government about whether the release may make the relator ineligible of an award.  However, when looking for whistleblower representation you should seek out some of the best whistleblower law firms who may have ideas both proactively and reactively how to address this issue.

Whistleblowers with Titanic Consequences

It seems no matter how many times the tragic events of the Titanic are replayed that ship will also have sunk due to pride and poor emergency planning.  The Oceangate disaster should never have happened. Even though individuals were bound by confidentiality clauses, speaking with a whistleblower lawyer could have provided outlets for reporting concerns through public safety exceptions, however there is the lingering issue that Congress must address.  Without a cognizable statute permitting a public safety reporting, even though the Confidentiality clause may have been circumvented through the use of a whistleblower counsel filing an anonymous complaint and invoking attorney-client privilege to shield the client, there was no guarantee about the confidentiality and about liability for the insider.  Complex issues mean you should hire firms that focus on addressing similar complexities.

The SEC has learned to avoid the icebergs by forcefully announcing it will not tolerate interference with reporting.  HIPAA specifically permits reporting under the False Claims Act.  Congressional action is still needed to squarely crush confidentiality clauses for reporting purposes when there’s the potential for human harm or large scale economic maladies.  In any event, you are always able to share your concerns with a whistleblower law firm, as there’s an attorney-client privilege that attaches in contemplation of representation and the firm can educate you on your rights and look for a route that avoids the sinking and in the end saves lives.