Judge slaps whistleblowers with $1.61 million fine for talking to media

U.S. District Judge Amy Totenberg has fined two whistleblowers in Atlanta for contacting members of the media during a five-year period while the suit was under seal.

Whistleblowers Victor Bibby and Brian Donnelly, mortgage brokers at U.S. Financial Services Inc., discussed the case confidentially with FOX investigative reporters nearly four years after they initially filed their complaint but a year before the case was unsealed. Their punishment, imposed in a January 5 order, is to pay a $1.61 million fine. The order was first reported by the Atlanta legal newspaper The Daily Report.

Attorneys for the whistleblowers argued, and First Amendment advocates agree, that the fine is extremely high, especially given that the government extended the sealing of the case for an unusually long five years while supposedly deciding whether to intervene, combined with the fact that Bibby and Donnelly had a secrecy agreement with the journalists that lasted until the case was unsealed.

“It’s just totally disproportionate, so much so that it seems to me to raise some basic constitutional issues,” counsel for the whistleblowers James Butler Jr. said at a June 2014 court hearing discussing punishment for the leaks.

In 2006, Bibby and Donnelly, who worked at a Georgia mortgage brokerage, discovered that several large mortgage and banking groups were taking advantage of veterans by charging them hidden fees as part of their home loans. They filed a complaint with the government under the False Claims Act, under which the government was then given sixty days with the case under seal to decide whether to pursue the case. Instead, the government moved to extend the secret deliberation period eighteen times, for a total of five years. Finally, in 2011, the government decided not to intervene. When Bibby and Donnelly subsequently filed suit as relators, the suit won $267 million for the government, with $43 million going to the whistleblowers after taxes.

But Bibby and Donnelly had become frustrated with the government’s inaction during the five-year extended deliberation. After nearly four years had passed following their complaint, they contacted two FOX 5 Atlanta reporters to discuss the case, with the understanding that the reporters would not publicize any of the information before the case was unsealed. The reporters kept their promise, and the parties all acknowledge that the communications had no actual effect on the integrity of the proceedings.

“Nothing that the Relators did, the Government has admitted in terms of the seal violations, prejudiced its investigation while the case was under seal,” said Brandon Peak, counsel for the whistleblowers, at the June 2014 hearing.

But the government prosecutor pressed the court to come down hard on the disclosures, citing in a June 2014 brief “the importance of sending a message that breaches of the seal will not be condoned.”

“The government has a significant interest in protecting the integrity of its investigations as well as the court’s orders,” the government stated.

Judge Totenberg, a sister of NPR legal correspondent Nina Totenberg, likewise took a dim view of the forbidden disclosures, even though they had not been released to the public.

“Relators’ misconduct, even if rooted in their self-defined good intentions, was deliberate and prolonged,” Totenberg said in the January 5 order imposing the $1.6 million fine.

As such, she said, “the Court finds this sanction is sufficient to provide proper compensation to the Government, vindicate the integrity of the judicial process, and accomplish the appropriate deterrent effect.”

As Judge Totenberg intends, the sanction will likely have a significant chilling effect on communications with the media about sealed cases. The large fine sends a strong message that courts are willing to punish leaks even when nothing was actually published and when the seal is extended an unusually long time.

However, the Court did not go after the press for receiving leaked information about the sealed case. Past cases dealing with leaked information have often bypassed the reporter’s privilege and attempted to subpoena the reporters involved. In this case, the FOX 5 reporters were not drawn into the case proceedings.

This large punishment for whistleblowers was handed down just weeks before a whistleblower triumphed at the Supreme Court. On January 21, in the case Department of Homeland Security v. MacLean, the Court held that a Transportation Security Administration whistleblower was protected under the federal whistleblowing statute because the TSA regulation forbidding unauthorized disclosure of sensitive information was did not fall under the statute’s exception for laws forbidding disclosure. The Court emphasized that holding otherwise would frustrate the purposes of the whistleblower statute by allowing agencies to insulate themselves from whistleblowers simply by promulgating regulations.

Iulia Gheorghiu contributed reporting.