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Yesterday, the U.S. Supreme Court agreed to review a decision against the Graham County (North Carolina) Soil & Water Conservation District for the second time. In its first trip, the District persuaded the Supreme Court that whistleblower Karen Wilson had to follow North Carolina’s three-year statute of limitations for her retaliation claims, and could not rely on the six-year time limit in the federal False Claims Act (FCA).  Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 545 U.S. 409 (2005). Now, the District is trying to evade liability altogether by asking the Supreme Court to say that state and local administrative proceedings bar whistleblowers from bringing fraud actions on behalf of the federal government.

 Graham County should not feel so confident on this trip to the Supreme Court.  Here, the Supreme Court asked the United States Solicitor General (SG) to submit a position statement on whether the federal government wanted the Court to hear this case.  On May 20, 2009, the SG did just that.  She expressed the government’s desire that the Court accept the case for the purpose of affirming the decision against Graham County.  The SG, Elena Kagan, explained to the Court how administrative decisions of state and local governments may not get the attention of the federal government such that it would take action against fraudulent use of taxpayer moneys.

Graham County began cooking its own troubles when it decided to use federal Emergency Watershed Protection Program money to give one of its own employees a no-bid contract.  The County District’s secretary, Karen Wilson, raised concerns about this abuse to her own supervisors and other county officials.  Unsatisfied with the response, she reported the abuse to the U.S. Department of Agriculture.  She met with agents of USDA’s Inspector General. Within a year and a half, the culprits had hounded Wilson out of her job. Later, she filed a sealed "qui tam" lawsuit on behalf of the federal government to recover the misspent funds for our national treasury. The government declined to intervene, and Karen Wilson’s own lawyers pursued the case.

The federal district judge in North Carolina first dismissed Wilson’s retaliation case, saying that she missed North Carolina’s three-year time limit for retaliation claims.  Wilson appealed that, and the Fourth Circuit reversed, holding that the FCA’s six-year time limit applies.  Graham County appealed to the Supreme Court and won its first case there, in a set-back for whistleblowers everywhere.

Now, the federal judge in North Carolina has dismissed the main case, holding that since Graham County and a state agency had investigated, and since its reports were technically public records, that counted as a public disclosure that barred Wilson from suing on behalf of the federal government.  Again, the Fourth Circuit reversed.  The Court said that the word "administrative" in the FCA applies only to administrative proceedings of the federal government.  Courts in the Ninth and Eleventh Circuits had held otherwise.

That the SG asked the Court to take the case is a traditional factor influencing the Supreme Court’s decision.  Here, the SG specifically indicated that on the merits, the federal government would ask the Supreme Court to affirm the Fourth Circuit’s position that only federal administrative proceedings would prevent whistleblowers from suing on behalf of the federal government.  The SG noted how ironic it would be for the perpetrators of the fraud to realize that they could insulate themselves from liability by making their own report against themselves. Karen Wilson could well have used a Supreme Court decision to just let the Fourth Circuit decision stand.  Certainly, the Supreme Court could have picked better cases if it wanted to help those whistleblowers who risk their careers to help the taxpayers recover ill-gotten gains. Hopefully, this time the Supreme Court will side with her and affirm the Fourth Circuit decision. We may not find out for another full year.