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Sixth Circuit: False Claims Act Anti-Retaliation Provision Extends to Post-Employment Retaliation

Arent Fox’s Investigations Blog provides legal updates and analysis on key enforcement news for companies and executives in highly regulated industries. 

Sixth Circuit Splits with Tenth, Holds False Claims Act Anti-Retaliation Provision Extends to Post-Employment Retaliation

On March 31, 2021, the US Court of Appeals for the Sixth Circuit addressed an issue of first impression regarding whether the False Claims Act’s anti-retaliation provision, 31 U.S.C. § 3730(h), covers only retaliatory actions taken during the course of a plaintiff’s employment, or also retaliation that occurs post-employment. In United States ex rel. Felten v. William Beaumont Hospital, 2021 WL 1204981, --- F.3d --- (6th Cir. Mar. 31, 2021), the court held that “the FCA’s anti-retaliation provision protects a relator from a defendant’s retaliation after the relator’s termination.”

In Felten, the relator alleged that the defendant retaliated against him for reporting alleged compliance issues while he was employed, and also after the defendant terminated his employment—specifically, by “blacklisting” him and maligning him after he filed suit so that he could not obtain a similar job elsewhere. The district court dismissed the relator’s anti-retaliation claim as applied to the alleged post-employment retaliation, but certified the issue for interlocutory appeal to the Sixth Circuit. The Sixth Circuit held that the provision extended to post-employment retaliation, reasoning that the word “employee” in the FCA’s anti-retaliation provision is ambiguous as applied to a former employee, but that “the more accurate reading” of the term is that it encompasses not just “current employees” but also “those who have lost their jobs.”

In so holding, the Sixth Circuit created a circuit split with the Tenth Circuit, which held in Potts v. Center for Excellence in Higher Education, Inc., 908 F.3d 610 (10th Cir. 2018), that the FCA’s anti-retaliation provision does not apply “when no retaliatory discrimination occurs until after employment ends.” The Arent Fox team’s past coverage of the Potts case can be found here. The circuit split could render the issue ripe for review by the Sixth Circuit sitting en banc or the Supreme Court.

Former Founder and CEO of Tech Company Sentenced to 97 Months in Prison for Fraud Convictions

On March 26, 2021, the Department of Justice (DOJ) announced that the former CEO and founder of Trustify, a private investigator platform, was sentenced in the Eastern District of Virginia to more than eight years in prison, ordered to pay $18,131,742.21 in restitution, and ordered to forfeit $3.7 million, for his role in an investment fraud scheme. The defendant had previously pleaded guilty, in December 2020, to one count of securities fraud and one count of wire fraud in connection with the alleged scheme.

Beginning in 2015, the defendant allegedly promoted Trustify as the “Uber” of private investigator services, and ultimately raised more than $18 million from over 250 individual and corporate investors, including by falsely overstating the company’s financial performance and fabricating business relationships. The defendant allegedly created a fake email account to pose as a prominent potential investor, which he used to send a fraudulent email to convince an investment firm to invest nearly $2 million in the company. The defendant also allegedly made false statements to investors about the amount of investor funds that he would personally receive, while diverting substantial amounts to his own benefit. According to DOJ, Trustify’s collapse in 2019 ultimately led to over $18 million in losses to investors and over $250,000 in unpaid wages and costs for the company’s employees.

The DOJ press release can be found here.

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