Health Net has been fined $340,000 by the Securities and Exchange Commission for developing a severance policy that prohibited employees from collecting whistleblower awards, according to an administrative proceeding filed by the federal agency.
Beginning in August 2011, Health Net issued voluntary severance agreements that prohibited employees leaving the company from “filing an application for, or accepting, a whistleblower award” from the SEC. Although the agreements noted that employees were not precluded from participating in a federal investigation, by consenting to the severance agreements they waived their right to the monetary recovery typically provided to whistleblowers.
Between August 2011 and June 2013, 600 employees signed severance agreements that included this language. Through the Dodd-Frank Wall Street Reform and Consumer Protection Act, whistleblowers receive a percentage of penalties or settlements linked to fraud or securities violations.
“They were basically saying to employees that they couldn’t tell anyone about what the company was doing wrong if they wanted their severance,” attorney Toni Jaramilla told the Los Angeles Times. “They were trying to muffle employees’ ability to report problems in the workplace.”
Whistleblowers have become a key cog in the government’s effort to crack down on False Claims Act violations, and experts expect whistleblower claims will continue to drive future fraud litigation. The former U.S. Attorney for the Eastern District of Tennessee previously told FierceHealthPayer: Antifraud that whistleblowers were a big reason the state was able to prosecute high value fraud schemes.
- read the SEC administrative proceeding