Department of Investigation rebuffs Council bill to protect private-sector whistleblowers

A City Council proposal to extend whistleblower protection laws to employees of city contractors threatens to divert limited resources, a top lawyer for the New York City Department of Investigation warned a Council committee on Monday.

The pending bill, sponsored by 25 out of the Council’s 51 members, would require the Department of Investigation (DOI) to probe any allegation of unlawful retaliation against employees who report criminal activity, mismanagement of city funds or abuses of authority by contractors.

“There is nothing more detrimental to the ability to prevent fraud and corruption than retaliation,” department deputy commissioner of legal affairs Marjorie B. Landa testified to the Commmitte on Governmental Operations. However, she added, “the concern is the resources we would have to devote to private sector retaliation claims…being drawn into these employer-employee relationships.”

Reading from a prepared statement, Landa added: “DOI does not have the resources to devote to what could potentially be an avalanche of mandatory investigations of matters within thousands of private companies throughout the city.”

City contracts for goods and services amounted to a $15 billion business in fiscal year 2011, involving 55,000 transactions, according to the Mayor’s Office of Contract Services. Contracts for social services, such as foster care and job training, made up nearly half of that total.

Last year, the Department of Investigation received 13,670 complaints of corruption, fraud and conflicts of interest. Most, said Landa, were reported by city employees, who are required by law to report abuse.

Meanwhile, just a handful of cases are filed under the city’s False Claims Act, a 2005 law that allows anyone alleging fraudulent activity against the city to propose a court case that seeks civil penalties and damages from violators, and win a portion of any proceeds. Since the law’s passage, DOI has received just 23 proposals for civil complaints, and pursued none of them, according to a required annual report submitted to the City Council.

Landa noted that criminal charges can already be leveled against city contractors that interfere with investigations, and that whistleblowers in the private sector are protected by existing provisions in the False Claims Act and state law.

Attorneys from the city’s Law Department and Mayor’s Office of Contract Services also oppose the measure. “This bill would entangle DOI and the City in private sector personnel and labor relations,” First Assistant Corporation Counsel Jeffrey D. Friedlander wrote in testimony submitted to the committee. “We would urge that the proposal not be adopted.”

Councilmember Gale A. Brewer said the City Council understands the department’s resource limitations, but that “it’s hard for us to believe” that existing provisions are enough to protect and encourage whistleblowers at city contractors.

“We’re very concerned about this group of people,” she said, adding that in the current economy, employees aren’t likely to come forward with damaging information if they do not have a guarantee they’ll be protected from retaliation and the risk of losing their job.  

Neil V. Getnick, a partner at Getnick and Getnick LLP in Manhattan and chair of the Washington-based Taxpayers Against Fraud, was among those who testified in support of the extension of whistleblower protections to contractors’ employees. “The law is valuable and should be expanded,” he said. He added that the city could strengthen its retaliation protection without increasing the administrative burden on the Department of Investigation by channeling complaints through the courts.
A related bill, which does have the support of the Department of Investigation and other city agencies, would require companies with city contracts valued at $50,000 or more to post signs notifying employees of their rights under the False Claims Act.

However, the Mayor’s Office of Contract Services suggested limiting the posting requirement to companies with contracts totaling $100,000 or more, the standard minimum for inclusion in the city’s VENDEX database of contractors. And the Department of Investigation asked that postings detail the process for reporting fraud.

Brewer questioned whether a sign without an anti-retaliation law would have an impact.

“We’ve done a lot of put-up-the-sign kind of legislation,” she said, “and it doesn’t always happen.”

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