A former Hanford worker convicted of timecard fraud is entitled to a portion of an $18.5 million settlement collected by the U.S. government for helping expand the fraud investigation from four people to hundreds, said his attorney Thursday.
Judge Lonny Suko, who heard arguments in the Yakima Federal Courthouse by telephone Thursday, did not rule on the motion by the U.S. Justice Department to dismiss former Hanford worker Carl Schroeder from a whistleblower case.
However, the judge said he questioned whether the False Claims Act could be interpreted in a way that would allow a person convicted of timecard fraud to collect part of a settlement with the government for fraud.
Schroeder filed a civil whistleblower lawsuit against CH2M Hill Hanford Group under the act, which allows whistleblowers to collect a portion of any damages awarded.
The federal government took over the civil lawsuit, as provided by the act, in fall 2012 and in March CH2M Hill agreed to pay $18.5 million to settle civil and criminal allegations of defrauding taxpayers.
Under the scheme, workers, including Schroeder, would work overtime offered in eight-hour shifts, even though the work often could be done in less time. Employees would leave when their work was completed, but claim overtime pay for a full eight hours, according to the Justice Department.
It has alleged that company officials, from supervisors who approved timecards through some upper management, knew that workers were being paid for hours not worked.
Court documents have alleged that overtime was offered in eight-hour shifts to entice employees to do the extra work and help CH2M Hill meet goals tied to financial incentives in its contract and allow management to collect bonuses.
"Prior to Carl's coming forward, the Office of Inspector General believed the timecard fraud involved a handful of employees, whereas Carl revealed to the government the wide-spread scheme that was initiated and controlled by the company itself," Schroeder's attorney, Jackson Schmidt, said in court documents.
In April 2008 the Office of Inspector General received an anonymous complaint that timecard fraud was occurring. As a result four employees who claimed unworked overtime were fired, according to court documents.
Schroeder also was investigated, but there was not enough evidence to fire him, said court documents.
But he was incensed that friends and colleagues were being singled out and told his supervisors it was unfair given that senior management was aware of and condoned the practice, Schmidt said in court documents.
"Carl was summarily fired for participating in the company-approved practice," according to court documents. "Carl believes he was fired because he represented a threat to senior management and needed to be discredited."
When Schroeder was fired "he immediately went to the IG office and spilled his guts," Schmidt said.
"Carl's information blossomed the investigation from one into the activities of four employees to one into a decades-long, companywide practice of defrauding the United States," Schmidt said in court documents.
Nine Hanford workers or former workers have pleaded guilty to charges related to timecard fraud and 10 current or former upper managers and supervisors at Hanford have been indicted by a grand jury on accusations they enabled timecard fraud.
The Department of Justice wants to dismiss Schroeder from the False Claims Act lawsuit it took over, saying the law calls for anyone who is convicted of criminal conduct from his role in the fraud to be dismissed from the lawsuit and to not receive any of the settlement.
Schroeder participated enthusiastically in the timecard fraud for four years, and to receive part of the settlement now "would be very unjust," said Daniel Fruchter, a Department of Justice attorney.
"It would turn the False Claims Act on its head," he said. Workers would be able to find out about fraud, participate in it and then profit from proceeds from a lawsuit, he said.
But dismissing Schroeder from the lawsuit would send messages counter to the intent of the False Claims Act, Schmidt argued.
Schroeder was a small fish in the fraud and should be entitled to part of the settlement, he said. Dismissing him would discourage other Hanford workers from coming forward to report fraud, he said.
It also would tell contractors not to worry about whistleblowers because they will not be rewarded and will be prosecuted, he said.
The timecard fraud occurred at the Hanford tank farms when CH2M Hill held the contract there from 1999 through 2008. CH2M Hill has said the timecard fraud started before it became the tank farm contractor. The conduct was not consistent with its values and it should have rooted it out sooner, it said.