Using Company Documents to Prove the Fraud

A recent case in Illinois highlights a common battleground in qui tam whistleblower cases namely, the whistleblower who keeps and relies upon company documents to prove the fraud allegations of his or her complaint.

In Shmushkovich v. Home Bound Healthcare, Inc., 2015 WL 3896947 (N.D. Ill. June 23, 2015), a whistleblower brought a qui tam complaint against his employer, a home health agency. As part of his job, the whistleblower had retained numerous company computer files on his personal computer at his home. The whistleblower was still employed at the home health agency at the time he filed the qui tam complaint, and he was still employed their when the complaint became unsealed.

As soon as the employer learned of the qui tam complaint, the employer immediately demanded the return of any company files in the whistleblower’s possession, including computer files. The whistleblower deleted all files from his computer but made two copies, one delivered to the employer and one delivered to his attorney.

The employer then filed a motion demanding that the attorney return the company’s computer files. In a well-reasoned opinion that can be found by clicking here, the court denied the employer’s motion.

The court first cited the long line of authority for the proposition that public policy and the False Claims Act encourages whistleblowers to investigate and report fraud against the government, even when that means violating confidentiality agreements or taking company documents that would otherwise be confidential.

The court then addressed a more practical concern. The whistleblower, in the context of litigating the qui tam case, would be entitled to request documents relevant to the fraud anyway. To the district court, it made little sense to require the whistleblower to return electronic documents, only to then request the exact same electronic documents in discovery from the employer. As the court explained, “requiring [whistleblower] to return documents that he will inevitably receive in discovery is a formality that has been obviated by the circumstances of this case (i.e. [whistleblower] already has copies of the documents and [employer] knows what documents he has) and will only serve to unnecessarily increase the expense and extend the length of the litigation.”

The district court added two caveats. First, the whistleblower could only retain documents that were relevant to his claims, and he had to delete the remainder. Second, the court acknowledged that the computer files might contain attorney-client privileged documents. In the event that the whistleblower’s lawyers gained access to these privileged documents, the court might have to hold a hearing in the future to determine whether the employer had been injured and what remedies might be necessary.