Constance Lyttle's job at AT&T slowly shifted from helping deaf people make phone calls, to assisting the efforts of foreign scam artists intent on ripping off Americans.
She refused to play along, and was eventually fired by AT&T, which was getting millions of dollars in government funds to run a scam-plagued system for relaying the calls of deaf people.
"I didn't have a college degree. There's not a lot of good jobs here" in the Mercer area, Ms. Lyttle, 56, said this month. "I had bills to pay, just like everybody else in America."
Her answer, ultimately, was to sue AT&T under the federal False Claims Act. That act allows an individual to sue on behalf of the government when he or she sees federal funds spent fraudulently.
Telling for Dollars
This is the first installment in an occasional series in which the Pittsburgh Post-Gazette explores the ways in which government pays those who provide information relevant to criminal and civil law enforcement.
Both powerful and controversial, payment for information is a large and growing governmental expenditure, used in everything from fraud detection and tax collection to prosecution of drug crimes and corruption.
Nationally, the act last year generated nearly $3 billion in settlements and judgments against those accused of fraud, most of which went back to the government, with the whistleblowers getting a share. Most of the big settlements came when federal attorneys opted to join the side of the whistleblower.
But until 2010, U.S. attorneys operating out of Pittsburgh stayed on the sidelines, never intervening for whistleblowers.
Then U.S. Attorney David Hickton decided to use federal investigators and attorneys to help some whistleblowers, including Ms. Lyttle. Mr. Hickton's attorneys have put federal muscle behind whistleblowers in five cases, whereas his predecessors in that office had never taken that step.
Now Pittsburgh is starting to become a bigger player in the multibillion-dollar False Claims Act arena, reeling in $9.95 million in recoveries for the government since 2010. With the settlement in November of Ms. Lyttle's claim, and a potential 2015 trial in a federal lawsuit against Downtown-based Education Management Corp., Pittsburgh is now considered friendly territory for whistleblower-filed cases.
"It's extremely unusual for a district of medium size, like the Western District of Pennsylvania, to become a national player in handling cases of this scope," said attorney Harry Litman, who was Pittsburgh's top federal prosecutor from 1998 to 2001, and now works as a private lawyer on False Claims Act cases, including one against EDMC. He said that Mr. Hickton's "office has become a national leader in the practice."
That's encouraging to attorneys who specialize in pursuing those who rip off Uncle Sam.
There are "large sums of money that the taxpayers are providing to the government to provide services," said Downtown attorney Andrew Stone. "We know there's no shortage of fraud."
PG graphic: Whistleblower cases (PDF)
(Click image for larger version)
'Ecstatic that they believed me'
Ms. Lyttle had been employed with AT&T Corp. at a New Castle center since 1997, facilitating calls placed by deaf people.
The system, called Telecommunications Relay Service Internet Protocol Relay, allowed the caller to use a web portal to type their side of the conversation. Ms. Lyttle would read it to the intended recipient. Then she would type the response back to the caller, with the Federal Communications Commission footing the bill at anywhere from $1.28 to $1.53 per minute.
About a decade ago, the relay became a tool for scam artists, primarily from Nigeria. The scammers would pretend to be deaf people, causing the operators to place calls for them. Using the New Castle-based operators as their mouthpieces, the scammers would buy items using stolen or fake credit card information, or trick Americans into sending them money or providing identity information.
"These were back-to-back calls, eight hours a day," Ms. Lyttle said. "I was in anxiety every day, pretty much," because she felt morally obliged to thwart the scammers who were now the bulk of her employer's call volume.
Operators were told to just relay the messages, according to Ms. Lyttle's lawsuit, and most of them dutifully complied. Ms. Lyttle, though, took to sabotaging the scam calls, often telling the recipient that the call was fraudulent.
She was fired in February 2010, accused of having failed to properly process two test calls, according to the lawsuit she filed in October of that year. Her sister, Lancaster attorney Rebecca Lyttle, tried to find her a lawyer, but none would take the case. So the sisters went to court together.
Under the False Claims Act, if a person sees fraud against the federal government, they can sue on the government's behalf as a "relator."
The lawsuits often spend years sealed from public view, while the Department of Justice, through its 93 U.S. attorneys offices, reviews the relators' claims.
The department can take one of two courses. It can decline to become involved, in which case the relator can go to court independently. Then the relator is entitled to 25 to 30 percent of any settlement or judgment -- a federal judge decides the precise percentage -- with the rest going to the government.
Or the Department of Justice can intervene, adding investigators and litigators who work alongside the relator and their private attorneys. In that case, the relator gets a smaller stake -- 15 to 25 percent of the recovery. The recoveries, though, tend to be larger when the government intervenes.
PG graphic: Whistleblower cases (PDF)
(Click image for larger version)
Ms. Lyttle said that when she met with attorneys at Mr. Hickton's office, "I was, like, ecstatic -- ecstatic that they believed me." Mr. Hickton decided in late 2011 to intervene in her case.
After investigation, the Justice Department filed court papers alleging that from 2004 through 2009 anywhere from 45 to 95 percent of the calls coming through AT&T's relay service were fraudulent. Internal emails cited by the department suggested that the efforts of some AT&T managers to weed out fraudulent users were intentionally undermined by other managers who wanted to keep call volumes up.
When the case was unsealed and reported by newspapers, Ms. Lyttle paid a price.
"Once it did come out in the paper, I lost friends," she said. "They turned their backs on me." She collected unemployment and then found temporary work, while burning through her savings.
In November, AT&T settled the case for $3.5 million.
"The Department of Justice did not prove and the court did not find that AT&T violated the False Claims Act, and AT&T maintains that it did not violate the Act," wrote AT&T spokesman Marty Richter in response to questions.
AT&T had earlier agreed to pay the FCC $18.25 million to settle accusations that it failed to adequately verify the identities of people registered to use its service for deaf people. AT&T noted that it has pulled out of the Internet-based relay business, though it offers other technologies for deaf callers.
Constance Lyttle and her sister got $525,000. "Yeah, it's changed my life," she said, adding that she paid off her mortgage, bought some property and is putting together a business plan.
Her advice to other would-be whistleblowers: "If you believe what's going on is really [wrong], and not just maybe, but it's really true, then yeah, go for it. It's the right thing to do as an American."
More claims, more dollars
President Abraham Lincoln signed the False Claims Act in 1863 because defense contractors were gouging the Union and selling faulty armaments. Congress defanged the law in 1943, in the midst of the World War II buildup, and it fell into disuse.
News in 1985 that the armed services were paying $435 for hammers and $640 for toilet seats, plus the Department of Defense's announcement that 45 of its largest 100 contractors were under investigation, prompted Congress to revive the act. Sen. Charles Grassley, R-Iowa, and Rep. Howard Berman, D-Calif., restored mandatory payments to whistleblowers. They also raised the stakes, allowing courts to charge those caught defrauding the government triple the damages they caused, plus penalties.
Since the act was revamped in 1986, private lawsuits alleging fraud against the government have surged from fewer than 100 a year prior to 1992, to 753 last year, according to Taxpayers Against Fraud, a Washington, D.C., nonprofit organization that tracks False Claims Act cases.
The total recovered through relator-filed False Claims Act lawsuits was just under $500 million in 1999. It topped $2 billion for the first time in 2010, and reached $3 billion in 2012. Typical recoveries over the past decade have approached $3 million, including a relator's share of around $500,000, with the private attorney usually getting 40 percent of the latter figure, according to Taxpayers Against Fraud.
Though the act was created to police the defense industry, fraud fighters have followed the money into the health care arena. Last year nearly 88 percent of the funds recovered through whistleblower-filed False Claims Act cases came from health and human services contractors, according to Taxpayers Against Fraud.
Some business groups argue that the act is being abused.
The False Claims Act "really encourages a lot of speculative litigation that unfortunately a lot of companies end up having to settle, because they are such an expensive type of case to litigate," said Matt Webb, senior vice president at the U.S. Chamber of Commerce Institute for Legal Reform.
He said Congress should change the act to give "reasonable treatment" or apply a "sliding scale of culpability" if accused companies show that they have strong internal programs to root out fraud.
Mr. Hickton, though, has embraced the process like none of his predecessors in Pittsburgh.
"We regard capturing money that's due and owing to the American taxpayer as a big priority," said Mr. Hickton. "We believe that partnering with relators' counsel in False Claims Act prosecutions allows us to fuse public resources with private resources and private incentive."
That's good news for local attorneys. When the feds get involved, companies tend to open their checkbooks.
Historically, about 97 percent of False Claims Act recoveries have come in cases in which the Department of Justice has intervened. Taxpayers Against Fraud notes that the figure includes cases in which the government got involved late in the process to nudge the parties into a settlement.
"Companies think it's one thing to try to fight a pesky whistleblower, but another to fight the government," said Mr. Litman, who splits his time between Pittsburgh and California. "The very large majority of cases in which the government intervenes settle without trial."
One case that has not been settled, and which has billion-dollar implications, involves one of Downtown's big employers: the for-profit college firm Education Management Corp.
Lynntoya Washington and Michael T. Mahoney, two former employees of EDMC, sued the for-profit college firm in 2007. Represented by Mr. Litman and others, the two relators alleged that EDMC's system of compensating recruiters based on the number of students they enrolled was illegal. They claimed that it violated a law meant to deter schools from luring inappropriate students.
EDMC has vigorously defended itself, countering in court filings that it based recruiter raises not just on new student enrollments, but on job knowledge, business practices, ethics, professionalism, customer service, initiative, seniority, location and administrative responsibility.
When Mr. Hickton decided to intervene in 2011, he entered fresh territory for the False Claims Act. The EDMC case is "one of the very first cases [federal attorneys] have taken in post-secondary education," said Patrick Burns, co-director of Taxpayers Against Fraud.
The government has alleged that EDMC institutions got $11 billion in federal student aid since 2003, raising the stakes into the 11-figure range.
Mr. Hickton's office declined to intervene in a second False Claims Act case against EDMC, in which a relator accused it of misrepresenting job placement statistics, student academic progress and accreditation of some programs. Attorneys, including Mr. Stone, are pursuing the case anyway.
There seems to be little limit to the act's applications.
On Wednesday, a judge unsealed a case filed in late 2012 by four community groups against the city of Pittsburgh and former Mayor Luke Ravenstahl, alleging that they misspent federal funds meant for improving low-income neighborhoods and desegregating housing. Some of the money went to citywide street paving and lighting, repairs to bridges and buildings and infrastructure for the upscale SouthSide Works, according to the lawsuit. Mr. Hickton's office declined to intervene, and plaintiffs' attorney Don Driscoll has said that he would like to settle.
In January, the U.S. attorney for the Middle District of Alabama intervened in a False Claims Act lawsuit filed by a former employee of U.S. Investigations Services. With a major facility in Butler County, the company conducts background checks of government employees and contractors.
The government joined the employee in alleging that U.S. Investigations Services routinely skipped the required quality control checks on large slices of its caseload, while earning $11.7 million in bonus payments alone from 2008 through 2010.
"The U.S. isn't trying to enrich whistleblowers," said Mr. Litman, who is not involved in the Alabama case. "The U.S. is trying to detect fraudsters. You just need the whistleblowers to get there."