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California State University Fails to Protect Whistleblowers Who Report Fraud
According to allegations, CSU teacher and employee Shumate bragged about how he purchased expensive recreation and sporting equipment for himself by requesting low invoices from vendors easily hidden from CSU audit. His explanation to a new co-worker Schwartz was simple. He had to use up all his budget each year to prevent a budget decrease. As the story goes, he purchased expensive bicycles and hang-gliding lessons. Some the loot was stored in lockers which miraculously were vandalized right after a higher up learned about the spending spree from Schwartz, the whistleblower. The higher up demanded an inventory.
California State University Fails to Protect Whistleblowers Who Report Fraud-Senator Leland Yee Sponsors New Whistleblower Bill

Despite its date of publication on April 1, 2012, this article on the inherent failure to protect whistleblowers in the SF Examiner was no April Fools joke except on California tax payers. However, the details of the California State University (CSU) internal investigation of wrongdoing are laughable.

According to allegations, CSU teacher and employee Shumate bragged about how he purchased expensive recreation and sporting equipment for himself by requesting low invoices from vendors easily hidden from CSU audit. His explanation to a new co-worker Schwartz was simple. He had to use up all his budget each year to prevent a budget decrease. As the story goes, he purchased expensive bicycles and hang-gliding lessons. Some the loot was stored in lockers which miraculously were vandalized right after a higher up learned about the spending spree from Schwartz, the whistleblower. The higher up demanded an inventory.

It appears the abuse and waste of tax payer funds was disclosed by Schwartz over several years. Schwartz is no longer an employee of CSU for unknown reasons but the whistleblowing appears to be a significant factor. Shumate, the expert on how to purchase items under the radar remains a CSU instructor notwithstanding the investigation that showed his unorthodox accounting methods. This case is just the tip of the proverbial iceberg concerning whistleblower retaliation, tax payer fraud and waste plaguing California and the nation. Fraud, waste, abuse of authority are like a thick bottom of a cocktail glass in a bar. A big money-maker!

Fast track over to another story on the debacle courtesy of Hospital/School/University Campus Safety; Whistleblower-Lawsuits-Cost-CSU-9M.aspx which mentions the plight of whistleblower Schwartz. There the headline is startling. The problem of failing to protect whistleblowers and defending those who retaliate against whistleblowers has cost California tax payers in the last 3 years a staggering $9 Million to settle and/or defend 7 cases of whistleblower retaliation. Case expense for shooting the messengers simply defy logic and are bad public policy. Don’t we want people to report wrongdoing? Especially government fraud?

Yet, here is the typical whistleblower retaliation pattern. An employee reports abuse, waste, mismanagement. The same honest employee who faced a moral dilemma to step forward now unknowingly does not realize they are under the microscope and someone in a managerial position is weighing whether to look into the matter or fire the whistleblower. Many times it’s a matter of money.

It is always far less expensive to fire one person than to take a good, hard, cold look at the failure of dozens of people, including mid to high level management who failed to do their jobs. Many managers receive high salaries and bonuses for performance. No high level executive ever returns money after proof of poor performance and non-existent oversight.

As the situation with Schwartz shows, he is out of a job. Meanwhile Shumate is still working for CSU. But the question remains who at the top is responsible for failing to obey California law that protects whistleblowers and where is the accountability of higher management? Apparently at CSU, there is none. Thus, enter the legislature.

State Senator Leland Yee is sponsoring new bill to correct the deficiency. 75scg9d On Yee’s website you can read his proposal to create change and the nonsensical comments by CSU officials.

“It is past due for the chancellor (Charles Reed) to mandate all his executives receive training in California’s whistle-blower protection laws,” Yee said in a statement. Reed’s spokesman, Mike Uhlenkamp, said executives are not required to take such training but can participate voluntarily. He said CSU has no plan to change. Yee is “more than welcome to express his opinion,” Uhlenkamp said.

The response from CSU is extremely bothersome. Executives are not required to take whistleblower retaliation training? How very odd that state employees are not required to learn the law, rules, regulations and policies inherent in employment law. And this is a government-funded educational institution? No wonder industry is struggling with issues of whistleblower retaliation when universities are not requiring executives to learn ethics and compliance. Fraud is rampant at state and federal agencies. It’s time the tax payers in California and elsewhere knew that those on the payroll are creating situations that essentially reward dishonesty.

We support Yee’s efforts to enhance protections for whistleblowers. We applaud Mr. Schwartz for his integrity. Good luck with the pending employment law case represented by Stephen Henry of Berkeley, California. We will be watching this case! provides a confidential system to report fraud and whistleblower retaliation. The computerized system software is provided through a cooperative agreement by award-winning A leader in bullying prevention, good governance and risk management. More companies and government agencies should adopt a 3rd party reporting system which includes training on current law, compliance and ethics.

It would save billions of dollars to allow experts handle whistleblower claims verses in-house methods. In many cases we are seeing an increase in departments handling whistleblower complaints actually turning over the reports directly to the managers where employees are reporting violations of law. Employees simply want to have the report handled properly without retaliation.

Whistleblower retaliation and wrongful terminations are costing tax payers. Making employees who were hired for their integrity out of work makes no sense. Defending managers that retaliate against whistleblowers is illegal. Fraud harms everyone. Tax payers deserve an honest days work from government employees. Tax payers also deserve to have their money protected from abuse. and would be happy to help companies create change in their reporting structures. Whistleblowers who need help reporting wrongful termination, government fraud and dangers to public health and safety are provided a referral to legal counsel, free of charge.

Below are a few thoughts from Rick Shaw, The facts are clear!

Situational Awareness at the individual-level with employees, managers, contractors, vendors, third-party resources etc. is critically needed. Lessons learned clearly reveal that traditional “tools” such as handbooks, general/annual training, intranets, shared drives, etc. are not working.

Anonymous Incident Reporting is critically needed because only 1 or 2 out of every 10 incidents are being reported utilizing traditional “tools” such as paper forms, one-size-fits-all web forms, e-mails, hotlines, texts, etc. are not working.

Proactive Intervention is critically needed due to numerous alarming trends in the workplace and in our educational institutions too. Lessons learned clearly reveal that traditional investigations, weekly meetings, paper-sharing and disconnected intervention processes are not working.

Proactive Prevention is critically needed to prevent preventable incidents. Lessons learned continue to reveal that most incidents were preventable, but reactive approaches and “tools” are more common, much more expensive, embarrassing and clearly not working.

Documentation from the beginning of an incident being reported to when the incident is closed is critically needed for internal controls, regulatory, insurability and legal defensibility. Lessons learned clearly reveal that traditional silo-based, paper-based, labor-intensive approaches are not working.

The TIPS platform is the only platform that delivers “innovative tools” that were developed to meet the critically needed efforts outlined above and many other related challenges, gaps, disconnects and risks.

The TIPS platform is the only platform that has been recognized with four (4) innovation awards from risk management and insurance experts from around the world. awards.asp

Massive Healthcare Fraud Exposed
by Brian Mahany

Federal prosecutors in Dallas charged a Texas physician and 6 others in a massive healthcare fraud. They say the defendants defrauded taxpayers of as much as $374 million dollars by making false claims to Medicare and Medicaid. Their crime spree went on for years before being caught.

Healthcare fraud is nothing new. Not a week goes by without some small nursing home operator, physician’s practice or home health agency being accused of bilking Medicare. Ultimately those crimes hurt all of us – higher healthcare costs and less availability for people truly in need. Lately, however, the crimes have become more brazen.

Recently we reported a medical group that was performing unnecessary cardiac surgical procedures, allegedly just to make more money from Medicare. Patients were left in great pain just so a few doctors could boost their pay. The Texas indictment is also in a category all to itself.

Prosecutors say that Dr. Roy Jacques and his partners at Medistat Group Associates “certified more Medicare beneficiaries for home health care and had more patients than any other medical practice in the United States.” They say Dr. Jacques was also a fraud and a thief.

Medical billing fraud of that magnitude involves many people. One physician alone can’t bill that much or see that many patients. Conspiracies of this size are rare – the more people involved, the higher the risk that someone “blows the whistle.” In fact, most healthcare fraud is exposed by remorseful participants or by coworkers who realize a crime is being committed.

According to the indictment, a business manager working for the defendants appears to be the person who came forward and cooperated with investigators. In our opinion, whistleblowers are the true heroes. Until someone comes forward, authorities often have no clue who is legitimate and who is breaking the law.

Prosecutors say that Jacques and his co-defendants billed for services not performed and performed services not medically necessary. The enterprise became so large that at one point the government claims that Jacques was telling associates to give out cash and groceries to Medicare beneficiaries to get them to sign up for medical services – services they didn’t need.

To many people, this type of activity is harmless yet it hurts everyone. In many places, there are waiting lists to receive medical assistance. That means that some go months without care while a handful of doctors and nurses submit hundreds of millions of dollars in false claims. The tab for those claims, of course, is picked up by the taxpayers.

If you are aware of healthcare fraud, or any other type of fraud involving taxpayers’ money, you may be able to collect a large cash award for your information. The United States and many state governments have whistleblower laws – often called “false claims acts” or the “Lincoln law”- that entitle whistleblowers to receive a significant percentage of any
monies recovered by the government. In a case this size, that could be tens of millions of dollars.

The law firm of Mahany & Ertl presently has the largest accepted false claims case in the nation. Whether it be our $2.4 billion whistleblower case against Allied Home Mortgage or something much smaller, we proudly represent whistleblowers and insure they receive proper respect and compensation.

If you are aware of mortgage, healthcare, highway, defense or other billing fraud involving taxpayers, give us a call. All inquiries are kept in strict confidence. For more information contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at

CEO Note: Once again my colleague Brian identifies the vital role a whistleblower played in exposing a corrupt group of medical providers who conspired to rip off the government. Brian correctly points out that some employees may have gone along to get along. In these tough economic times, is it any wonder that people won’t buck the system if it means they will lose their jobs? However, in the bottom line analysis, it is the responsibility of all employees not to engage in corruption.

One question I’d ask; How did the State of Texas and the federal government fail to provide oversight for so many years that Medistat managed to amass hundreds of millions of dollars in fraudulent billing? Is this one of the great employment and corporation friendly opportunities in Texas where no one in government ever checks up on the company? Is there a hands off policy for certain employers? Should there be an inquiry into whether whistleblowers filed reports with government agencies but those reports were never investigated?

If you know of any type of fraud, please contact for a free consultation with an expert lawyer such as Brian Mahany.

© 2003 The E-Accountability Foundation