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Feds Pay In Battelle Fraud Case Taxpayers Even Pay Cost Of Defending Hanford Firm Against Whistleblower

U.S. government investigators agreed that scientist Jagdish C. Laul was fired for turning in his managers for fraud.

A federal appeals court agreed Laul could sue the Hanford contractor for whom he worked for wrongful termination.

The government made the contractor, Battelle’s Pacific Northwest National Laboratory, pay back $330,000 for double-billing lab equipment - and even recommended Battelle managers be criminally prosecuted for fraud.

But who picked up the $750,000 tab for defending Battelle against Laul’s lawsuit?

U.S. taxpayers.

Laul’s case is the most recent example of a system that allows private nuclear contractors to rack up huge legal bills fighting whistleblowers - even when the contractor’s in the wrong.

Battelle settled with Laul in January to head off a federal jury trial in Spokane.

The cost of his case to taxpayers includes the $250,000 settlement paid to Laul; $400,000 in legal fees to Battelle’s outside law firm, Davis Wright Tremaine of Seattle; and about $100,000 in legal work and other Battelle costs to fight Laul.

If Laul had won at trial, taxpayers would have paid that bill, too. That’s because of a Cold War agreement in which the U.S. government promised to pay all legal costs of its nuclear weapons contractors when they agreed to run the government’s weapons plants.

The agreement, called indemnification, is still in effect today. It applies to Battelle, which works on Hanford cleanup and other government nuclear programs.

Under contract reforms pushed by the Clinton administration, the government plans to stop reimbursing contractors when a court rules against them, or if they’re found guilty of reprisal in a whistleblower case.

The reforms don’t yet apply to Battelle. Under its current contract, the company’s top manager has to be involved in illegal retaliation before taxpayers won’t pay their legal bills, said Carolyn Reeploeg, DOE’s assistant chief counsel in Richland.

That will change in Battelle’s new contract, currently under negotiation, Reeploeg said.

The reforms, which also apply to other Hanford contracts, “broaden protections for whistleblowers,” she said.

But they don’t go far enough, said Alene Anderson, Laul’s attorney from the Government Accountability Project, a group that represents whistleblowers.

“The system is stacked against whistleblowers. They still let these cases get to the courthouse doorstep. Millions of taxpayer dollars can be spent before that,” Anderson said.

Despite its settlement with Laul, Battelle still isn’t admitting any wrongdoing in his firing. The company even denies Laul’s a whistleblower.

“In our view, the taxpayers are served when contractors defend themselves from frivolous lawsuits,” said Battelle spokesman Greg Koller.

But newly disclosed reports show the U.S. Department of Energy’s inspector general recommended criminal sanctions in 1993 against Battelle managers for covering up the lab fraud reported by Laul.

The confidential reports were obtained under the Freedom of Information Act.

Battelle improperly modified a $210,000 piece of lab equipment, fired Laul and then lied to the Energy Department in a cover-up, the inspector general’s investigation found.

The U.S. Justice Department made Battelle repay the government $330,000. Laul got $60,800 of that for his role in identifying the fraud under the Federal False Claims Act. He brought the claim in 1995.

Battelle’s treatment of Laul demonstrates the company’s “inability to conduct an unbiased investigation,” said George Allen, the inspector general’s investigator.

Battelle repaid the government with private contract revenue, not taxpayer money. The criminal charges were then dropped.

The dispute goes back a decade.

In 1987, Battelle purchased two $210,000 mass spectrometers to analyze chemicals for a government program at Hanford, Nevada and Texas to build a tomb for commercial wastes from nuclear power plants.

Laul, a 57-year-old geochemist, was a project manager doing groundwater studies for that program. It was canceled in 1988 when Congress decided to build a repository at the Nevada Test Site.

In 1990, Battelle illegally modified the spectrometer in the Hanford nuclear waste cleanup program, the inspector general’s report said.

Battelle was “double billing” Hanford’s former site contractor, Westinghouse Hanford Co., for the equipment by seeking reimbursement from both the civilian nuclear waste project in Nevada and the Hanford cleanup program, the report said.

The lab flap delayed progress in nuclear waste cleanup, including Hanford’s single shell tank program, the most urgent and riskiest in the nation’s weapons complex, the inspector general noted.

Those delays cost taxpayers $300,000, according to the report. That’s in addition to the legal fees.

In October 1989, Laul reported the equipment misuse to DOE because he was angry his work would be jeopardized by modifying the machine.

Battelle fired Laul in May 1990, saying he had improperly disposed of hazardous waste - a violation DOE later said Battelle used as an excuse to fire him.

On at least two occasions, Battelle’s legal spat with Laul could have been stopped.

Energy Department records show that John Wagoner, Hanford’s top manager, was told by his own investigator in April 1991 that Battelle should settle with Laul because Battelle was at fault and likely would lose a jury trial.

Steve Abernethy, DOE’s safety concerns manager, said in a report to Wagoner that Battelle fired Laul because he reported the fraud, not because he mishandled the chemical.

DOE should “direct PNL (Battelle) to quit spending contract funds to defend this case” and order a settlement with Laul, Abernethy said in his report.

Battelle strongly disagreed.

“We think there’s no connection” between Laul’s firing and his reporting the lab equipment dispute to DOE, Koller said in an interview last week.

An early DOE investigation by contractor Stone & Webster supported Laul’s termination. But Abernethy said Battelle’s legal department “may have obstructed” the investigation by having Battelle lawyers present at all employee interviews about Laul’s conduct.

Laul used “very poor judgment” in disposing of the chemical, but that didn’t justify firing him, Abernethy’s report said. Termination “is a rather harsh and unprecedented punishment for a senior scientist that has had a distinguished 15-year career at PNL,” he added.

The inspector general later agreed, saying Laul’s complaints to DOE about the lab equipment led directly to his firing.

Wagoner referred the issue to an internal Battelle committee to decide whether Laul’s treatment was consistent with DOE and Battelle whistleblower policies.

Battelle said the committee was “united” in concluding Laul was fired for “severe misconduct,” Koller said.

But the inspector general’s report disputed that.

“At least half of the six committee members found evidence of fraudulent management of the (Battelle) lab. However, those findings were not reported back to John Wagoner,” by Battelle managers, the inspector general’s report said.

The committee’s legal counsel was from Davis Wright Tremaine, the law firm taxpayers later paid $400,000 to litigate against Laul.

“This was a conflict of interest,” Laul said last week. Battelle’s Koller said it’s “standard practice” for Battelle to use its outside law firm on such issues.

The DOE’s inspector general report recommended criminal sanctions against Battelle for “theft, conspiracy and false statement.”

“The U.S. attorney’s office intends to prosecute the violations detailed in the July 1993 report,” the report said.

A grand jury was convened last year in Spokane to consider criminal charges. But they were dropped when Laul won his Federal False Claims Act case, forcing Battelle to reimburse the government, said Assistant U.S. Attorney James Crum.

Laul sued Battelle in 1993 for wrongful termination. His claim was initially denied in U.S. District Court in Spokane. But he appealed to the 9th U.S. Circuit Court of Appeals, which ruled in his favor and ordered a jury trial.

A whistleblower trial was justified because Laul’s immediate supervisor “drafted a memorandum only five days before Dr. Laul’s termination calling for (his) termination because of his complaints to the DOE,” the court said last June.

That’s when Battelle offered to settle, Laul said.

He got the inspector general reports after he agreed in January to accept the offer.

“These reports show I could easily have prevailed at trial,” Laul said.

Laul is now living in Boulder, Colo. He’s taken loans against his house and depleted his savings in his long fight with Battelle.

Now, he’s talking to Congress in an effort to make his case an issue in DOE contract reform.

“I stood up in the interest of DOE and had Battelle pay back $330,000, and then DOE turns around and pays back all the litigation costs to Battelle to fight my lawsuit.

“This just does not make any sense,” Laul said.

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