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Editor: Mike Bothwell
Profession: Qui Tam Attorney

Category: Qui Tam Legal News

The Red Cross is usually referred to and thought of as a compassionate company that provides needed assistance for disaster relief and keeps the supply of blood flowing to the U.S. healthcare system. What happens to an organization like that when it encounters fraud, waste and abuse?

Just like everyday citizens, good companies' good intentions are tested when they encounter the problems of fraud, waste and abuse. It appears from recent articles as though the Red Cross is failing its test.

In one instance, the Red Cross may not have been taking as good care of the blood supply as we would all hope and expect. According to an article published in the Houston Chronicle April 27, 2006, a whistleblower has filed a lawsuit against the Red Cross for being discharged after reporting the possible sale of exposed blood. The whistleblower, Michelle Hoyte, claims that the Red Cross failed to immediately notify authorities that 600 pints of contaminated blood were released in New Jersey and then fired her for reporting it to her superiors. She said, "'There's supposed to be an internal system for people to report incidents like this[.] But the employees are afraid to do so for fear of being dismissed.'" While this refers to the Red Cross and not some mammoth defense contracting company, this is exactly the corporate atmosphere Congress tried to dismantle in passing the amendments to the False Claims Act in 1986.

It seems that even though the government actually investigated the whistleblower's claims and found substantial support, nothing has been done. The lawsuit has been partially dismissed and no fines have been levied. "The FDA investigated her claim last year and found that 539 of the 607 units had been exposed to air. In spite of the FDA's findings, Hoyte's attorney, Vincent McKnight, said the Red Cross has not been fined." It appears that the government may have even helped fight against the whistleblower case by taking positions adverse to the whistleblower.

That is not all for the Red Cross, however. In a similar test of how a company deals with issues of fraud, waste and abuse, the Red Cross is now facing another lawsuit concerning its cover up of such activities within its own organization. The New York Times recently ran a story about how the Red Cross historically sweeps fraud, waste and abuse under the rug and fails to pursue money stolen from donations because it prefers to keep these activities from coming into the public light.

"The Red Cross is under intense scrutiny over its response to Hurricane Katrina, including accusations of fraud and theft of relief supplies that volunteers say were ignored for months." "Volunteers and former Red Cross executives say the organization often places a higher priority on avoiding scandal than recovering stolen money, and a former president of the Red Cross, Dr. Bernadine Healy, offered support for that view.

In an interview, Dr. Healy, who was pushed out after the terrorist attacks of Sept. 11, said the Red Cross board criticized her for firing the executive director of the Hudson County chapter in New Jersey, after she learned that he and the bookkeeper had embezzled almost $2 million from the organization.

'They told me I was too tough and too fast in firing the guy and moving in on this fraud,' Dr. Healy said. 'I was told the way to handle these things was quietly and that nobody needed to know.'"

It seems a simple tenant that if an individual knows about fraud, waste and abuse she has a duty to report it and if a company is told about fraud, waste and abuse, it should do everything it can to protect the victims. Here the victims are those helpless patients who get tainted blood, those trusting individuals who give hard earned money to Red Cross relief, and apparently, those brave enough to bring these problems to the public attention who are rewarded with discrimination, harassment, and the loss of livelihood.