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The Associated Press September 22, 2010, 8:47AM ET

Fed court in Va. hears whistleblower secrecy case

The secrecy part of a federal whistleblower law undermines the nation's open court system and tramples on the right to free speech, a lawyer for the American Civil Liberties Union told an appeals court Tuesday.

Attorney Christopher A. Hansen urged a three-judge panel of the 4th U.S. Circuit Court of Appeals to reinstate the ACLU's lawsuit, which claims the government has used the whistleblower law to keep allegations of Iraq war profiteering and other fraud hidden from the public, in some cases for years.

The law, known as the federal False Claims Act, allows citizens to collect damages for reporting contract fraud against the U.S. government.

The Civil War-era law was amended in 1986 to require whistleblowers to file their federal court complaints in secret. Claims must remain under seal for 60 days to give the Justice Department time to evaluate the allegations and determine whether to intervene. After 60 days, the government can ask a judge to extend the secrecy period.

In July 2007, the Justice Department estimated more than 1,000 False Claims Act lawsuits were under seal. That means the cases can't even appear on court dockets.

"One of the dangers of this statute is it hides what the court is doing," Hansen told the appeals court. "That's not good for justice, and it's not good for the First Amendment."

The ACLU is appealing the dismissal of the case by U.S. District Judge Liam O'Grady of Alexandria, who agreed with the government's position that whistleblower complaints must initially remain secret to avoid tipping off defendants to parallel criminal investigations.

Justice Department attorney Eric Fleisig-Greene argued that a lawsuit that has not yet been served on a defendant is not subject to First Amendment protection.

"For the first 60 days, literally nothing is being done with the complaint," Greene said.

Judge Roger Gregory, however, seemed troubled by a statutory scheme that allows the executive branch of government to require the judicial branch to keep complaints secret.

"Transparency is the soul of our court system," Gregory said.

The ACLU also objects to a provision of the False Claims Act that says whistleblowers can't collect damages if they tell the public they have filed a complaint. They can talk about the underlying allegations but cannot disclose the existence of a lawsuit.

Greene said the 1986 revisions were intended to encourage more whistleblowers to come forward. He added that most whistleblowers want to keep quiet because of possible reprisals or the prospect of impeding an investigation.

The appeals court usually takes several weeks to rule.

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