Group Against Fraud Accused of Deception

Taxpayers Against Fraud, a California group that helps employees sue defense firms, has itself been charged with fraud and deceit in a lawsuit filed by whistle-blower Max Killingsworth.

The suit marks the first time that plaintiffs have so openly squabbled in a system that allows individuals to sue defense contractors on behalf of the federal government. Under the federal False Claims Act, a whistle-blower can obtain a share in any court awards.

Killingsworth’s suit also names as a defendant board member Leonard Jacoby, a founder of the law firm chain Jacoby & Meyers.

The suit, filed Friday in Los Angeles Superior Court, charges that Taxpayers Against Fraud and its attorney, John Phillips, failed to disclose Phillips’ contingency-fee arrangement with the group. Phillips is also a board member of Taxpayers Against Fraud.

Phillips dismissed the allegation, asserting: “It is outrageous, groundless and reckless.” He said the contingency relationship “was fully disclosed.”

At the heart of the lawsuit is the assertion that Phillips receives excessive fees, according to Phillip Benson, Killingsworth’s attorney.

Taxpayers Against Fraud becomes a co-plaintiff in False Claims Act cases brought by a whistle-blower, entitling the group to share any potential award. But Killingsworth alleged in the suit that Phillips secretly gets some of the group’s share. Then Phillips requires a whistle-blower to pay any attorney fees awarded under provisions of the False Claims Act, Killingsworth alleged.

The case arises from a pending suit filed by Taxpayers Against Fraud and Killingsworth in 1989 against Teledyne Systems.