A Pasadena man who blew the whistle on alleged federal flood insurance fraud will receive more than $600,000 after a settlement agreement was reached last week.
Wayne Lutz, a former employee with Electronic Data Systems Inc., filed a lawsuit in federal court more than six years ago alleging that his employer, EDS, and insurance giant Travelers Casualty and Surety Co. defrauded the National Flood Insurance Program by knowingly paying claims for losses not covered under the federal flood program.
EDS and Travelers deny the allegations and are not admitting fault as a result of the settlement agreement.
Lutz?s lawyer, J. Stephen Simms of the Baltimore law firm Simms Showers LLP, said Lutz came forward after noticing that EDS was processing flood insurance claims on backdated policies written by Travelers. The backdated policies were allegedly written following a flood in the Midwest.
“Like any good employee who cares about their company and comes forward, he [Lutz] was told to go away,” Simms said. “Wayne got locked out of certain parts of the computer system … and he found himself in a cubicle doing nothing.”
Lutz ultimately was laid off from his job with Plano, Texas-based EDS.
As part of the settlement agreement, EDS and Travelers also will pay the government a combined total of $2.85 million.
The settlement was reached after the government joined Lutz? civil complaint and there was an investigation by the Federal Emergency Management Agency and the U.S. Attorney?s Office for Maryland. FEMA uses private insurance companies to sell and administer the National Flood Insurance Program under their own company names for the federal government.
Several NFIP insurance writers, including Travelers, use EDS to administer and pay NFIP claims.
While neither EDS nor Travelers admit guilt as a result of the settlement, Simms said, “the amount that the defendants paid speaks for itself.”
Carol A. Jablonski, manager of national litigation and intellectual property for EDS, declined to comment, referring all calls to Bob Brand, EDS? director of corporate public relations. Brand said EDS? “claims-handling process was proper.”
“We?re pleased EDS was able to reach a settlement with FEMA and the Department of Justices,” he said. “This allows us to put this issue behind us.”
Glenn McNamara, vice president and group general counsel for Travelers, could not be reached for comment.
