Corruption is like a cancer that destroys public confidence in companies, organizations, financial institutions and governments. There are various types of corrupt practices: misleading the public by means of a false financial statement; selling stock under misleading pretexts; evading or defrauding tax authorities; billing the government for services that were not performed; or providing the government with less than it was due under a contract, to name but a few examples.
One of the primary methods the government uses to combat corruption at all levels is the “Whistleblowers.” Whistleblowers are courageous individuals who, upon learning of corruption within their company or another company they may be working with, come forward and report the violation to the government. In exchange for their information, they may be entitled to a financial reward for the information they provide to the government.
There are four agencies that pay Whistleblower awards. They are the Internal Revenue Service, the Securities Exchange Commission, the Commodities Futures Trading Commission and the Department of Justice. In general, the government pays between 10% and 30% of any amount it recovers from a company when it recovers in excess of $2,000,000. There are a number of factors that determine the size of an award.
The short answer is just about anyone. Frequently, an employee becomes aware of some questionable activity. It may be an accounting clerk who sees that tax information being prepared is not accurate or a salesman who learns that a colleague has bribed a foreign official. It may be a medical assistant who sees that certain procedures have been up-coded or unbundled. It may be an employee of a defense contractor who sees that certain materials being used do not comply with their employer’s contract with the government. It may be an accountant with a publicly traded company who sees that certain information is omitted from the books before they are sent to the outside accountants or auditors. You do not have to be an employee of the company. You only need to have knowledge of a violation and information of use to the government.
The short answer, again, is it depends. The largest whistleblower award paid to date is a $104 million dollar award paid to a former employee of UBS, a Swiss Bank, by the IRS. There have been other awards of over $100 million to employees of pharmaceutical companies and healthcare companies who reported fraud against the government. The government has a significant amount of discretion in determining an appropriate award. Most awards to date have been in the range of $2,000,000 or less.
The law is clear that a whistleblower cannot be fired for making a report to the government under any of the Whistleblower programs; however, I recommend caution in deciding when and how to report a violation. An employer may decide to take some type of disciplinary action under the guise of some other unrelated misconduct, forcing the employee to engage in protracted litigation to vindicate his or her rights.
Reports, in many cases, can be made anonymously through an attorney in the first instance providing the employee with some level of anonymity. The best course of action for the potential Whistleblower is to consult with an attorney familiar with the practice area and develop a strategy for how best to proceed. Every case is different.
There is nothing in any of the statutes creating the whistleblower programs that requires a potential claimant to have an attorney. Each of the government programs has its own form, available on the agency’s website; however, the regulations are complex. Just because a whistleblower provides assistance to the government does not mean that he or she will automatically collect something. An attorney who understands these programs is in a better position to assist in the development of the claim and to protect the claimant’s interests. Also, if a claimant wishes to protect his or her anonymity, the claim must be submitted through an attorney.
Three of the four agencies administering whistleblower programs leave vest the agency involved with determining whether it will pursue a claim. If the agency opts not to pursue a claim, there is no recourse for the claimant. If the claim is reported through an attorney, there is probably a better chance that it will be accepted by the agency.
The Department of Justice and its administration of the False Claims Act is different. Under the False Claims Act, a person reporting a violation (known as a “relator”) can file suit on behalf of the government if the Department of Justice decides not to. These cases are referred to as Qui Tam actions. In these cases, the relator files suit against a government contractor and proceeds to settlement or verdict and collects a percentage of any recovery the government receives. Qui Tam actions are most commonly brought against companies receiving Medicare reimbursement or defense contractors, but any company that defrauds any agency of the government can be subject to a Qui Tam action.
Stopping the illegal actions of corrupt employees and companies is very important. If you know of actions you believe are or could be illegal, or you have questions as to whether certain actions are illegal or not, call my office at (202) 430 1900 or email us. It costs nothing to ask a question and you could help out your government, your fellow citizens and yourself.