Whistleblower and Qui Tam Laws Explained
Whistleblowers are those individuals who come forward to disclose critical information about wrongdoings and misdemeanors. It was in 1863 that the first law to protect whistleblowers came into being through the False Claims Act. Under this Act, whistleblowers may receive rewards for exposing wrongdoings in the form of a percentage of the total sum recovered through their efforts. In 2006, a new whistleblower law was enacted to enable individuals to expose tax frauds including underpayments and other violations of the internal revenue law.
The whistleblower stands to get between 15% to 25% of the total sum recovered by the government as reward for his/ her efforts in cases where the government joins in. When the whistleblower decides to sue after the government has declined to participate, he/ she may be entitled to rewards of 25% to 30% of the recovered sum.
Both the Federal government and State governments maintain whistleblower reward programs to ensure that fraud can be detected early and deterred as well. A recent Forbes.com report highlighted the efficacy of whistleblower laws and protection for these individuals. The report discussed how healthcare whistleblowers have been responsible for the recovery of nearly $20 billion over a five year period. The article also quoted from another report to say that every dollar spent by the government on pursuing whistleblower cases ultimately helps recover $20.
Clearly, the whistleblower law/ whistleblower protection is functioning very effectively as a fraud detection mechanism for the U.S. government. One key point to note here is that many of these frauds that are uncovered by whistleblowers would not have been detected by the government, but for the exposure through these individuals.
Purpose of Whistleblower Laws
Typically, whistleblowers are employees of a business or entity who are witness to violations within the organization. External whistleblowers report misconduct or fraud to outside entities such as the media, the law enforcement agencies or watchdog agencies. Whistleblower laws came into being to support the efforts of such individuals in bringing these violations to light.
Evidently, the whistleblower stands the risk of coming under some heavy pressure, as well as strong retaliation from the persons/ entities who stand accused of the misdemeanors. For instance, if an individual has exposed violations carried out at his workplace, his employer may retaliate by firing him with immediate effect. This kind of retaliatory action could be a huge deterrent to people desirous of exposing fraud/ violation. To ensure that no harm comes to the whistleblower and that he/ she does not face any loss from exposing violations/ fraud the law offers complete protection to the individual in such cases.
Federal and State Stance on Whistleblower Law and Protection
The federal laws contained within the False Claims Act may not exactly be duplicated by State governments. Furthermore, the law, as well as the degree of protection granted to whistleblowers may differ from state to state. For example, in Florida, the state laws (citation §448.102) covers public and private employers and public employers cannot discharge from duty, take disciplinary action against or subject to adverse personnel action any employee who is or intends to become a whistleblower. In Colorado, state employees are given whistleblower protection. In Nebraska, private employers, state employees and unions are covered under the whistleblower law. These variations in legal outlook make it necessary for a whistleblower to hire a competent and highly experienced whistleblower law firm to represent him/ her.
The IRS’ whistleblower law vs. the False Claims Act
The objective of the IRS’ whistleblower law and False Claims Act may be similar but there are some significant differences between the two. An IRS whistleblower has to go through a very different process for reporting the fraud when compared to the False Claims Act whistleblower. Unlike the latter, a lawsuit is not initiated by the whistleblower. Instead, the report of fraud or violation is addressed directly by the IRS Whistleblower Office and the dispute may be appealed in the Tax Court. The IRS’ whistleblower law applies to individuals whose gross income exceeds specified limits. For the False Claims Act no monetary thresholds are applicable.
The Dodd- Frank Rules
The Dodd- Frank Wall Street Reform and Consumer Protection Act covers securities fraud exposed by whistleblowers. This act was created in 2010 to make Wall Street accountable so that financial meltdowns like the one in 2008 can be prevented in time. Whistleblower protection is a core component of this act. The provisions of this act are aimed at encouraging cooperation by insiders in the financial sector to eliminatecorruption. Individuals who offer original, valid information about violations and fraud are entitled to a reward under this act.
What kinds of frauds can be exposed under whistleblower law?
A general rule of thumb is that any fraud that impacts federal or state monies or is a violation of any federal/ state regulation can be exposed under whistleblower law. Whistleblower attorneys represent their clients, as well as the government in such actions. Federal False Claims Act covers actions that aim at recovering defrauded federal dollars, while state statutes enable recovery of state / municipal funds that have been misappropriated.
The most common types of fraud uncovered by whistleblowers include education fraud, pharmaceutical fraud, Medicare/ Medicaid fraud, government contract fraud, defense contractor fraud and fraudulent grants/ loans.
Securities fraud exposure is also covered under whistleblower law. Individuals who have uncovered or witnessed securities and commodities law violations and frauds can bring it to light under the new provisions of the SEC whistleblower reward program.
Fear of retaliation may force many individuals who are aware of violations to keep their silence. To break this barrier and to ensure that every citizen can come forward to report fraud and violation, the law facilitates complete protection for whistleblowers. The concept of whistleblower protection first gained ground in the late 1970’s after the adoption of the Civil Service Reform Act of 1978. These provisions were expanded when the Whistleblower Protection Act of 1989 came into being. In order to protect whistleblowers in specified private sector employment categories the government has also adopted such provisions in several federal statutes of which the Sarbanes Oxley Act and Dodd Frank Act are examples.
The law offers protection from the following retaliatory actions that can be initiated by the accused:
- Laying off or firing
- Initiating disciplinary action
- Denying overtime
- Denying promotion
- Threats and intimidation
- Denying benefits
- Failure to hire/ rehire
- Reassignment in such as way as to impact promotion prospects adversely
- Pay cuts
To ensure that the whistleblower does not face problems arising out of any of the above retaliatory measures, it is important for him/ her to learn about these protection guidelines from qualified whistleblower attorneys. When such retaliation does take place, the whistleblower can bring action against the party responsible for the same. He/ she may be able to recover double the damages sustained, as well as attorney fees through such action.
The importance of hiring a competent whistleblower attorney
The success of the whistleblower’s action, as well as the protection of his/ her rights depends heavily on the expertise of the whistleblower law firm fighting the case. The law is very complex in this regard;interpreting it correctly and laying out the aspects that support the whistleblower’s claim for rewards require the skills of experienced whistleblower attorneys.
Often these cases may take substantial time to come to a conclusion. Only a whistleblower law firm with adequate resources and qualified staff can sustain the pace throughout the investigation process and trial to garner the maximum possible reward for the whistleblower. In addition, the whistleblower law firm or the specific whistleblower attorneys working with the plaintiff should have sufficient experience working with the Department of Justice. The success rate of any whistleblower action is substantially greater if the government intervenes or joins in. In order to encourage the government to give priority to the action, the whistleblower attorneys should be able to make an impressive oral and written presentation of why their client’s case should receive government intervention and support. Again, this too requires the skills of an attorney who has handled several false claims and whistleblower cases.
Partnering with a whistleblower law firm that has a sufficient number of skilled attorneys to handle the various aspects of the case is in the best interests of the whistleblower. This ensures that the case is presented effectively, no matter how long it takes for the final judgment to be declared.