Whistleblower Rights and Protections
Whistleblowers are the key to exposing corporate wrongdoing and government fraud. Someone who has first-hand knowledge of fraud or other wrongdoing may have a whistleblower case.
A whistleblower may sue on behalf of the government when they witness fraud, waste, and abuse in government programs, and may be eligible to receive a portion of any money recovered by the government, up to 30 percent, as a whistleblower reward. There are also whistleblower protection provisions in place to assist whistleblowers who may face retaliation as a result of reporting wrongdoing.
In Fiscal Year 2016, the U.S. Department of Justice reported that it recovered more than $4.7 billion in civil settlements and judgments under the False Claims Act. That was the third highest annual recovery since the federal False Claims Act was passed during the Civil War as a measure to deter Union Army suppliers from defrauding the government and recover from those that had.
Although False Claims Act recoveries have gone down each year under the Trump Administration ($3.7 billion in 2017 and $2.8 billion in 2018), the False Claims Act remains one of the government’s best fraud-busting weapons. That’s because it allows private individuals to act as the government’s eyes and ears, calling out fraud, waste, abuse, and other wrongdoing that otherwise likely would go undetected.
Most False Claims Act cases involve fraud aimed at cheating Medicare, Medicaid, and other government health care programs. Pharmaceutical corporations, medical device companies, hospitals, nursing homes, laboratories, and physicians are some of the False Claims Act violators that most often defraud government health care programs for profit.
Apart from the health care industry, the False Claims Act also empowers private parties to sue on behalf of the government across a broad spectrum of other industries, including aerospace, defense contractors, the nuclear power industry, and manufacturers that cheat U.S. Customs by misclassifying imports to avoid paying import duties, to name a few.
Before blowing the whistle, it is very important to secure all proper and legal documentation, and make sure there is a valid claim under either the federal or a state’s False Claims Act. The best way to make sure your False Claims Act case is valid and to see it through to a settlement or judgment is to hire an experienced lawyer to navigate you through the process.
In addition to the False Claims Act, there are a host of other whistleblower programs established to provide protections for people who want to report fraud:
- The Internal Revenue Service (IRS) has the IRS Whistleblower Law, designed to protect whistleblowers calling out tax fraud.
- The Securities Exchange Commission (SEC) Office of the Whistleblower was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to help prevent the type of securities fraud that triggered the financial crisis of 2007-2008.
- The U.S. Commodity Futures Trading Commission’s (CFTC) whistleblower program, also established by the Dodd-Frank Act, provides monetary incentives to individuals who report possible violations of the Commodity Exchange Act.
- The Motor Vehicle Safety Whistleblower Act was passed by Congress in 2015 in response to a series of deadly automotive defects and auto industry coverups.
These whistleblower programs contain provisions that protect the privacy and confidentiality of whistleblowers while providing anti-retaliation protections that prohibit employers from lashing out at employees who report wrongdoing.
What is the False Claims Act (FCA)?
The False Claims Act (FCA) – also called the Qui Tam statute – is a federal law that was first established by Congress in 1863, allowing everyday citizens the authority to file a lawsuit on behalf of the United States when they believe an individual or company is defrauding the government.
The False Claims Act holds liable those who knowingly submit, or cause another entity or person to submit, false claims for payment of government funds. Those found responsible for fraud are liable for three times the government’s damages plus civil penalties of $5,500 to $11,000 per false claim.
Those who choose to come forward and report the wrongdoing through an FCA lawsuit, better known as “whistleblowers,” are entitled to between 15 and 30 percent of the amount recovered by the government due to the “qui tam” provision of the FCA.
Although originally coined the “Lincoln Law” due to its beginnings in the Civil War Era, the FCA works to not only protect those who “blow the whistle” on the misconduct, but also ensures that they are compensated for their time and effort.
The False Claims Act gives the U.S. an opportunity to investigate claims filed on its behalf. If the U.S. government chooses to “intervene” in an FCA case, effectively taking over in the litigation, the whistleblower will be rewarded between 15-25 percent of any judgment or settlement the case brings.
If the U.S. declines to intervene, the whistleblower can still proceed with the lawsuit. False Claims Act cases unsupported by the government that result in a judgment or settlement have higher awards for whistleblowers – up to 30 percent.
In addition to the federal False Claims Act, many states also have False Claims Acts that work in a similar fashion.
In 1986, Congress strengthened the False Claims Act by amending it to increase incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.
False Claims Act settlements and judgments returned $2.8 billion to federal agencies and programs in fiscal year 2018, with more than 89 percent of the recoveries coming from cases involving health care fraud, according to the U.S. Department of Justice (DOJ).
Of the $2.8 billion in recoveries in 2018, nearly 75 percent of them – more than $2.1 billion – were qui tam cases initiated by whistleblowers who witnessed fraud or other wrongdoing and chose to file suit on behalf of the U.S. government.
Total awards paid to whistleblowers whose FCA cases resulted in a recovery amounted to $301 million collectively in 2018.
There also is a part of the False Claims Act that is known as the whistleblower protection provision. This provision ensures that if you are fired, demoted, suspended, threatened or discriminated against in any other way by an employer as a result of your filing a report of fraud, that you will be reinstated to your former position. This includes receiving any seniority that may have been affected, as well as back pay, interest and other compensation that may be due as a result of damages or losses you suffered as a result of filing a claim.
Additionally, the Whistleblower Protection Act of 1989 is a federal law that protects federal whistleblowers who work for the government and report agency misconduct. Employers are forbidden from retaliating against employees who file complaints. An employee may file a complaint about matters involving violation of a law, rule or regulation; gross mismanagement; gross waste of funds; abuse of authority; or substantial and specific danger to public health or safety.
Before Blowing the Whistle
Before you report suspected fraud or other wrongdoing – before you “blow the whistle” – it is important to make sure you have a valid claim and that you are prepared for what lies ahead. Here are some things to consider:
- Be hands-on – A whistleblower must have first-hand knowledge of the fraud or other wrongdoing in order to file a claim. It is important to have physical evidence such as documents, emails, invoices, billing statements or other materials that support your allegations. These materials must be things the whistleblower collected from the employer, organization or entity. They cannot be public records or information from another source.
- Be specific – Identify the “who, what, when and where” of the fraud. Organize your information and, if possible, create a timeline for the fraudulent conduct. You will be required to explain why the conduct is fraudulent. As an employee familiar with your company’s procedures and industry standards for those procedures, you are uniquely qualified to spot fraud where others may miss it or assume it is a standard business practice.
- Verify criteria – In order to file a federal False Claims Act, the fraud must be committed against the U.S. Government; in other words, U.S taxpayers. You may also file a state False Claims Act provided your state has one if state funds are affected by the fraud.
- Determine motive – The fraud must have been committed willingly and deliberately. Mismanagement is not a cause for a whistleblower claim.
- Check yourself – If you are a government employee who witnesses fraud against the government, you may need to first make an effort to report the fraud through channels within your agency before filing a whistleblower lawsuit. Talk to an attorney to determine if you should take this course.
- Talk to a whistleblower attorney – An experienced whistleblower attorney is an important ally in bringing wrongdoers to justice. It is advisable to talk to an experienced whistleblower lawyer before filing any claim or reporting the wrongdoing. A whistleblower lawyer will be able to help you navigate a potential claim and guide you through what is often a long process. Although your information will initially be kept confidential, you will eventually be identified as the whistleblower. Your lawyer can help you obtain whistleblower protections available under the False Claims Act. Taxpayers Against Fraud (TAF) has created this helpful video to illustrate what may be involved in filing a whistleblower lawsuit.
Health Care Fraud
Health care fraud involves the filing of dishonest health care claims in order to turn a profit. Examples of practitioner schemes include a health care provider who bills Medicare for services that were not performed or were unnecessary, double-billing, billing for a non-covered service as a covered service, modifying medical records, intentionally reporting incorrect diagnoses in order to maximize payment, and prescribing unnecessary treatment.
Congress established the IRS Whistleblower Award Program in 2006 to award those who report – or “blow the whistle on” – people, companies, and organizations that fail to pay the tax they owe.
The Federal False Claims Act explicitly excludes tax fraud as do most state False Claims Acts. However, there is an IRS Whistleblower law, separate from the Federal False Claims Act, which provides for up to triple damages and whistleblower awards of 15 to 30 percent of the amount recovered. In simple terms, if the IRS uses the information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.
To file under this section of the law, the tax, penalties, interest, and additions in dispute must total a sum in excess of $2,000,000, and a few other provisions must be met. If the case involves an individual who is not paying taxes, his or her annual gross income must be more than $200,000. There is another IRS Whistleblower award program for cases that do not meet these criteria. The award is discretionary and pays less, with a maximum of 15 percent for up to $10 million.
In its 2018 report to Congress, the IRS Whistleblower Office reported it made 217 awards to whistleblowers totaling $312.2 million. Since its establishment, the IRS Whistleblower Program has helped the IRS to recover $5 billion, with total whistleblowers awards totaling about $811 million.
Until recently there has been no federal law protecting tax whistleblowers from retaliation. The IRS Office of the Whistleblower has called on Congress repeatedly to enact statutory protections from retaliation.
The IRS Whistleblower Office says in its 2018 report that “providing whistleblowers with a zone of protection from economic or physical harm is imperative to the success of any whistleblower program as Congress has recognized in other whistleblower statutes … The need for greater protection of whistleblowers is amplified as sophisticated taxpayers are increasingly attempting to learn the existence or identity of a whistleblower.”
In June 2019, Congress finally responded by enacting better protections for tax whistleblowers, modeled on the whistleblower protection provisions of the Sarbanes-Oxley Act and False Claims Act. The new whistleblower protections are included in the Taxpayer First Act, passed by the House on June 10, 2019, and by the Senate on June 13.
By offering better protection from retaliation, the IRS has a better chance of closing the more-than $400 billion gap in unpaid taxes every year.
In cases of fraud within the financial services industry, whistleblower protection is provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as the Securities and Exchange Commission (SEC) Whistleblower Law. This is a federal statute signed into law by President Obama on July 12, 2010. It represented a major change in the American financial regulatory environment and affects almost every aspect of the nation’s financial services industry.
The SEC Whistleblower Act also gives the SEC powers of enforcement, including a “whistleblower bounty program.” This allows people who provide information that leads to successful SEC enforcement to receive 10 to 30 percent of the monetary sanctions over $1 million.
Additionally, the Act amends the SEC Act of 1934 and the Investment Company Act of 1940 to allow the SEC to not disclose records or information that have been obtained for uses such as “surveillance, risk assessments, or other regulatory and oversight activities.” The only exception is for judicial or congressional inquiry.
The SEC Office of the Whistleblower was launched in response to the U.S. financial crisis of 2008-2009 that resulted in costly bail-outs of major investment firms and banks to prevent a total economic collapse. The aim of the SEC whistleblower program is to increase transparency within the financial services industry, protect investors from investment fraud, and provide tools for managing future financial crises.
The Dodd-Frank Act expanded the protections for SEC whistleblowers and broadened the prohibitions against retaliation. These protections give the SEC the authority to take legal action against employers that have retaliated against whistleblowers and give whistleblowers the right to file a retaliation complaint in federal court.
Additionally, the SEC never discloses any information that could directly or indirectly reveal a whistleblower’s identity.
The SEC has awarded approximately $384 million to 64 individuals since issuing its first award in 2012.
Auto Manufacturing Whistleblower
The need for effective auto industry whistleblower laws and protections has become ever clearer in recent years amid a series of scandals that led to record penalties and recalls, such as the GM ignition switch defect, Takata exploding airbags, and VW emissions cheat fraud.
Whistleblowers in the auto industry are protected by the Moving Ahead for Progress in the 21st Century Act (MAP-21). Enacted by the Occupational Health and Safety Administration (OSHA) in July 2012, MAP-21 protects employees of automobile manufacturers, auto part suppliers, and car dealerships who have been demoted, harassed, terminated or otherwise retaliated against for voicing concerns to their employer or to federal regulators over auto defects or violations of motor vehicle safety standards.
in December 2015 Congress created the Motor Vehicle Safety Whistleblower Act (MVSWA) to further encourage auto-industry whistleblowers to come forward. The MVSWA provides financial incentives to whistleblowers in the auto industry to bring to light their concerns about auto safety. Advocates believe the MVSWA will be as successful as the False Claims act in fighting fraud and other misconduct in the automobile industry.
The MVSWA provides protections and awards to whistleblowers who voluntarily provide federal regulators information relating to motor vehicle defects, noncompliance, or violations of notification or reporting requirements that create an unreasonable risk of death or serious physical injury. A whistleblower must be an employee or contractor of a motor-vehicle manufacturer, parts supplier (i.e., manufacturer of motor-vehicle equipment), or dealership.
Whistleblowers whose tips lead to penalties of $1 million or more will be awarded up to 30 percent of the total sanctions against the violating company.
The aerospace industry encompasses manufacturers and suppliers of civil, military and business aircraft, helicopters, unmanned aircraft systems, space systems, aircraft engines, missiles, material and related components, equipment, services and information technology. Basically, companies in this field engage in research, design, manufacturing, operation and maintenance of vehicles that move through air and space. In most industrial countries, the aerospace industry is a cooperation of public and private industries.
When an individual or company acting as a defense contractor knowingly deceives the government in order to receive personal benefit, usually financial, this is fraud and a violation of the False Claims Act (FCA). In 1863, Congress enacted the False Claims Act (also called the “Lincoln Law”) to hold individuals and companies responsible when they defraud governmental programs.
Types of fraud that may occur in the aerospace industry include:
- Deliberately inflating prices on contracts
- Failing to meet the specifications required by the contract
- Supplying defective or inferior parts or goods
Defense Contractor Whistleblower
A defense contractor is defined as any person or company who enters into a contract with the United States government related to national defense. They may provide goods or services, or both. These goods and services are used for the production of material or for the performance of services for national defense. Usually the contract is with a branch of the U.S. military. Jobs commonly performed by defense contractors include data protection and purchasing and procurement services.
When an individual or company acting as a defense contractor knowingly deceives the government in order to receive personal benefit, usually financial, this is fraud and a violation of the False Claims Act (FCA). In 1863, Congress enacted the False Claims Act (FCA) to hold individuals and companies responsible when they defraud governmental programs.
Types of defense contractor fraud include:
- billing the government for time spent on a commercial job or other project,
- charging multiple times for the same service,
- substituting a cheaper or inferior product for one originally promised but still billing for the more expensive or better product.
Nuclear Power Whistleblower
Nuclear power is the use of sustained nuclear fission to generate heat and electricity. The U.S. is the world’s largest producer of nuclear power, accounting for more than 30 percent of worldwide nuclear generation of electricity, according to the World Nuclear Association. The U.S. has 104 nuclear power reactors in 31 states, operated by 30 different power companies. There are 69 pressurized water reactors (PWRs). Almost all the U.S. nuclear generating capacity comes from reactors built between 1967 and 1990.
The Nuclear Regulatory Commission (NRC) is the government agency established in 1974 to regulate and oversee the nuclear industry. In particular, it oversees reactors, fuel cycle facilities, materials and wastes, as well as other civil uses of nuclear materials. Performance against 19 key indicators is reported by nuclear power generating facilities to the NRC each quarter and made available to the public through the NRC website. The 19 criteria include 14 indicators on plant safety, two on radiation safety, and three on security.
A nuclear facility is rated as to whether it is operating normally, requires regulatory oversight, requires regulatory action, or is in an unacceptable state, in which case it would probably be shut down.
Whistleblowers within the nuclear industry can file a False Claims Act lawsuit on behalf of the federal government if they are witness to fraud, waste, abuse and other wrongdoing.
Types of abuse that occurs in nuclear power industry include:
- Failing to conduct required safety inspections but reporting them as complete
- Failure to implement and enforce proper worker safety standards
- Unmanaged disposal of nuclear waste
- Supply fraud
The Energy Reorganization Act (ERA) prohibits retaliation against any employee who reports violations or refuses to engage in violations of the ERA or the Atomic Energy Act. Protected employees include employees of operators, contractors and subcontractors of nuclear power plants licensed by the Nuclear Regulatory Commission, and employees of contractors working with the Department of Energy under a contract pursuant to the Atomic Energy Act.
State False Claims Act
In addition to the federal False Claims Act, which targets fraud against the U.S. government, some states have their own False Claims Act, which allows citizens to report fraud, waste or abuse affecting state agencies and programs. Not all states have a False Claims Act, and not all State FCAs encompass all types of fraud. For example, some state FCAs are only used to identify and prosecute Medicaid fraud. Whistleblowers whose state does not have a FCA or whose state FCA doesn’t encompass other types of fraud, should talk with a lawyer about their options for filing as a relator under the qui tam provisions of the federal False Claims Act.
Find out if your state has a FCA and what it covers by visiting our States False Claims page.
An experienced whistleblower attorney is an important ally in bringing wrongdoers to justice. It is advisable to talk to an experienced whistleblower lawyer before filing any claim or reporting the wrongdoing. Beasley Allen has a talented team of attorneys dedicated to pursuing whistleblower cases. We would like to meet with you CONFIDENTIALLY to review your potential whistleblower claim.