Five Successful Whistleblower Programs in the United States
Whistleblowers play a critical role in holding individuals and organizations accountable for fraudulent or corrupt practices. In the United States, several whistleblower laws provide legal protection and incentives for individuals who report illegal or unethical conduct. Each year billions of dollars are recovered through the whistleblower statutes and hundreds of millions of dollars go to whistleblower awards for individuals who blow the whistle the right way. Here are five successful whistleblower statutes in the United States, that have resulted in major recoveries over the years.
False Claims Act (FCA)
The first whistleblower law if the False Claims Act. It falls on the top of the list because each year for the last decade or so over a billion dollars has been recovered through the False Claims Act and whistleblowers in aggregate receive over $100 million dollars in whistleblower rewards. The volume of successful FCA cases speaks for itself, but some of the bigger whistleblower awards have flowed from other programs. The False Claims Act is a federal statute that prohibits defrauding the federal government. The statute seeks to recoup fraud against the federal government in the form of false billing or keeping funds that are overpayments which should be returned.
Whistleblowers usually report the following actions under the False Claims Act: healthcare fraud, Medicare Fraud, Medicaid Fraud, Tricare Fraud, kickbacks, customs fraud, defense contractor fraud, PPP Loan Fraud and other fraudulent practices against the government. The FCA provides protection for individuals who report fraudulent activities and allows whistleblowers to file a lawsuit on behalf of the government which is known as a qui tam lawsuit. Whistleblowers who successfully report fraud cases are entitled to receive a percentage of the recovered funds which is up to 25% if the government declines intervention and 30% if the government intervenes. The increased percentage optically is offset by the fact that the law of averages has the government on average recovering $10 million more if they intervene. However, an outlier case in 2022 in which one non-intervening qui tam under the False Claims act resulted in a whistleblower reward of over $200 million dollars may skew the results back to parity if included.
Some of the largest False Claims Act settlements involve pharmaceutical fraud and defense contractor fraud. The every day False Claims Act cases tend to linger about Medicare Fraud and Medicaid Fraud. One that is still evolving is the PPP loan whistleblower program.
Example case: In 2021, the U.S. Department of Justice announced a $60 million settlement with a pharmaceutical company for violating the FCA. The case was brought forward by a whistleblower who received a $9.9 million whistleblower award.
Dodd-Frank Wall Street Reform – Sarbanes-Oxley Act (SOX) – SEC Whistleblower Laws
Generally, an SEC Whistleblower files with the SEC via a TCR (Tips, Complaints, Referrals) to report violations of securities laws. The Dodd-Frank Act was enacted in 2010 as a response to the 2008 financial crisis. It includes a whistleblower law program, which provides financial incentives and protections to individuals who report securities law violations to the SEC. The program allows whistleblowers to receive between 10% and 30% of any monetary sanctions collected by the SEC as a result of their information, and also provides anti-retaliation protections.
In contrast, the whistleblower provisions in the Sarbanes-Oxley Act were enacted in 2002 and apply specifically to employees of publicly traded companies. The act provides protections to whistleblowers who report financial fraud or other types of misconduct to their employer, a federal agency, or Congress. The act requires publicly traded companies to establish procedures for receiving and handling whistleblower complaints, and it prohibits retaliation against whistleblowers. In recent years, both also stridently address the need for good record keeping and an audit trail and the failure to keep one may result in liability.
Whistleblowers usually report the following actions under the SEC whistleblower program: securities fraud, bribery, violations of the Foreign Corrupt Practices Act, regulatory violations, Ponzi Schemes, failure to keep accurate records, inside trading, churning, and not having the best interest of the client in front of the interest of the firm.
The SEC Whistleblower Law Program allows a whistleblower to potentially remain anonymous from start to finish with the use of an SEC whistleblower attorney. The anonymity feature is an excellent prophylactic measure against retaliation, but if the whistleblower’s identity is disclosed or if the misconduct is properly reported, the whistleblower is entitled to strong protections from retaliation including back pay, double damages, attorneys’ fees, costs, and reinstatement as well as other potential relief. Since its inception in 2010, the program has resulted in over $5 billion in penalties and fines.
Whistleblower retaliation examples serve as stark reminders of the challenges individuals face when exposing wrongdoing, as evident in recent cases of whistleblower retaliation such as Company X’s alleged termination of an employee who reported financial misconduct. Understanding the detrimental impact of whistleblower retaliation examples underscores the urgent need for robust whistleblower protection programs that safeguard those who bravely come forward to expose wrongdoing, ensuring a culture of accountability and integrity within organizations.
In 2022, there was an aggregate in excess of $170 million in whistleblower rewards under the SEC whistleblower program, and impressive amount, which featured in 2022 eight out of ten of the largest whistleblower awards for the year.
Example cases: In 2019, the SEC awarded a whistleblower $37 million for reporting a fraud case involving a major financial institution. In 2019, a federal jury awarded $2.2 million to a whistleblower who was fired for reporting accounting irregularities at a technology company which shows the strident anti-retaliation provisions.
CFTC Whistleblower Program
The CFTC whistleblower program stands for the Commodity Futures Trading Commission Whistleblower Program. It is a program created to encourage individuals to report potential violations of the Commodity Exchange Act (CEA) to the CFTC.
The program offers monetary rewards to whistleblowers who provide original information about violations that lead to successful enforcement actions resulting in penalties of $1 million or more. The rewards range from 10% to 30% of the total amount collected by the CFTC in the enforcement action. Like the SEC Whistleblower Program an individual can potentially remain anonymous from start to finish with the use of a CFTC whistleblower attorney.
Some common violations under the CEA that the CFTC may investigate include market manipulation, fraud, insider trading, and false reporting.
An example of a case with a whistleblower reward under the CFTC whistleblower program is the case against JPMorgan Chase & Co. In 2019, the CFTC announced a settlement with JPMorgan for $920 million for engaging in manipulative and deceptive conduct in the trading of precious metals and U.S. Treasury securities. The CFTC also announced that it had awarded a whistleblower over $30 million for providing valuable information that led to the successful enforcement action.
Internal Revenue Service (IRS) Whistleblower Program
Whistleblowers usually report tax fraud under the IRS Whistleblower Program. The program provides financial incentives for individuals who report tax evasion and other fraudulent activities. Whistleblowers are entitled to receive a percentage of the recovered funds. Since its inception in 2006, the program has resulted in over $5 billion in recoveries.
Example case: In 2019, the IRS awarded a whistleblower $52 million for reporting tax evasion by a major financial institution.
Whistleblowing can take many forms including other programs like PPP loan whistleblower, and its important to promptly file the matter with the right program. If you are considering blowing the whistle, you should consult with an experienced whistleblower attorney to protect your rights and maximize your chances of success.