Thinking about Blowing the Whistle? Here are Some Key Concepts You Need to Understand – Part 1
Everyone at some point comes to a crossroads in life and thinks there is some secret that needs to be unearthed, whether it’s something as simple as the boss cursing too much or as complicated as Medicare fraud with kickbacks or headline grabbing political whistleblowing. The press volleys around the word whistleblower to describe anyone disclosing information not previously known, but under the law blowing the whistle has very defined attributes and potential rewards, but it’s all contingent on factors such as what are you blowing the whistle on, do you qualify as a whistleblower and what statute are you invoking. Before blowing the whistle you need to read this article, as it could save you heartache and headache and steer you into a route in which could earn you a potential windfall for doing the right thing, instead of wallowing in misfortune and misery for taking a wrong calamitous turn.
Part one of this blog will discuss whether there’s a whistle to actually blow and the statutes that entitle whistleblowers to a percentage of the recovery. Part 2 will discuss statutes that protect whistleblowers, but don’t necessarily entitle whistleblowers to a percentage of anything. Key Concept 2 in part two will discuss how to blow the whistle, and Key Concept 3 will discuss ways in which a whistleblower case can fall apart while reaffirming paths to success.
Key Concept # 1 – Is there a whistle to actually blow?
The concept of whistleblowing is deeply ingrained in our vocabulary. Everyone thinks they are whistleblowing when disclosing something, and potentially they are in a colloquial, but not a legal sense. There are some whistleblower statutes that provide for protection from retaliation and others that provide the individual with a whistleblower reward along with protection. If you don’t invoke a statute that falls into one of those categories then you may be surprised to learn that you are not actually blowing the whistle in the legal sense of the word and you may have ZERO protection with what you are doing.
Whistleblower Programs That Have Whistleblower Awards
If you wish to blow the whistle and potentially receive a percentage of the recovery here are the key whistleblower statutes and what they enable you to blow the whistle on:
False Claims Act: The False Claims Act permits individuals to blow the whistle on fraud against the government and in turn receive up to 30% of what the government receives. Typical fraud against the government is Medicare Fraud, Medicaid Fraud, Defense Contractor Fraud, Pharmaceutical Fraud and Customs Fraud, as well as PPP Loan Fraud. Billions of dollars in False Claims Act whistleblower awards have gone to insiders who have timely filed False Claims Act lawsuits.
Securities and Exchange Commission (SEC) Whistleblower Program: The SEC whistleblower program allows anonymous reporting with the use of an SEC attorney regarding information about securities law violations within publicly traded companies. Generally, when the fiduciary has its own interests superior to its clients or engages in a pattern in which it shreds its audit trail there may be an actionable violation. Successful SEC whistleblowers can receive an SEC whistleblower award based on a percentage of monetary sanctions collected by the SEC up to 30%. Billions of dollars in SEC whistleblower rewards have gone to the insiders who have blown the whistle the right way and better yet, have stayed anonymous along the way.
Anti-Money Laundering (AML) Whistleblower Program: The AML Whistleblower Program incentivizes individuals to report information related to violations of anti-money laundering laws. This program targets individuals or entities involved in money laundering, terrorism financing, or other illicit financial activities. Secreting the source of funds or dealing with a prohibited sanctioned country could trigger AML awards. Further, if financial institutions skirt their Know Your Client (KYC) obligations, it could trigger liability as well. The AML statute was recently revamped with the Bank Secrecy Act (BSA) and to date there has not been any successful AML whistleblower recoveries, however, with billions a year estimated to be laundered, it’s only a matter of time before the inaugural AML whistleblower and their progeny start to receive substantial whistleblower awards.
National Highway Traffic Safety Administration (NHTSA) Whistleblower Program: The NHTSA Whistleblower Program allows individuals who are within the industry (no outsiders) to report violations of motor vehicle safety laws such as defects, non-compliance, or other hazards that jeopardize public safety. Eligible whistleblowers can receive a percentage of the penalties recovered from the responsible party and there have been a few NHTSA whistleblower awards.
Commodity Futures Trading Commission (CFTC) Whistleblower Program: The CFTC is analogous to the SEC whistleblower program, except it concerns commodities. If you possess information about violations of the Commodity Exchange Act or other regulations related to commodities and derivatives trading, the CFTC Whistleblower Program offers protections and potential rewards. Whistleblowers who contribute to successful enforcement actions may be eligible for a CFTC whistleblower reward and those that have succeeded have recovered tens of millions of dollars for their information.
Internal Revenue Service (IRS) Whistleblower Program: When it comes to tax-related fraud, the IRS Whistleblower Program is an avenue to pursue if the tax shortage is in excess of $2 million and if you have strong proof. Information about tax evasion, underreporting of income, improper deductions, off the books employees, or other forms of tax fraud and schemes may trigger liability. Some of the biggest IRS whistleblower cases involved financial institutions deliberately shield US based customers from US tax obligations and have paid whistleblowers tens of millions of dollars in IRS whistleblower awards.
California Private Insurance Fraud Whistleblower Program, Illinois Private Insurance Fraud Whistleblower Program: Some states have established their own whistleblower programs to combat insurance fraud. For instance, California and Illinois offer avenues for individuals to report systemic fraud against private insurance and in turn receive a whistleblower reward. However, these statutes are notoriously difficult to navigate as the insurance company oftentimes wants the information and wants to circumvent the whistleblower out of their portion of any whistleblower reward.
New York Tax Fraud Whistleblower Statute: With the proliferation of global commerce facilitated by the internet, there have been instances in which entities have evaded paying things like sales or use tax to any state. The New York Tax Fraud statute enables whistleblowers to receive a percentage of any tax fraud whistleblower recovery.
FIRREA Whistleblower Program: The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) Whistleblower Program focuses on violations within the financial industry. If you’re aware of fraud related to federally insured financial institutions, such as banks and mortgage companies, the program allows you to report such misconduct. Whistleblowers can receive rewards based on a percentage of the monetary sanctions obtained.
There may be other whistleblower programs not listed here that entitle whistleblowers to a percentage of any recovery, but in the last decade the False Claims Act whistleblower program and the SEC whistleblower program have been the meat of the financial recovery. This concludes part 1 of this blog, stay tuned to part 2 to learn more about key concepts in whistleblower law.