Whistleblowers Do Get Paid But The Rewards Vary Widely Depending On the Program
There are several whistleblower programs that pay cash awards to folks who come forward and report fraud. Some programs, such as the SEC’s whistleblower program, have received bad press lately because so few awards have been paid. Not all the news is bleak, however.
There are four major federal whistleblower programs that offer compensation. The IRS whistleblower program, FIRREA (the Financial institution Reform Recovery and Enforcement Act), the False Claims Act and the newest effort, the SEC whistleblower program.
The False Claims Act is the biggest 0f the programs and dates back to the Civil War. Created by Abraham Lincoln (many folks refer to the False Claims Act as the “Lincoln law”), the law allows ordinary Americans to act and serve as mini, private Attorneys General.
To qualify for an award under the False Claims Act, a whistleblower must have original source information about a fraud involving federal funds or guaranties. A bank that writes bad mortgages backed by Freddie Mac could be a target of a whistleblower suit. Ditto for a medical clinic that improperly bills Medicare or a defense contractor who bills for services that were never provided. Even a bridge builder who builds bridges with imported steel could be prosecuted (transportation projects generally must use American steel).
To be eligible for an award, the whistleblower must first file a lawsuit under seal in federal court. Under “seal” means the case is secret and remains so while the government is given a chance to investigate. Ultimately, the government can intervene, allow the whistleblower to prosecute the matter independently or ask the court to dismiss the case.
Whistleblowers that have successful claims generally receive 20% of what the government collects, although that amount varies. The False Claims Act allows the government to collect triple damages meaning the whistleblower compensation can be very attractive.
Because a federal lawsuit must be filed to start the case, a good whistleblower lawyer is a must.
So has anyone collected any money from these cases? Yes!
According to the U.S. Department of Justice, $8.7 billion has been paid out in awards between 1987 and 2012. In the last two years alone, the government has paid $1,000,000,000.00.
The federal government is not alone with a False Claims Act. Most states have a similar law, although in some states awards can only be paid for healthcare fraud claims.
FIRREA is another federal law that can pay awards to whistleblowers. Unlike the False Claims Act which has no cap, FIRREA awards are capped at $1.6 million. FIRREA claims can be lodged against anyone who harms a financial institution. In an unusual legal twist, courts have ruled that claims can be lodged against banks that have in essence hurt themselves. If a lender commits fraud and that fraud weakens the bank, chances are there is a good FIRREA claim.
The FIRREA statute is quite complex. Again, we recommend a good whistleblower lawyer.
There are no statistics on payment of FIRREA claims but the law is relatively new and only in the last several years has it become a popular tool for prosecutors.
The IRS whistleblower program has been on the books for many decades. Only recently, however, has Congress beefed up the law and made it a more powerful tool. That program pays money to people who report businesses and individuals who fail to pay the taxes that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.
Unfortunately, the IRS is very slow to act on information and pay awards. With an average claim time of over 5 years if the IRS even acts on the information, it has not been very popular. Under the False Claims Act, a whistleblower lawyer can prosecute the case if the government fails to act. Not so with the IRS program.
Unfortunately, the False Claims Law excludes claims for unpaid taxes. If you have information about unpaid federal taxes, the IRS program is the only game in town.
The SEC’s whistleblower program, the newest of the big four, pays between 10 and 30% of what the government collects from companies that violate federal securities laws. Like the IRS program, it too has been criticized for few awards. Unlike the IRS, however, the SEC’s program is new and that agency has been very vocal telling folks that more and larger awards are on the way.
Last year, Stephen Cohen, the SEC’s associate director of enforcement said the agency expects “some extremely significant whistleblower awards” for information that has led to “incredibly impactful cases.” The director of the SEC’s Whistleblower Office, Sean McKessy, told the Wall Street Journal last summer that, “We are likely to see more awards at a faster pace now that the program has been up and running and the tips we have gotten are leading to successful cases.”
The bottom line?
Whistleblower programs vary widely. Some have a strong history of paying large rewards while others appear to be quite stingy. Having a great whistleblower lawyer is important to help you determine the best possibilities for recovery and how to insure that your claim stands out.
If you think you have knowledge of a fraud involving taxpayer monies or a federal or state program, give us a call. Having the right lawyer often means the difference between receiving a big check (up to 30% of what the government collects) or having the government lose interest.
For more information, contact attorney Brian Mahany at or by telephone at (direct). Our whistleblower lawyers have handled some of the largest cases in the United States including the $2.4 billion case against Allied Home Mortgage.
(Whistleblower photo courtesy of Dave Winer – scriptingnews)