Whistleblower Law Practices

Modern False Claims Act

The Federal False Claims Act underwent significant amendments in 1986, revitalizing its effectiveness after a period of limited use. Since then, there has been a substantial track record of successful cases under the False Claims Act, resulting in whistleblower awards.

Subsequently, other significant whistleblower reward laws were enacted, including the IRS whistleblower law, as well as the SEC and CFTC Whistleblower programs, which were established as part of the Dodd-Frank financial reforms. These laws allow individuals to report fraud to the IRS, SEC, or CFTC and potentially receive an award if the government takes action based on the provided information and successfully collects funds. It’s important to note that these laws do not grant the whistleblower the right to bring a lawsuit (no Qui Tam provision), but they do offer the opportunity to report fraud and seek an award. The IRS whistleblower law, for instance, typically requires a minimum of $2 million in controversy for the IRS to be obligated to provide an award.

Motivation

IRS and SEC whistleblower regulations were established to incentivize individuals to come forward with new information regarding fraud or misconduct. These regulations outline the procedures and guidelines for whistleblowers to follow when reporting such information to the respective government agencies. In general, the strength of a whistleblower’s position in seeking an award may be enhanced if they can demonstrate that the information they provide is novel and previously unknown.

Being able to identify the source of the information is often crucial for whistleblowers. The government places great importance on reports of fraud under the False Claims Act, as well as investigations conducted by the Securities and Exchange Commission and the IRS. To determine which information may be most valuable to a government agency responsible for investigating fraudulent activities, it can be beneficial for whistleblowers to seek guidance from a whistleblower attorney.

SEC and CFTC Rewards

The whistleblower award programs established by the SEC and CFTC not only provide rewards for individuals who provide original information, but they also prioritize the protection of whistleblowers. Both agencies have implemented procedures to safeguard the identity of the whistleblower. Whistleblowers can file a tip and apply for an award on an anonymous basis through these programs. In situations where the SEC prosecutes an action and requires the whistleblower’s testimony, their identity may have to be disclosed to the defendants as the whistleblower becomes eligible to collect an award.

The SEC has demonstrated its commitment to settling cases, achieving results, and granting anonymous awards. They have taken measures such as staggering the announcements of actions and awards to maintain anonymity and prevent others from linking specific actions to corresponding awards. The SEC has also contested the notion that whistleblowers can waive their right to collect an award through settlements in employment actions. Given the complexities involved in whistleblower activities, seeking legal counsel is crucial when engaging with the SEC and CFTC procedures, which encompass filing a tip, remaining anonymous, and pursuing an award.

The award amounts under these programs range from 10% to 30% of the collected sanctions, with the percentage determined by various factors assessed by the agencies. Whistleblowers are eligible for awards if the CFTC or SEC collects one million dollars or more and publicly posts a covered action on their respective websites. Once a covered action is announced, whistleblowers can submit a claim asserting that their information led to the award. The inclusion of an actual procedure for anonymous reporting within the bounds of the law and collaboration with the agencies makes these programs particularly valuable for individuals seeking to report wrongdoing while preserving their anonymity.

Pursuing a Claim

In the IRS whistleblower program, individuals are not allowed to file their cases anonymously. Instead, whistleblowers are required to provide relevant information and sign Form 211 provided by the IRS, with the form carrying the requirement of being signed under the pains and penalties of perjury. The IRS is responsible for investigating and pursuing the claim, and if funds are collected as a result, the whistleblower may be entitled to an award. Since tax fraud cases are specifically excluded from the scope of the Federal False Claims Act, the IRS whistleblower program serves as the avenue for pursuing tax fraud cases at the federal level.

When it comes to the SEC and CFTC, specific guidelines have been established regarding the type of information that whistleblowers can bring forward in order to remain eligible for an award. Both agencies allow whistleblowers to submit tips based on original analysis. Even if the underlying information might already be publicly available, a whistleblower’s analysis of that information could still be considered as original information, qualifying them for a potential award.

For the analysis to be considered original, it should not have been published or presented to the government by anyone else before, and it should provide the SEC with the means to prosecute a crime. This allowance for original analysis sets these whistleblower award laws apart from others, offering an intriguing and significant opportunity for whistleblowers.

Whistleblowers reporting to the CFTC and SEC should seize the opportunity provided by these programs to submit tips and potentially apply for awards. The ability to report original analysis anonymously adds an extra layer of protection, as their identities are unlikely to become public unless an award is granted, and even then, disclosure of their names may be avoided.

The SEC has implemented regulations that make it highly challenging for a whistleblower to forfeit their right to collect an award or to face interference when reporting fraud to the SEC. Generally, SEC whistleblower awards cannot be waived in the context of an employment dispute, ensuring that whistleblowers are protected and encouraged to come forward with valuable information.

Requirements for Receiving a Whistleblower Reward

Whistleblower reward laws now incorporate programs where the IRS is obligated to provide a portion of the funds collected based on the information received. To be eligible for an award under the Internal Revenue Code (IRC) 7623(b), a whistleblower must provide information that leads to an IRS recovery involving at least $2 million in controversy. However, the IRS has the discretion to provide awards for cases involving lesser amounts. Similarly, the SEC and CFTC offer awards when the collected sanctions under their programs reach $1 million or more.

Each office has different filing requirements and covers distinct types of conduct and claims. However, there can be overlapping facts and fraudulent schemes that violate multiple whistleblower laws. It is crucial to carefully review the requirements with the guidance of a whistleblower lawyer before pursuing an action under any whistleblower law. In certain cases, it is possible to file a matter involving multiple whistleblower programs.

To qualify for an award, a whistleblower must provide information to the government voluntarily under the SEC, CFTC, or IRS whistleblower laws. Under the Federal False Claims Act, the eligibility for an award may be affected by whether or not the whistleblower planned and initiated the fraud. However, if a whistleblower is employed by a company engaged in fraud and voluntarily comes forward to the government, they are likely to be eligible for an award, assuming that the government collects some money under these laws.

These laws were established to ensure that valuable information reaches the government and to assist in prosecuting fraudsters. Their purpose is to encourage individuals to come forward and provide powerful information that can help hold wrongdoers accountable.