Whistleblower Programs That May Reward You For Reporting Wrongdoing
The lawyers at Helmer Friedman LLP can help you navigate through the state and federal whistleblower programs that may reward you for reporting fraud against the federal or state government or for assisting the Securities and Exchange Commission in enforcing U.S. securities law. There are three primary federal laws that allow people to blow the whistle and collect monetary rewards:
- The Dodd-Frank SEC Whistleblower Law
- The IRS Whistleblower Program
- The False Claims Act
The Dodd-Frank SEC Whistleblower Law
In 2007, the U.S. housing bubble burst causing the values of real estate and securities tied to real estate pricing to plummet, severely harming individuals, damaging financial institutions, and forcing the U.S. (and many parts of the world) into what has become known as the Financial Crisis of 2007–2008 and/or The Global Financial Crisis. As a result, Congress passed the Dodd–Frank Act Wall Street Reform and Consumer Protection Act in 2010. The Act established a whistleblower program that rewards people for helping the Securities and Exchange Commission enforce U.S. securities law. Under this whistleblower program, the SEC will pay 10 – 30% of the total amount recovered (including penalties, illegal profits, and interest) to “eligible” whistleblowers who provide “original” information leading to sanctions greater than $1 million.
Under the SEC whistleblower program, the most commonly reported types of securities violations include:
- False financial statements
- Accounting fraud
- Investors being sold inappropriate or unregistered investment products
- Insider trading
- Ponzi Schemes or other forms of financial fraud
- Commodities Fraud and Market Manipulation
- Foreign Corrupt Practices Act Violations
An “eligible” whistleblower is a person who voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The information provided must lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million. One or more people are allowed to act as a whistleblower, but companies or organizations cannot qualify as whistleblowers. You are not required to be an employee of the company to submit information about that company.
“Original” information is information derived from your independent knowledge (facts known to you that are not derived from publicly available sources) or independent analysis (evaluation of information that may be publicly available but which reveals information that is not generally known) that is not already known by the SEC. So if the SEC received your information previously from another person, that information will not be original information unless you were the original source of the information that the other person submitted.
You may submit your information anonymously. To do so, you must have an attorney represent you in connection with your submission. You must also provide the attorney with a completed Form TCR signed under penalty of perjury at the time you make your anonymous submission.
The SEC considers many factors in determining the amount of an award based on the unique facts and circumstances of each case. The SEC may increase the award percentage based on the existence of these factors:
- The significance of the information you provided the SEC to the success of any proceeding brought against wrongdoers.
- The extent of the assistance you provide to the SEC in its investigation and any successful proceeding.
- The SEC’s law enforcement interest in deterring violations of the securities laws by making awards to whistleblowers who provide information that leads to the successful enforcement of these laws.
- Whether, and the extent to which, you participated in your company’s internal compliance systems, such as, for example, reporting the possible securities violations through internal whistleblower, legal or compliance procedures before, or at the same time, you reported them to the SEC.
The SEC may reduce the amount of an award based on these factors:
- If you were a participant in, or culpable for the securities law violation(s) you reported.
- If you unreasonably delayed reporting the violation(s) to the SEC.
- If you interfered with your company’s internal compliance and reporting systems, such as, for example, making false statements to your compliance department that hindered its efforts to investigate possible wrongdoing.
Of course, employers may not discharge, demote, suspend, harass, or in any way discriminate against you because of any lawful act done by you in providing information to the SEC under the whistleblower program or assisting the SEC in any investigation or proceeding based on the information submitted. If you believe that your employer has wrongfully retaliated against you, you may bring a private action in federal court against your employer. If you prevail, you may be entitled to reinstatement, double back pay, litigation costs, expert witness fees, and attorneys fees. The SEC can also take legal action in an enforcement proceeding against any employer who retaliates against a whistleblower for reporting information to the SEC.
If you believe that you have original information regarding a serious securities violations, call Helmer Friedman LLP at 310-396-7714 today.
The IRS Whistleblower Program
The IRS Whistleblower Office, which was established by the Tax Relief and Health Care Act of 2006, processes tips received from individuals who spot tax problems in their workplace, while conducting day-to-day personal business or anywhere else they may be encountered.
Such a tip could result in an award worth between 15 and 30 percent of the total proceeds that IRS collects could be paid, if the IRS moves ahead based on the information provided. Under the law, these awards will be paid when the amount identified by the whistleblower (including taxes, penalties and interest) is more than $2 million. If the taxpayer is an individual, they must have at least $200,000 in gross income.
If you believe that you have information regarding a business not paying all taxes owed, call Helmer Friedman LLP at 310-396-7714 today.
The False Claims Act
President Abraham Lincoln signed the False Claims Act (“FCA”) into law in 1863 to enable the federal government to punish contractors who had defrauded the U.S. military during the Civil War. Although the FCA has been amended multiple times since the 1860, the law remains a potent weapon against businesses which defraud the government. The following actions are generally considered to be violations under the False Claims Act:
- Knowingly presenting (or causing to be presented) to the federal government • a false or fraudulent claim for payment;
- Knowingly using (or causing to be used) a false record or statement to get a claim paid by the federal government;
- Conspiring with others to get a false or fraudulent claim paid by the federal government;
- Knowingly using (or causing to be used) a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the federal government.
Violators of the False Claims Act are liable for three times the dollar amount that the government is defrauded and civil penalties of $5,000 to $10,000 for each false claim. A False Claims Act plaintiff can receive between 15 and 30 percent of the total recovery from the defendant, whether through a favorable judgment or settlement. To be eligible to recover money under the Act, you must file what is called a qui tam action. Merely informing the government about the violation is not enough. A qui tam action is a lawsuit that is confidentially filed under seal in federal district court. A copy of the complaint, with a written disclosure statement of substantially all material evidence and information in the plaintiff’s possession, must be confidentially served on the US Attorney General and the US Attorney for the district in which the complaint is brought. An action under the False Claims Act must be filed, in camera and under seal. The complaint and its contents must be kept confidential until the seal is lifted. The complaint is not served on the defendant. If the plaintiff violates the provisions of the seal, his or her complaint could be dismissed.
Common types of fraud covered by the FCA include:
- Charging for goods or services not provided
- Quoting artificially inflated prices to the government during negotiations
- Falsely certifying information to the government to receive payment for goods or services not allowed
- Falsely identifying a non-authorized service provider as authorized
- Billing the government for goods or services already paid for
- “Unbundling” services to gain higher prices for each individual service
- Billing the government for inferior goods or services
- Billing for unnecessary medical procedures, tests and equipment
- Marketing pharmaceuticals for uses not approved by the FDA
If you believe that you have information that may support a False Claims Act claim, call Helmer Friedman LLP at 310-396-7714 today.