There are some instances where a whistleblower could potentially receive a monetary reward from the government for exposing certain wrongdoing, usually a percentage of funds recovered by the government from the company, as mandated by federal and state laws.
These programs fall under various US federal and state agencies depending on the issue and the desired outcome. Each program has its own regulations and statutes of limitations, ranging from several months to several years from when the incident occurred, so it is best to speak with a lawyer as soon as you are able in order to understand your options and any potential deadlines.
Rewards are based on the usefulness of the information. Whistleblowers can obtain compensation [only] if their allegations prove correct and support a government prosecution resulting in collection of a sanction from the wrongdoer.”
Realistically, the odds of cashing in on whistleblowing are akin to winning the lottery.” Tom Devine & Tarek F. Maassarani, The Corporate Whistleblower’s Survival Guide: A Handbook for Committing the Truth (2011), p. 63
Becoming a whistleblower does not guarantee a large recovery. While some whistleblowers obtain bounties of millions of dollars, these recoveries are the exception, not the rule.” I Think I Have a Whistleblower Lawsuit, Constantine Cannon LLP website
“It can make it easier for the company and/or the press to smear a whistleblower if people find out they are getting a reward.” Tom Devine, Legal Director of the Government Accountability Project
What to know about the Commodity Futures Trading Commission and Securities and Exchange Commission
The mission of the Commodity Futures Trading Commission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation. Relatedly, the Securities and Exchange Commision (SEC) is a government agency that protects investors and ensures fair and efficient capital markets by ensuring the following comply with US securities laws: investment brokers, stock exchanges, and other market participants.
“Congress enacted two separate financial qui tam laws: one for securities and the other for commodities. [ . . . ] these laws were drafted by Congress in a virtually identical manner.” Stephen Martin Kohn, The New Whistleblowing: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself (2017), p. 125
“Both pathways contain strong anti-retaliation provisions, prohibiting employers from firing employees who file qui tam actions or engage in other protected activities. Employees can file their retaliation claims directly in federal court.” Kohn (2017), p. 124
“Employees are permitted to file themselves or act through an attorney intermediary and provide their information to the government without ever having to reveal their names . . . At the very end of the proceeding . . . the government must verify the whistleblower’s eligibility as an original source before the check is placed in the mail. Even then, the disclosure of information on the whistleblower should remain strictly confidential and exempt from public release.” Kohn (2017), p. 125
“It makes no difference whether, for example, the claimant [whistleblower] was a foreign national, the claimant resides overseas, the information was submitted from overseas, or the misconduct comprising the US securities law violation occurred entirely overseas.” Kohn (2017), p. 135, quoting from a SEC award decision from September 22, 2014: Release No. 73174
SEC Whistleblower Program
As of end of Fiscal Year 2020 (2010-2020)
- More than $2.7b paid as result of WB info
- More than $562m paid out in awards to 106 WBs
In 2020
- $175m in awards to 39 WBs
- More than 6,900 tips
- The awards made in FY 2020 represent 31% of the total dollars awarded to all whistleblowers ever and 37% of the individual award recipients since the beginning of the program
In 2019
- $60m to 8 Whistleblowers
- More than 5,200 tips
- Unlike rewards programs through other government agencies, wWhistleblowers using the SEC route cannot continue to pursue their claim as a private citizen privately if the SEC declines to initiate an enforcement action based on the whistleblower’s original claim.
- Many cases brought to the SEC don’t get their full and urgent attention due to a variety of situational factors. If you feel like your case is not being reviewed properly, you can work with people on your team like journalists and Congress to put more attention on your case. This should be done cooperatively and in good faith so as to not create tension between you and the regulator. You also cannot reveal any information given to you by the regulator or that would disrupt a case, as this could be obstruction of justice. You can work with your lawyer and civil society organizations to find the most appropriate route.
What to know about the False Claims Act
“Always ask: Is the taxpayer, directly or indirectly, on the hook for any of the costs associated with your disclosure? Do your concerns touch upon federal spending, procurement, or contracting? If you answer “yes,” you may be protected under the most effective whistleblower law in the United States: the False Claims Act (FCA).” Kohn (2017), p. 89
“If government monies are in any manner involved in your whistleblowing allegations, you may be protected under the federal FCA or similar state and local laws.” Kohn (2017), p. 95
“If a whistleblower is discriminated against or fired for raising allegations of contract fraud, he or she has the right to include retaliation claims as part of the False Claims Act lawsuit . . . The statute of limitations for the retaliation claim is three years.” Kohn (2017), p. 104
If the government decides to pursue action after an investigation triggered by a whistleblower, the government will take control of the case.
“This . . . does not leave the whistleblower out in the cold. The whistleblower has the right to fully participate in the civil proceeding, conduct discovery, file briefs and motions, question witnesses at trial, and otherwise be fully included in every aspect of the case. The [whistleblower] also must be informed of any settlement agreement and has an opportunity to oppose court approval of a settlement.” Kohn (2017), p. 105
If the [United States federal] government declines to pursue action after an investigation triggered by a whistleblower, the whistleblower can still bring the case in court, although this route has a lower success rate.
“No matter how strong you may think your case is, if the United States declines to intervene, it is absolutely imperative that you stop and take a hard look at your claim. You must evaluate why the United States declined to intervene. You must evaluate the costs and risks of going forward. You must evaluate the realistic likelihood of success, especially in light of the controlling case law, how much money is at stake, the facts you actually have at your disposal, whether your complaint can withstand a motion to dismiss, and the various defenses the corporation will aggressively raise.” Kohn (2017), p. 106
If you want to get a reward and remain anonymous under the False Claims Act, you have to hire an attorney. The attorney has to confirm your identity and make a good-faith effort to ensure that the complaint filed has a sound basis in law and fact.
“The lawyer has to personally sign the charge filed with the government under oath.” Kohn (2017), p. 28
Carefully document post-filing activities, especially ones that you conduct to get more information if you are still at the company. These can be used to update regulators and your claim.
“Whistleblowers can and should continue to investigate and collect additional information that backs up their claims. Sometimes this can be done by the employee working on his own (without ever disclosing the existence of the FCA claim to anyone) and sometimes this occurs in conjunction with the government investigation.” Kohn (2017), p. 102
12 Steps for Filing a Successful False Claims Act Case
- Don’t go public
- Try to qualify as an “original source”
- Confidentially file allegations with the government
- Be the first person to file
- Choose the venue for filing your claim where you will have the greatest advantage
- Prepare a detailed “disclosure statement”
- File the complaint “under seal” and keep it confidential
- The complaint filed in court must be detailed
- Keep investigating the claim after the complaint is filed
- Determine whether state funds were involved
- Prepare for a retaliation case
- Decide whether to proceed with a civil case if the government decides not to intervene
Stephen Martin Kohn, The New Whistleblowing: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself (2017)
What to know about the IRS
“The tax whistleblower law is not limited to tax fraud. It covers any underpayment of taxes, fraudulent or not.” Kohn (2017), p. 113
“Any person can file an IRS whistleblower claim. The applicant for the reward does not have to be an employee . . . He or she can be an outside contractor, a banker . . . or any other person who is able to obtain credible information of a major tax fraud or underpayment.” Kohn (2017), p. 113
Unlike the FCA, you cannot continue to pursue the case as a private citizen initiate legal proceedings on your own if the government does not take up your case after its investigation.
“Initial reward filings with the IRS Whistleblower Office are required to be signed by the whistleblower, under oath, and thus cannot be anonymous. But the rules governing IRS whistleblower claims require that the IRS keep the whistleblower’s information strictly confidential.” Kohn (2017), p. 28
“The tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed in the aggregate $2 million and, if the allegedly noncompliant person is an individual, the individual’s gross income must exceed $200,000 for any taxable year at issue in a claim.” Kohn (2017), p. 119
“Whistleblowers who participated in the fraud are entitled to a full reward,” but if they planned or initiated the fraud, “the IRS can reduce the reward owed to any such person based on the culpability of that person. The reward can be reduced to any level, including zero.” Kohn (2017), p. 119
How to tell if you have an IRS whistleblower case
- Did the whistleblower act “promptly to inform the IRS or the taxpayer of the tax noncompliance”?
- Did the “information provided” identify an “issue or transaction of a type previously unknown to the IRS”?
- Was the “information provided” “particularly difficult to detect through the IRS’s exercise of reasonable diligence”?
- Did the whistleblower present his or her information “thoroughly” and present “factual details of tax noncompliance in a clear and organized manner”?
- Did the whistleblower’s information save “IRS work and resources”?
- Did the whistleblower provide “exceptional cooperation and assistance during the pendency of the action(s)”?
- Whether “the information provided identified assets of the taxpayer that could be used to pay liabilities, particularly if the assets were not otherwise known to the IRS.”
- Whether “the information provided identified connections between transactions, or parties to transactions, that enabled the IRS to understand tax implications that might not otherwise have been understood by the IRS.”
- Whether “the information provided had an impact on the behavior of the taxpayer, for example by causing the taxpayer to promptly correct a previously-reported improper position.”
Stephen Martin Kohn, The New Whistleblowing: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself (2017)
