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Should I Become a Whistleblower?

This is the golden age of the whistleblower. With the serious consequences of fraud and corruption becoming more apparent, more people recognize that getting involved is the right thing to do. Blowing the whistle and seeking to hold wrongdoers to account for their actions is a noble quest, but you must undertake it with your eyes wide open. Each individual will want to weigh a number of factors when determining whether to be a whistleblower, including an assessment of personal concerns such as anonymity, retaliation, or the impact of personal involvement in the conduct. Becoming a whistleblower may not be exactly what you had in mind.

Should I Become a Whistleblower?

Whistleblowers are people who come forward to disclose evidence they have of wrongdoing.  Whistleblowers play a critical role in letting the government and the public know:

  • that a law has been broken
  • that a rule or regulation has been violated
  • that a government contractor has cheated on a contract or misused government funds
  • that a company is lying about its financial situation or cheating on its taxes
  • that a company has created a danger to public health and safety
  • and much more.

Whistleblowers are people who can’t stay silent about this wrongdoing.

Whistleblower reward laws offer whistleblowers the chance to share in any funds recovered as a result of a government investigation or  lawsuit. To make a claim as a whistleblower under these reward programs, the wrongdoing must be of a certain type and the disclosure to authorities must be accomplished in a specific manner.

Almost anyone with evidence of fraud or misconduct can be a whistleblower. You do not have to be a current or former employee of the company that engaged in the fraud or misconduct. You do not need to have witnessed the fraud or misconduct yourself or have documentary evidence of the fraud or misconduct. You do not need to be an American citizen or resident. And you may even have been involved to some extent in the misconduct.

The risk of retaliation against whistleblowers is very real. Employees who have reported misconduct have been unfairly fired, transferred, demoted, or suffered other mistreatment, and even those who are not employees of the target company, or are no longer employees, may face some form of estrangement, alienation or even blacklisting. However, many federal and state whistleblower laws have anti-retaliation provisions to prevent and punish such retaliation. These provisions are intended to protect whistleblowers from being fired or demoted or in any way discriminated against in the terms or conditions of their employment in retaliation for bringing a whistleblower claim.

Typically, submissions under the whistleblower reward programs are confidential and the identity of the person providing the information is not public. Whether a whistleblower can remain anonymous depends in large part on the particular whistleblowing program involved and on how the case proceeds. While some programs provide for anonymous filing, and others provide for a period of confidentiality, if the government is forced to litigate or go to trial regarding the underlying violation, the whistleblower’s information and identity may need to be revealed. In addition, there are the practical realities of whistleblowing, and the company might guess the whistleblower’s identity correctly based on what the government in investigating. If you believe you may have a case and are concerned about your identity becoming known, you should talk with an experienced whistleblower attorney about the likelihood of disclosure, and options to protect your identity.

Participating in the fraud does not automatically mean a whistleblower cannot file a claim or receive a reward. This is especially true if a whistleblower participated in the fraud unknowingly or at the direction of a superior. In fact, such individuals often have access to exactly the sort of information necessary, and the law recognizes that to prevent ongoing fraud we need such people to come forward. Although a whistleblower may receive a reduced reward if his or her participation in the fraud was substantial, generally a whistleblower will be barred from receiving a reward only when the whistleblower planned or initiated the fraud, or is ultimately convicted of a crime stemming from the reported fraud.

Whistleblowers have often worked for years to change the wrongful conduct before they contemplate making a formal submission or filing a case for a whistleblower reward. Whistleblowers may have already reported the fraud or misconduct, either directly to the company (“internally”) or to a government agency or personnel (“externally”). Usually this prior reporting does not prevent a whistleblower from formally making a submission or filing a case to obtain an award. If you believe you may have a case and are concerned about the impact of any prior reports you made, you should talk with an experienced whistleblower attorney.

Whistleblowers often find it gratifying to share their story and evidence with counsel, the government, and ultimately the public.  There can be tremendous satisfaction in finally being heard and having the evidence reviewed and investigated.  Becoming a whistleblower, however, is not for everyone. The process can be lengthy, lonely, and frustrating. First, 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. Second, becoming a whistleblower can be a tiresome and unpleasant ordeal. Although there are laws protecting whistleblowers, the risk of retaliation or some form of estrangement or alienation remains very real. Third, the process takes a very long time, in most cases several years or more. During this process, whistleblowers can feel out of the loop and helpless as the government proceeds with its investigation. The government often keeps a tight lid on the progress of its investigations and may not communicate for long stretches of time. On top of that, generally a whistleblowers may not discuss their matters with people other than their attorneys or the government; keeping this silence can be very challenging.

The process is taxing and the decision to become a whistleblower should never be taken lightly. It is important to find a lawyer who will be candid with you about the risks and rewards of being a whistleblower.

Do I Have a Case?

It’s helpful to consider certain factors regarding your potential whistleblower case:

1) The Type of Misconduct or Harm: Can you show financial loss to the government, a violation of the securities or commodities laws, or harm to employees, investors, or others?  Different whistleblower laws and programs address different harms, and there might not be a program that addresses your circumstance.

2) Whether Your Information Could Lead to a Financial Reward: Under many whistleblower laws, evidence leading to a successful result might entitle the whistleblower to a percentage of the recovery.  But not all whistleblower programs have this reward feature.

3) Whether Your Information Is Timely: The laws that provide financial rewards for whistleblowers each have some form of requirement that the whistleblower bring forth new information or analysis, and that the whistleblower report the wrongdoing within a certain time period after it happened.  These “first-to-file” rules, non-public information requirements, and statutes of limitations, are different for different programs and often present complicated questions of law and fact, with many exceptions and caveats. You should consult with a whistleblower lawyer as soon as you realize that you may have a claim.

Do I Have a Case?

There are a number of whistleblower reward laws.  The largest programs include:

A wide variety of fraud and wrongdoing is covered by these laws.  Examples include:

The False Claims Act is the statute most commonly employed by whistleblowers to report fraud against the federal government. It allows private citizens, known as “relators,” to bring a qui tam lawsuit on the government’s behalf and may reward them with a significant portion of any government recovery (anywhere from 15-30%).

The key factor in determining whether conduct is covered by the False Claims Act is whether that conduct caused the government to suffer a financial loss. As examples, such losses are incurred when the government overpays for a product or service, pays for a product or service it did not receive, or pays for a product or service that is defective or otherwise materially different from what the government contracted to purchase. The government also suffers a relevant financial loss when a company falsifies information or improperly structures its activities so as to avoid making required payments to the government.

In addition to the federal False Claims Act, many states and some local governments have their own False Claims Acts, for claims involving fraud against those state and local governmental entities.

Under the SEC and CFTC whistleblower programs, which were created by the Dodd-Frank Act, whistleblowers who disclose fraud and misconduct involving publicly traded companies or in the sale and trading of securities and commodities, or otherwise regarding violations of the securities laws or Commodity Exchange Act may receive up to 30% of recoveries achieved because of their information. Common types of misconduct addressed by these laws include: Ponzi schemes, insider trading, accounting fraud, foreign bribery, and market manipulation.

Unlike the False Claims Act, the Dodd-Frank Act covers fraud or misconduct that harms private investors, even if it was not directed at the government or caused a financial loss to the government.

The Motor Vehicle Safety Whistleblower Act gives industry insiders a financial incentive to report motor vehicle safety-related problems. Under the program, a whistleblower can receive a reward of up to 30% of any monetary sanctions over $1 million the government imposes based on information the whistleblower provides. Unlike the other rewards programs, eligible whistleblowers must be an employee or contractor of a motor-vehicle manufacturer, parts supplier, or dealership.

In addition to the False Claims Act, Dodd-Frank, and the IRS and Motor Vehicle Safety whistleblower rewards programs, there are numerous other whistleblower laws that enable whistleblowing, provide protection to whistleblowers from retaliation, and/or offer financial incentives for reporting on relevant misconduct. These laws may protect whistleblowers against retaliation for reporting fraud internally (i.e., generally to the whistleblower’s employer) or externally to the government. Many of these whistleblower laws are industry specific. For example, there are specific whistleblower protection laws related to airline safety, mine safety, and consumer finance protection.

Under the False Claims Act, and the SEC, CFTC, IRS, and Motor Vehicle Safety Whistleblower programs, as well as under several other laws, a whistleblower responsible for providing the government with evidence that leads to a successful prosecution or settlement may be entitled to a percentage of the government’s recovery. The size of the award, and the specific requirements to be eligible for an award, vary between programs. You should consult with a whistleblower lawyer to determine if you have information that could lead to a claim under one of the whistleblower reward programs.

Generally, the earlier a whistleblower reports, the better. All of the whistleblower rewards programs described above incentivize quick reporting by imposing potential limitations on recoveries if the whistleblower is not the first to inform the government of the issue.

There may also be a relevant statute of limitations to contend with. The statute of limitations varies depending on your whistleblower claim. For the False Claims Act, cases generally must be filed within six or sometimes ten years of the violation. For the SEC and CFTC whistleblower programs, claims generally must be reported to the relevant whistleblower office within three years of the violation. For violations of the various state FCA laws and industry specific whistleblower laws, claims must be reported between 30 days and 6 years after the violations, depending on the particular statutes at issue. Statutes of limitations are subject to change and apply differently to different circumstances. You should consult with an experienced whistleblower lawyer as soon as you realize that you may have a claim.

“First to file” rules can bar a whistleblower claim if another whistleblower has already filed a case or made a submission based on the same facts or evidence. Therefore, it is best to file your claim as soon as possible. Multiple whistleblowers, however, may file a joint claim or separate claims based upon different evidence. First-to-file problems are very fact-specific, so you should discuss the details of your situation with an experienced whistleblower attorney before concluding that your action may be barred by another’s prior reporting.

Because whistleblower reward laws are designed to encourage people to come forward with information that is not already public, if there has already been press coverage, a government investigation, or other public disclosure of the fraud or misconduct, a whistleblower’s right to claim a reward may be limited. Often, however, the whistleblower has information that reveals a different or additional fraud than the fraud that is public. In addition, the fraud may have become public because of the whistleblower’s actions, or there may be other reasons the whistleblower reward laws would still be available. The rules regarding public disclosure have changed over the years, and apply differently to different circumstances and under different reward programs. You should consult with a whistleblower lawyer to determine your options if there has been a prior public disclosure of some or all of the wrongdoing.

What Kind of Evidence Do I Need?

You do not need to have witnessed the fraud or misconduct, but you must have concrete and specific evidence of the fraud. Suspicion or belief is not enough.  An experienced whistleblower attorney can help you evaluate the evidence you have and, if needed, help identify and collect additional evidence while protecting your rights.

What Kind of Evidence Do I Need?

The cornerstone of any whistleblower claim is proof that fraud or misconduct covered by one of the whistleblower reward programs occurred. A whistleblower need not have witnessed the challenged fraud or misconduct but he or she must have concrete and specific evidence of the fraud. Mere suspicion or belief is not enough. Being able to identify the “who, what, where, when, why and how” of the challenged fraud or misconduct is most helpful. Knowing as many specific facts as possible about the fraud or misconduct will greatly strengthen your claim.

Generally, you will want to provide the government with new information that it does not already have and might not otherwise obtain. The collected evidence cannot primarily (or substantially) come from public sources, such as the press, internet, TV, government records or reports. However, public information may be utilized in certain instances if you provide a unique analysis demonstrating the existence of the fraud or misconduct.

Gathering evidence of the fraud or misconduct is the first step in bringing your whistleblower claim. Documentary evidence — such as email communications, internal studies, billing records, test results, etc. — is not necessary, but will greatly support any claim you present to the government. Witnessing the conduct first-hand helps but is not required.

What Do I Do Next?

If you feel you might have a valid claim, it’s time to contact a lawyer specializing in whistleblower cases and procedures.  An experienced whistleblower attorney can answer your questions, help you decide whether to blow the whistle, advise you on the merits of your potential claim, and work with you to plan your next steps.

If you proceed with a whistleblower claim, do not expect the process to move quickly or smoothly.  A lawyer with experience in whistleblower claims will guide you through the often complicated procedures, will work on your behalf with the government, and help you make decisions as your claim proceeds.

What Do I Do Next?

One of the most important decisions a whistleblower makes is choosing a lawyer. The whistleblower reward programs involve complicated areas of law, and a lawyer with experience in these areas can help you develop your case and avoid pitfalls. Attorneys with a history of successful partnerships with the government agencies involved in the whistleblower reward programs know how to present information to those decision-makers, know how to provide effective assistance to the government, and understand the benefits that come from providing such assistance throughout the investigation and any subsequent proceedings. Look for an attorney who has expertise in these matters and a record of success in pursuing actions under the whistleblower reward programs.

You’ll want to hire a whistleblower lawyer as early as possible so that you have someone to assist you in navigating the various options, laws, and legal procedures to be followed under the various whistleblower programs. An experienced whistleblower lawyer can evaluate your potential case and determine whether the conduct you’ve observed and evidence you have can form the basis of a whistleblower suit. If more information is needed, an experienced whistleblower lawyer will know how to gather that information and be able to advise you on your options. A competent lawyer can also help you to take full advantage of the protections and rewards available to whistleblowers. An experienced attorney will also guide you through deciding whether becoming a whistleblower is the right thing for you.

Many whistleblower lawyers represent clients on a contingency basis. This means the attorney will be paid only out of any recovery the whistleblower obtains from the government or the company that engaged in the fraud. While this means there is no cost to you, it also means that you will want to choose a law firm that can afford to commit the resources necessary to represent you successfully and pursue your case, sometimes for years, before there is a recovery.

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Procedures are different under different programs. Under the federal False Claims Act, and most analogous state acts, a whistleblower must file a qui tam complaint in court and submit it to the government, along with a “Disclosure Statement,” detailing the alleged misconduct. Under the SEC and CFTC Whistleblower Reward Programs of the Dodd-Frank Act, instead of formally filing a complaint in court, you must file a whistleblower form summarizing the fraud or misconduct. The procedure is similar for IRS whistleblower submissions and those made under the Motor Vehicle Safety Whistleblower Act.

After filing these claims, typically you and your whistleblower lawyer will meet with the appropriate government agency to discuss your claims in person. During these initial meetings, often attended only by the government and your whistleblower lawyer, it is important to be honest and straightforward, and to present your evidence and legal arguments as effectively as possible. The government has limited time and resources to devote to the fraud or misconduct cases presented to it. What happens at these early meetings will often influence the direction of your case.

False Claims Act complaints are filed “under seal” and initially served on the government only, but not the defendant. This gives the government an opportunity to investigate the allegations in the complaint and decide whether it wants to take over the litigation. Under the False Claims Act, complaints are sealed for an initial sixty days, but the government may — and often does — request that the time be extended, and extensions can last months or even years.

While a case is under seal, a whistleblower is not permitted to discuss the suit with anyone other than his or her whistleblower lawyer and the government attorneys and agents assigned to the case.

As part of its investigation, the government may interview witnesses (including you), review documents and other evidence, and gather related agency information. The government likely will request documents relating to the alleged fraud from both defendants and the government agencies involved. It is important during this phase for the whistleblower to be accessible and cooperative and provide the government with whatever information it requests. It is also important that the whistleblower not reveal the existence of the case while it is under seal. Your experienced whistleblower attorney will be at your side and guiding you through these steps.

If the challenged conduct involves potential criminal violations, the government may involve the FBI, issue search warrants, conduct raids, or convene a grand jury. A whistleblower often has little to no visibility into a criminal investigation, even if it was initiated due to the whistleblower’s information.

Investigations often take a very long time, in most cases several years or more. It may be difficult to not be able to discuss your sealed case for a long period of time. A lawyer who can guide you through this and other tricky situations that arise during the government’s investigation is invaluable.

In the False Claims Act context, when the government has concluded its investigation, it has the option to formally join — i.e. to “intervene in”— the case. Although the case “belongs to the government” from the moment you submit it, upon intervention the government formally and actively takes over the prosecution of the matter. The government also has the option at the conclusion of the investigation to decline to join or otherwise further pursue the matter. In whistleblower reward programs other than the FCA, the procedures vary depending on the agency involved.

If the government decides to intervene in a False Claims Act case, the matter is unsealed and, if the whistleblower’s identity has not already been revealed, it will almost certainly be disclosed at that point. The case will then proceed through the process of litigation, trial, or settlement. The whistleblower may be asked to testify.

A whistleblower case’s chances for success are greatly improved where the government intervenes. In fact, roughly 90% of the False Claims Act cases in which the government intervenes resolve favorably by settlement or trial, resulting in vindication for the whistleblower and a portion of the government’s recovery. Keep in mind, however, that the period after intervention and leading up to trial may take considerable time, on top of the earlier sealed investigation period.

The government is not able to intervene in every case, or even in every good case. If, at the conclusion of its investigation, the government chooses not to intervene in or otherwise pursue your allegations, the result of that decision will depend on the type of case you brought. Under the Dodd-Frank Act, IRS program, and Motor Vehicle Safety program, the whistleblower’s claims are simply dropped. Under the False Claims Act, however, the whistleblower has a difficult decision to make. You may drop the case or choose to continue to litigate the case on behalf of the government.

It’s important to know that the chances of success drop significantly when the government declines to intervene. The pursuit of these cases, without the government’s support, is expensive and lengthy. If you persevere with the case and ultimately succeed in the action, however, you likely will be entitled to a larger portion of the government’s recovery than you would have received had the government intervened.

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