Steps to Filing a Whistleblower Claim

What It Means To Be A WhistleblowerThe American whistleblower system of “private” regulatory enforcement has been around for 150 years. However, it emerged as the principal means through which the government uncovers, prosecutes and protects against fraud and other misconduct over the past twenty years. In 2011, for example, of the roughly 760 False Claims Act matters the government investigated or prosecuted, whistleblowers initiated about 640 of them (or 85%). This represents quite a significant change in False Claims Act enforcement compared to the mid-1980s when whistleblowers initiated less than 10% of False Claims Act lawsuits. Click here for a selection of recent whistleblower success stories.

Whistleblowers play a critical role in government enforcement, and newly energized regulations and statues are adding more incentives and protections. Under the current system, if done carefully and properly, bringing a whistleblower claim can lead to a large financial reward. In 2011 alone, whistleblowers received roughly $530 million in rewards. More importantly, acting as a whistleblower can also shine a spotlight on and ultimately put a stop to conduct that endangers public health and safety.

Below are the steps a whistleblower will generally follow when bringing a claim under the False Claims Act, Dodd-Frank Act and other key whistleblower laws.

Step 1 – Gathering Your Evidence

Gathering evidence of the fraud or misconduct is the first and perhaps most important step in bringing your whistleblower claim. Documentary evidence — such as email communications, internal studies, billing records, test results, etc. — will greatly support any claim you present to the government. Witnessing the conduct first-hand helps but is not required. The government has limited resources to investigate whistleblower actions. Consequently, they will devote their energy to the strongest cases with the most evidence and the best chance of succeeding.

It is critical that the whistleblower keep the documentary evidence and information confidential. If you reveal the fraud to a third-party who then reports it to the government, you might not be covered under most whistleblower provisions. Collected evidence generally should not come from public sources, unless you provide a unique analysis exposing the fraud or misconduct.

Step 2 – Presenting the Evidence/Filing the Claim

Under the False Claims Act and most of the state analogues, the whistleblower must file a complaint in court and submit it to the government along with a Disclosure Statement, detailing the alleged misconduct. Under the Dodd-Frank Act, instead of formally filing a complaint in court, you must file a whistleblower form summarizing the fraud or misconduct.

Before filing these claims, you and your whistleblower lawyer must set up a meeting with the appropriate government agency to discuss the claim in person. During these initial meetings, often attended only by the government and your whistleblower lawyer, it is important to present the most convincing evidence and legal arguments supporting the claim. Again, the government will devote its limited time and resources only to those matters that involve the most compelling case of fraud or misconduct. What happens at these early meetings will often influence the direction of your case.

Step 3 – The Government’s Investigation

The government’s investigation of the alleged fraud or misconduct can be the longest phase of the claims process. In order to protect the investigation and the identity of the whistleblower, virtually all aspects of the matter and investigation are kept confidential. Any formal complaints that are filed in court are kept under seal so that even the defendants are unaware of them. Submissions to the appropriate agencies are also generally kept confidential. During this period, you likely will be interviewed by the government at least once. Additionally, the government may also interview other witnesses involved in or knowledgeable of the fraud or misconduct. It will also try to obtain internal company documents relating to the challenged conduct and the records of the government agencies involved.

Under the False Claims Act, the complaint will remain under seal for sixty days. At the end of this period, the government generally asks for multiple extensions of the seal in order to continue its investigation, interview additional witnesses, review documents, issue search warrants, conduct raids, and coordinate with multiple agencies. If the challenged conduct involves criminal violations, the FBI will also likely get involved. It is important during this phase for the whistleblower to be accessible and cooperative and provide the government with whatever information it requests.

Step 4 – The Government’s Decision

If the government decides to bring a case, the whistleblower may be asked to testify at a grand jury proceeding or trial. At this point, your identity will be disclosed, and it is likely that the case will result in a settlement or judgment. In fact, roughly 90% of the False Claims Act cases the government intervenes in are successful, resulting in vindication for the whistleblower and a sizeable portion of the government’s recovery.

If the government decides not to pursue the case, under the Dodd-Frank Act, the whistleblower’s claims before the agencies are dropped. Under the False Claims Act, however, the whistleblower has a difficult decision to make. You are entitled to continue with the case on behalf of the government. But the chances of success drop significantly when the government declines to intervene. Only about 20%of such cases are successful. The pursuit of these cases, without the government’s support, will be expensive and lengthy. However, if you persevere and ultimately succeeds in the action, you likely will be entitled to a significantly larger portion of the government’s recovery.

One final point to keep in mind in all of this is the risk of retaliation against those whistleblowers employed at the company against which they are reporting the fraud or misconduct. The risk of retaliation is real and there are many instances of firings, transfers, demotions, and other forms of discrimination of employees who have reported misconduct. However, both federal and state whistleblower laws have dramatically strengthened the confidentiality and anti-retaliation provisions in the False Claims Act and other federal and state whistleblower laws.

These provisions strictly protect the whistleblower from being fired, demoted or in any way discriminated against in the terms or conditions of employment in retaliation for bringing a whistleblower claim. Under the False Claims Act and other whistleblower provisions, a company found to violate these anti-retaliation provisions will be required to reinstate the employee at the same level of seniority and pay two times the amount of backpay owed, as well as compensation for any “special damages” incurred as a result of the retaliatory treatment.