And with this new outlook has come some additional prodding from a host of laws that sweeten the pot considerably for those willing to step forward. And the results have been staggering for both the government and the whistleblowers. In 2012 alone, the government reclaimed close to $5 billion through the False Claims Act, the principal tool through which whistleblowers and the government can uncover and take action against corporate fraud. Whistleblowers led the charge in roughly 85 percent of the cases, recovering roughly $440 million in rewards for their efforts.
These figures will no doubt continue to climb with the recently passed Dodd Frank Wall Street Reform Act which like the False Claims Act provides whistleblower awards of up to 30 percent of any government recovery relating to fraud or misconduct in the sale of securities or commodities. The SEC in particular has made it very clear that they are open for business with hefty whistleblower rewards on the horizon.
But before you are off and running to cash in your whistleblower chit, a reality check is in order. There is much more (and less) to going down the whistleblower path than you might otherwise appreciate. So a few words of caution to make sure you undertake this noble quest with your eyes wide open and without regret.
First, becoming a whistleblower does not guarantee a gargantuan payday. No doubt, some whistleblowers have obtained bounties in the seven and even eight figures. These recoveries, however, remain the exception, not the rule. The government intervenes in only about a fifth of the matters whistleblowers bring under the False Claims Act and when the government takes a pass the chance of success drops precipitously. Under Dodd-Frank, it falls away altogether as whistleblowers have no private right to pursue an action in court like they do under the False Claims Act. Even for those actions that are ultimately successful, the whistleblower awards are almost always significantly less than the eye-popping amounts we hear about in the press.
Second, becoming a whistleblower can be a tiresome and unpleasant ordeal. The laws protecting whistleblowers have vastly improved. But the risk of retaliation or some form of estrangement, alienation or even blacklisting remains very real. And you can be sure the target company will take pains to discredit the whistleblower as a mere snitch, opportunist or disgruntled employee. Work, or how you practice your profession, may never be the same.
Third, you may not receive the hero’s welcome you are expecting. Some government representatives treat whistleblowers with apathy, distrust or even hostility, making them feel like they are the guilty party, not the ones reporting the crime. So be prepared for a grilling. The government does not want to spend precious resources on a whistleblower complaint that does not hold up.
Fourth, the whistleblower process takes a very long time — in most cases, several years or longer. And throughout the extended ordeal, you will likely be in the dark about what is going on. The government keeps a tight lid on the progress of its investigations and can disappear for long stretches of time without any indication of its interest or activity in a particular matter. If it makes it to the courts, the process can be even more glacial as the parties slog through the procedural niceties of a complex litigation.
Finally, you are going to need a lawyer. The various whistleblower laws are long and complicated with innumerable requirements and restrictions on the type of fraud or misconduct that is covered and the way the complaint must be presented to the government. If you do not submit all of the required information, or submit it the wrong way or to the wrong agency or too late in the process, you might be disqualified as a whistleblower altogether. Remember, the government will not be looking out for your interests as a whistleblower. What the government cares about is getting as much information and evidence as it can.
For these and other reasons, becoming a whistleblower may not be exactly what you had in mind. It may require more time, more work and more daring than you would have thought. And it may not offer you the pecuniary promise you would have expected. But it is a critical component of our regulatory enforcement scheme, more important now than it has ever been before. Afterall, corporate fraud remains as vibrant as ever, drawing into its wake an ever expanding array of victims.
And even with the surge of whistleblower enforcement, a huge portion of the fraud that is witnessed today remains unreported. We clearly still have a long way to go to shake that old schoolyard stigma against snitches — to get to that place where we will never see another Enron or Madoff; where the alarm will be sounded well in advance of the next mortgage crisis or pharmaceutical screw-up. But the protections and incentives are there and growing still. And the mindset is changing. Just make sure you really know what you’re getting yourself into.