The Frequently Asked Questions (FAQs) and answers provided below are intended as a general overview only and are not intended, and should not be relied upon, as legal advice. If you are aware of misconduct and are considering reporting it but you want legal advice about the potential risks and rewards involved in doing so, you should contact the experienced whistleblower lawyers at Youman & Caputo for a free consultation about your specific situation.
A whistleblower is a person who reports misconduct with the goal of stopping it.
A whistleblower may be entitled to an award for reporting certain types of illegal conduct that harm the government, such as:
- Fraud on federal government programs, including federal health care programs like Medicare and Medicaid
- Fraud on government programs of certain states
- Federal tax fraud
- State tax fraud in certain states, including New York and Illinois
- Federal securities law violations
- Commodity Exchange Act violations
It depends on the type of illegal conduct at issue. A person with information about fraud on the federal government (other than tax fraud) must file a lawsuit in federal court under the United States False Claims Act. Likewise, a person with information about fraud on a state government program must file a lawsuit (assuming the fraud is on one of the roughly 30 states with a False Claims Act). To seek an award for reporting other types of illegal conduct, the whistleblower must file an administrative claim with the appropriate agency. The Internal Revenue Service (“IRS”) Whistleblower Program provides awards for reporting federal tax fraud. The Securities and Exchange Commission (“SEC”) Whistleblower Program provides awards for reporting federal securities violations. The Commodity Futures Trading Commission (“CFTC”) Whistleblower Program provides awards for reporting violations of the Commodity Exchange Act.
The United States False Claims Act allows a private citizen whistleblower to file suit on the federal government’s behalf against companies that are defrauding the government and, if the case is successful, the whistleblower (or “relator”) is entitled to a percentage of the government’s recovery (generally between 15% and 30%). The False Claims Act was enacted during the Civil War to address the problem of fraud on the Union Army and several amendments since then have strengthened the Act. Whistleblowers now return billions of dollars to the federal government – and earn hundreds of millions of dollars in awards – in <em>qui tam</em> False Claims Act cases each year.
A qui tam lawsuit is another name for a lawsuit brought by a private citizen under the United States False Claims Act. The qui tam provisions of the False Claims Act create the private right of action. Qui tam is an abbreviation for a Latin phrase meaning “he who sues in this matter for the king as well as for himself.”
A qui tam lawsuit is initially filed under seal, so only the whistleblower, his or her lawyers, and the government know that suit has been filed. The case remains under seal for at least sixty days and for as long thereafter as the Court allows (often a year or more) while the government investigates the allegations. The government must eventually decide whether or not to intervene in the case, and once it notifies the Court of its decision, the lawsuit will come out from under seal. When the seal is lifted, while it may be possible to protect the whistleblower’s identity in very rare cases, the whistleblower’s identity usually becomes a matter of public record at that point.
On average, the United States Department of Justice (“DOJ”) intervenes in fewer than 25% of the roughly 600 to 700 qui tam lawsuits filed each year across the country.
DOJ’s intervention decision often has nothing to do with the merits of the whistleblower’s allegations and may be a function of the government’s limited resources to devote to such cases. The False Claims Act, therefore, authorizes the whistleblower to litigate the case on the government’s behalf without the government’s assistance and, if the case is successful, receive an award of at least 25% of any judgment or settlement. Whistleblowers consistently recover hundreds of millions of dollars for the government annually – and receive tens of millions of dollars in awards – in so-called “declined” cases.
A specific provision of the False Claims Act provides “Relief from Retaliatory Actions.” Under 31 U.S.C. § 3730(h), “[a]ny employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts … in furtherance of” a qui tam lawsuit or “other efforts” to stop violations of the False Claims Act. The relief available includes reinstatement, two times back pay and attorney’s fees.
A person with “specific and credible information” that a taxpayer is failing to pay a tax that they owe may submit a confidential claim form reporting that information to the IRS Whistleblower Office. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects. If the amount collected exceeds $2 million and the other applicable qualifications are met, the IRS will pay 15 to 30 percent of the amount collected. Awards on claims that do not meet the $2 million thresholds are discretionary with a maximum award of 15 percent. Since the IRS Whistleblower Program’s inception in 2007, the IRS has paid more than $500 million in whistleblower awards.
A person with “high-quality original information” about federal securities law violations may submit a confidential claim form reporting the information to the SEC’s Office of the Whistleblower. If that information leads to an SEC enforcement action in which over $1,000,000 in sanctions is ordered, the SEC is authorized to pay monetary awards between 10% and 30% of the money collected. The SEC has paid more than $300 million in awards for tips leading to enforcement action since the SEC Whistleblower Program was established in 2010.
The CFTC pays monetary awards to eligible whistleblowers who voluntarily provide original information about violations of the Commodity Exchange Act. The whistleblower is entitled to an award from the CFTC if the tip leads to successful CFTC enforcement action (or other eligible related action) resulting in monetary sanctions exceeding $1,000,000. The total amount of an award for eligible enforcement action is between 10% and 30% of the number of monetary sanctions collected. Tips are submitted to the CFTC via a confidential claim form; a separate form must be submitted to apply for an award after the resolution of a successful enforcement action.
There are important differences among these programs, including differences in the administrative claim procedure, the ability to proceed confidentially or even anonymously in some cases, and protections against retaliation. In general, however, the IRS, SEC and CFTC make every effort to protect the whistleblower’s identity. The names of IRS, SEC and CFTC whistleblowers generally are not disclosed publicly, and whistleblowers are often able to keep their identity confidential even when an award is paid.
A whistleblower is required to have a lawyer to file a qui tam lawsuit. While a lawyer may not be required to file a claim with the IRS, SEC or CFTC programs, the applicable substantive law is often quite complex, and the procedural requirements are unique. It is therefore extremely advisable to hire an experienced whistleblower lawyer to evaluate the potential claim, provide advice regarding the potential risks and benefits of filing the claim, and ultimately handle the claim filing and awards process, including interacting with federal agents and attorneys during the investigation and prosecution of any enforcement action. In addition, an experienced whistleblower lawyer will often have contacts in the affected government agencies who are willing to have pre-filing discussions that can prove enormously useful to the whistleblower in deciding whether and how to proceed.
Like most experienced whistleblower lawyers, Youman & Caputo represents its whistleblower clients on a contingent fee basis. Youman & Caputo earns a fee only when the case is successful, advances all of the expenses incurred in investigating and litigating the case, and does not charge any fee or seek reimbursement for any expenses if the case is not successful.