Keller Rohrback’s nationally recognized litigators help ordinary people combat fraud. As plaintiffs in federal and state whistleblower lawsuits, Keller Rohrback clients play an essential role in exposing bad business practices and helping the government reclaim public funds.
What is Whistleblowing?
Whistleblowing is the act of reporting dishonest and illegal activities that cause risks to public health and safety, lead to improper and unfair uses of taxpayer dollars, and otherwise threaten the public interest. Whistleblower suits generally must be based on original or non-public information.
There are federal and state laws under which whistleblowers can report illegal activities and be protected from retaliation. In addition, there are federal government agencies with specific whistleblower programs. Examples of these laws and programs are:
False Claims Act
Many whistleblower lawsuits are based on reports of improper dealings with the government that fall under the definition of “false claims.” “False claims” include misconduct in virtually any financial transaction directly or indirectly related to a federal government program. The government cannot possibly uncover every instance of fraud committed against it, so it depends on private citizens to report abuse, and it pays those citizens handsome rewards if and when the governmental entity is able to recover money.
The federal False Claims Act allows individuals or entities, called “relators” in litigation, to stand in the shoes of the government and sue to recover damages for fraud against the United States. These are called qui tam actions, shorthand for a Latin phrase describing the relator’s suit on the government’s behalf.
Suits under the False Claims Act usually must be filed within six years after the date on which the violation was committed. Under certain circumstances, a claim may be brought within 10 years after the violation.
Examples of fraudulent business practices that may violate the False Claims Act are:
- Submission of false cost, billing, or pricing data
- Excessive markups of or overcharging for products or services
- False claims for goods or services that were not provided
- False certification of compliance with laws, regulations, or contract terms
- Provision of inferior services or products
- Submitting false applications for government loans or grants
- Fraudulently seeking to obtain a government contract
- Conspiring with others to obtain false claim payment or secure a “reverse false claim”
Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFCT) Whistleblowing Programs
The SEC and CFCT Whistleblower programs were created by Congress under the Dodd-Frank Act to provide monetary incentive for individuals to come forward and report possible violations of the federal securities laws to the SEC and violations of federal commodity laws to the CFCT.
Examples of fraud or wrongdoing involving potential violations of the securities laws are:
- Ponzi or Pyramid Schemes
- Theft or misappropriation of funds or securities
- Manipulation of a security’s price or volume
- Insider trading
- Fraudulent or unregistered securities offering
- False or misleading statements about a company (including false or misleading SEC reports or financial statements)
- Abusive naked short selling
- Bribery of, or improper payments to, foreign officials
- Fraudulent conduct associated with municipal securities transactions or public pension plans
- Foreign Currency rate manipulation
- Inter-bank interest rate manipulation
- “London Whale” credit default swap manipulation
Internal Revenue Service (IRS) Whistleblowing Program
The IRS Whistleblower program was created by Congress under the Tax Relief and Health Care Act of 2006, and provides monetary incentives for whistleblowers to come forward and provide information about tax fraud and tax underpayments in violation of the Internal Revenue Code. There are also state whistleblower laws that deal with the non-payment of state taxes.
Examples of common tax schemes that can be the subject of IRS whistleblower submissions are:
- Improper transfer of tax benefits from one company to another
- Abuse of tax shelters that lack any real economic purpose, and are created to evade taxes
- Artificially depressing income reported by one subsidiary to another subsidiary for goods and services
- Underreporting of income due to investment in offshore tax havens
- Fraudulent manipulation of revenue or profits to avoid paying taxes
How Can I Blow The Whistle?
Ordinary people witness fraudulent business practices every day, but those red flags may only be recognizable within a particular professional context. You have an important role to play as a potential whistleblower if your specialized knowledge allows you to recognize fraud that the government might not otherwise discover.
Are you a nurse who has witnessed a doctor falsely certifying “medically necessary” procedures? An accountant who recognizes a pattern of fraud in your company’s billing practices? A public works subcontractor who has witnessed the general contractor engaging in bid rigging, or cutting corners? Those practices could be the basis of a whistleblower lawsuit.
If you are thinking about reporting fraud, misrepresentations or abuse and wish to contact an attorney at Keller Rohrback, all communications will be protected by the Attorney-Client Privilege and held in strict confidence, whether or not you decide to hire us.
What are the Risks and Rewards of Blowing the Whistle?
The decision to come forward as a whistleblower is not an easy one. Most people thinking about reporting fraud, misrepresentation or abuse are very cautious about speaking up, and that caution is wise. Being in a position to disclose fraud often means you are working closely with people who are participating in the fraud, including coworkers, supervisors, and business contacts. Uncovering misconduct in your workplace could result in your unlawful dismissal or demotion, or may cause you to feel forced to quit because of attacks on your personal and professional reputation. Keller Rohrback’s attorneys advise prospective whistleblowers about the protections and incentives available to minimize any adverse effects of this decision. Depending on the law providing the cause of action for your whistleblower claim, these can include:
False claims reports are initially submitted confidentially. A report must comply with numerous technical and procedural requirements. Hiring legal counsel will help you ensure compliance and confidentiality. At the outset, the potential defendant will not know that its false claims have been reported or who reported them. During this period of initial secrecy, the government is given an opportunity to investigate and manage the litigation if it chooses. If the government chooses not to manage the litigation, the person reporting the false claim is entitled to pursue the case on behalf of the government, and the false claim report is made public.
Whether or not the government chooses to play an active role in the litigation, the whistleblower reporting the false claim is entitled to a reward if the suit succeeds in recovering money for the government. Depending on the law under which the claim is brought and a number of other factors, rewards generally range from 10% of the total recovery to up to 30% of the total recovery. To illustrate, if the government recovered $1 million as a result of false claims litigation, the person who reported the false claim would be awarded $100,000 to $300,000. This compensation rewards the risk and effort the whistleblower undertakes in filing a qui tam case.
The amount of money recovered in false claims cases can be significant. In 2014 alone, the federal government recovered nearly six billion dollars because ordinary citizens stepped forward to report fraud, misrepresentations, and abuse as whistleblowers. State whistleblower laws also provide rewards to those who report misuse of state money and contracts.
Double Back Pay, Reinstatement, and Attorneys’ Fees
In addition to significant financial rewards, the law provides special protections for people who report false claims. If you are discharged, demoted, harassed or otherwise mistreated because you reported a false claim, whistleblower laws entitle you to reinstatement, double back pay, and recovery of any special damages such as attorneys’ fees and litigation expenses.
The benefits of whistleblowing are considerable. Not only do whistleblowers help the government recover money and share in that recovery, they prevent future societal harm by encouraging companies to follow regulations designed to protect the public. By doing what is right and fighting against fraud, whistleblowers provide an invaluable public service.
If you hire Keller Rohrback, firm attorneys will advise you of the risks and benefits of whistleblowing, and you will decide whether to proceed to the next step. At every step in the process, an attorney or team of attorneys will explain the risks and benefits so you can make informed decisions. They will help you navigate the technical and procedural hurdles of whistleblower litigation to protect confidentiality and mitigate any potential retaliation.