A number of programs offer financial incentives to successful whistleblowers, including the following:
Federal False Claims Act: Originally enacted during the Civil War, this law gives whistleblowers an incentive to shine a light on frauds committed against the federal government, and it allows the government to recover three times its damages suffered by the government plus penalties for each violation. As a general matter, violations occur when defendants falsely claim payments from the government or when they make statements to avoid paying money owed to the government. A whistleblower who brings a successful action under this law can be awarded between 15% and 30% of the government’s recovery. The Act also provides whistleblowers with protection against retaliation.
State False Claims Acts: Many states have their own False Claims Acts that allow state and local governments to recover three times their damages and penalties for the same types of violations addressed by the Federal False Claims Act. Under all these statutes, a successful whistleblower can be awarded a percentage of the government’s recovery, usually in the range of between 15% and 30%. These laws also generally have anti-retaliation provisions that prevent employers and others from retaliating against you for being a whistleblower. In some states, the False Claims Act applies to tax law violations.
SEC and CFTC Whistleblower Programs: In the wake of the financial crisis, Congress created whistleblower programs at the SEC and the CFTC to combat financial fraud. Examples of activities covered by the SEC whistleblower program include insider trading, financial misstatements, money laundering, thefts and violations of the Foreign Corrupt Practices Act. Examples of activities covered by the CFTC whistleblower program include price manipulation, disseminating false information into the market, and front-running positions in the commodities, currency, futures and derivatives markets. If the CFTC or SEC successfully recovers more than $1 million in monetary sanctions, the whistleblower is can receive between 10% and 30% of the recovered amount. These programs allow whistleblowers to file anonymous tips and also include anti-retaliation provisions for individuals who provide information to the SEC or CFTC.
IRS Whistleblower Program: Individuals who report evidence of tax fraud and other misconduct to the IRS are eligible to recover significant monetary awards. Whistleblowers are eligible to receive mandatory awards of between 15% and 30% of recovered amounts when the IRS successfully recovers more than $2 million from corporations (or from an individual earning more than $200,000). If the IRS recovers lower amounts, a whistleblower may receive a discretionary award of up to 15% the recovered amount.
The targets of whistleblower cases are persons or companies that have falsely taken taxpayer dollars or harmed investors in securities and commodities.
Where taxpayer dollars are at issue, a target may be an individual or business that has a direct relationship with the government, such as through contracts to sell goods or services to a governmental agency, by selling securities to government pension plans, by participating in government grant programs like Medicaid and Medicare. The target may also be an individual or company that owes obligations to the government, such as obligations to pay their taxes or to pass unclaimed property along to the government.
The targets may also be individuals or businesses that have indirect relationships with the government, such as subcontractors on government building projects, pharmaceutical companies that make drugs that will be paid for by government programs, or tax professionals who prepare tax returns for others.
Where securities and commodities are at issue, the targets may be the sellers, issuers, underwriters or others who may have a legal obligation to make truthful disclosures.