Why it Can Pay to Be a Whistleblower
by: Melissa L. Stuart, Attorney
Most people think of a referee in black and white stripes when they hear the term whistleblower, and thanks to Ralph Nader, that’s exactly where the term comes from. No longer considered a “snitch” or “informer,” whistleblowers who tell the state or federal government about dishonest, illegal, or fraudulent activities against it enjoy greater protection and reward thanks to new and expanding laws.
One of the first laws to protect whistleblowers was the 1863 False Claims Act. First enacted to combat fraud against the government during the Civil War, the FCA encourages people to report fraud against the government by allowing the whistleblower (often called a “relator”) to keep a percentage of the money recovered while also protecting that person from retaliation, like wrongful termination.
Whistleblowers who suffer from employment retaliation, for example, can sue for reinstatement of their job, back pay, and other damages.
The False Claims Act (FCA), 31 U.S.C. §§ 3729(a) and Indiana’s parallel FCA (Ind. Code § 5-11-5.5-2), in general, applies when any person:
(1) knowingly presents a false claim to the government for payment or approval;
(2) makes or uses a false record or statement to obtain payment or approval of a false claim; or
(3) conspires to defraud the government by getting a false or fraudulent claim allowed or paid.
To earn the reward, generally, the whistleblower must be the “original source” of the information about the false claim. This means that he or she must be the first to file a complaint on behalf of the government and avoid publicizing information about the claim until the government has had the opportunity to investigate and determine whether it wants to prosecute the claim itself. The complaint brought under the qui tam provision of the FCA and its parallel state laws must be filed under seal using special procedures to keep the claim from becoming public. Under provisions in the Dodd-Frank Act, now there is even greater protection for whistleblowers, allowing them for the first time to report fraud anonymously by filing a claim through an attorney. Thus, it is important to act fast and consult an attorney with experience in FCA claims if you have information relating to a fraud perpetrated on either the state or federal government (or both, in the case of co-funded programs like Medicaid).
There are different federal and state laws that incentivize whistle-blowing and offer significant protection for those who report fraud. For example, the Securities and Exchange Commission (SEC) can reward those who provide information concerning violations of federal securities law at companies that are required to report to the SEC.
Indiana also recently changed its law through House Enrolled Act (HEA) 1294 to provide an enhanced process for rewarding whistleblowers reporting fraud under Indiana’s securities laws. HEA 1294 allows the securities commissioner to use discretion to determine the amount of the reward owed to the whistleblower based on the usefulness of the information, the amount of cooperation from the whistleblower and the need to discourage future violations.
Reporting fraud against the government is part of our civic duty and can be financially rewarding, if done correctly. Now, because of expanding protection and reward for whistleblowers, there is more incentive than ever before to report. Whistleblowers can now file claims anonymously and are protected against retaliation. However, because the process of filing a qui tam can be confusing, it is important to consult an attorney with experience in FCA cases to help make sure your rights as a whistleblower are protected.