When people think of whistleblowers, they usually think of corporate insiders. But does that mean that only insiders can be whistleblowers under the False Claims Act (FCA) and other qui tam statutes? No! In fact, almost anybody with knowledge of fraud can be a whistleblower.
As we look at the various categories, keep in mind that there are many different whistleblower programs, so ineligibility under one set of program rules does not mean you are barred under every program, or vice versa; this is not intended to be a comprehensive list of all whistleblower statutes.
And as always, if you have information about a fraud occurring, contact our Atlanta whistleblower attorneys right away.
When you ponder who can be a whistleblower, this is usually the first person to pop up. They work for the company, the hospital, the doctor’s office. They can be a low-level employee, middle management, or even an executive. A current employee or a former employee. They see wrongdoing, and they want to find a way to make it right.
Are there any insider do-gooders who cannot be a whistleblower? Although technically the answer is no, this comes with a big caveat. If your profession is governed by an outside body, there may be serious repercussions. We address “the Counselor” later.
What about insiders who maybe weren’t such perfect angels and have unclean hands? You still are in a common category of whistleblowers. Many whistleblowers were forced to participate in the scheme as part of their job responsibilities. You may not have known what you were doing was fraud. You may have a family to feed and bills to pay. You may just not be the type to make waves, and were pushed until you couldn’t be pushed any further.
That is fine. You have just as much right to file your case as does the Do-Gooder.
As the Ninth Circuit once said addressing this very issue, “the framers of the [False Claims] Act recognized that wrongdoers might be rewarded under the Act, acknowledging the qui tam provisions are based upon the idea of setting a rogue to catch a rogue.” Mortgages, Inc. v. United States Dist. Court for Dist. Of Nev. (Las Vegas), 934 F.2d 209, 213 (9th Cir. 1991).
Courts have generally declined to reduce the relator’s share for this reason. In U.S. ex rel. Koo v. GS Caltex, the relator was alleged to have participated and profited from the fraud and to have even attempted to thwart the government’s investigation by threatening another potential whistleblower. The court still declined to reduce the relator’s share.
Participating in fraud is one thing, but what if you planned the fraud? You are still a party who can be a whistleblower. However, under 31 U.S.C. § 3730(d)(3), “if the court finds that the action was brought by a person who planned and initiated the [False Claims Act] violation… upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds…, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation.”
In other words, the court does not want to reward someone who planned a fraud – maybe even without the higher-ups knowing about it – just so they could report it and get paid.
But importantly, it doesn’t say you can’t bring an action or get a reward, only that the reward may be less than the standard relator’s share. Moreover, the statute gives you an opportunity to redeem yourself by helping the government conduct its investigation and litigate the case. The IRS Whistleblower Program has a similar rule. IRC § 7623(b)(3).
At some point, however, a line has to be drawn. If the person bringing the action is “convicted of criminal conduct arising from his or her role in the [False Claims Act] violation, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action.” 31 U.S.C. § 3730(d)(3).
Here is our first group that cannot be whistleblowers. They are so involved as to be convicted criminally of the activity. The U.S. Securities and Exchange Commission (SEC) Whistleblower Program and Internal Revenue Service (IRS) Whistleblower Program have similar provisions, barring someone convicted of a related criminal violation from receiving an award. IRC § 7623(b)(3); 17 C.F.R. § 240.21F-8.
Can a lawyer be a whistleblower? Attorney-client privilege and confidentiality attach to your conversations with the client, and you breach those obligations once you reveal the content of those conversations to the government.
Generally, courts have held that whistleblowers have protection from certain counterclaims, such as breach of non-disclosure agreements or fiduciary duty, because the public policy interest in whistleblowing is so great. Even lawyers have been afforded these protections, in some instances, notwithstanding their heightened responsibility to their clients.
For example, in a 2020 decision (the Bio-Rad whistleblower case), the Northern District of California afforded protections under Sarbanes-Oxley to an in-house lawyer who was terminated after reporting potential Foreign Corrupt Practices Act violations to the government. But even though you may have certain protections from civil lawsuits, you still may face repercussions from the state bar if you violate your code of ethics.
Moreover, the court may exclude your evidence under attorney-client privilege, making it more difficult to prove your case in court.
That said, nothing precludes a lawyer (or accountant or doctor or therapist) from filing a whistleblower complaint or from being the recipient of an award. In fact, with the IRS Whistleblower program, there is some expectation that attorneys and accountants will be whistleblowers, as there is an option to select these relationships on the Tip form.
One exception is “the auditor” – you cannot file an SEC complaint if you obtained the original information through an audit of a company’s financial statements and making a whistleblower submission would be contrary to 15 U.S.C. § 78j-1 (i.e., you are an employee of a registered public accounting firm retained for the purpose of auditing the company’s records so that the firm can address any illegal acts).
Simply put, there is no rule that a whistleblower has to be a United States citizen. A foreign national may have knowledge of a defense contractor or non-profit organizations defrauding the federal government while operating overseas.
For example, a Kuwaiti businessman brought a $95 million FCA case alleging that a food vendor for the U.S. military bases had inflated food costs to obtain higher reimbursement.
Although False Claims Act cases tend to focus on the fraud against the government, there are often individual victims of the fraud as well. Maybe you are a Medicare beneficiary who was improperly billed for services. Or a laborer who wasn’t paid Davis-Bacon wages. One example we see time and again is Section 8 housing residents whose landlords are defrauding the program, often to their detriment.
While these are individuals who can be whistleblowers, it is often difficult to proceed with these cases because courts may limit you to what you know. So, for example, if you only have knowledge of the one instance of fraud against you, the court may not grant you extensive discovery into possible fraud against others. Hence, these cases tend to resolve for smaller amounts of money.
Although we usually think of whistleblowers as being individuals, courts permit corporations to act as whistleblowers as well, including companies in direct competition with the defendants. For example, a company bidding for a government contract may lose out to a competitor that falsely indicated it was veteran-owned, or it may be aware of anti-competitive behavior amongst multiple competitors to raise bids.
In perhaps the most famous example of a competitor being a whistleblower, pharmaceutical company Sanofi-Aventis filed a False Claims Act case against Mylan for misclassifying EpiPens as generic drugs to avoid paying Medicaid rebates. The case was settled for $465 million.
Many fraudulent schemes require two to tango. For example, a violation of the Anti-Kickback Statute requires two parties: someone offering remuneration for patient referrals, and someone willing to make those referrals in exchange for the remuneration. But what happens when instead of agreeing to the deal, the party turns into a whistleblower? Or has a crisis of conscience partway through the deal?
Depending on the level of their involvement, their share might be reduced as a “planner/initiator”, but they are not prevented from filing a False Claims Act case. Moreover, they might save themselves some pain and suffering later if someone else were to turn them in. The government gives valuable cooperation credit to bad guys who self-disclose their wrongdoing and undertake remedial measures.
Getting a reduced share or not getting a relator’s share at all may be considerably better than ultimately having to pay treble (tripled) damages and civil penalties under the statute.
Sometimes, in the course of business, a whistleblower stumbles across information, puts two and two together, and figures out the scheme. The most prominent example of this was a company called Ven-A-Care, which recovered billions of dollars from the world’s largest pharmaceutical companies.
These companies inflated their Average Wholesale Prices (AWP), which resulted in Medicare and Medicaid paying larger than appropriate sums to pharmacists. In other words, they were selling drugs for much less than they reported selling the drugs. This way, they were able to “market the spread” to the pharmacists – buy our drugs instead of our competitors, and you will get more money back from the government.
Ven-A-Care was a small home infusion company in the Florida Keys that had access to the actual AWPs; otherwise, they had nothing to do with the scheme itself.
The Data Miner:
Some people may view the False Claims Act and SEC Whistleblower program as a potential career path. They don’t have any inside information, nor did they witness a scheme in their daily lives, but they have access to data. The Centers for Medicare and Medicaid Services (CMS) publishes annual Medicare billing data. Public companies issue investor reports. And brilliant people who know how to be a whistleblower scour this information for possible fraud.
One of the most famous whistleblowers ever, Harry Markopolos, was a portfolio manager for an equity derivatives asset management firm tasked with analyzing Bernie Madoff’s methods. Using only that which was available to him, he was able to determine that Madoff’s returns were mathematically impossible. He spent years reporting to the government. However, there was no SEC Whistleblower program at the time, and so he got no reward!
Although data mining is a potentially lucrative path to uncovering fraud, most of the information is still based on publicly disclosed data. It’s subject not only to the possible reduction in the relator’s share, but also a public disclosure bar that can prevent whistleblowers from litigating a declined case. The government ideally wants cases based on information that it could not have figured out on its own (even if it didn’t before you arrived). So it is best if you have additional information than what is publicly available.
Can a government employee be a whistleblower? Sometimes. There is nothing the federal False Claims Act expressly barring government employees from bringing cases based on information they learned in the course of their employment.
However, some courts have examined the issue and said that if you learned of the information as a government employee, then ipso facto the information was publicly disclosed. And you are not an “original source” because you learned it by way of being a government employee. Other courts, however, have rejected this argument and allowed government employees to litigate cases. So, it likely depends on where you file.
Certain state False Claims Acts have provisions that disallow employees of that state from bringing a case under the state statute, but that doesn’t prevent you from bringing a case under the federal statute. And both the IRS and SEC Whistleblower programs have provisions barring federal employees from getting rewards.
However, except for a hard and fast rule of the SEC program barring employees or their family members, this is based on the government employee learning of the fraud through their role in the government. If you learned of fraud through other means, you may still be able to file your claim.
How To Be a Whistleblower: Call Bracker & Marcus LLC
If you suspect you fall into any of the above whistleblower categories, one of your very first moves should be to contact experienced False Claims Act attorneys. Bracker & Marcus LLC fully dedicates itself to False Claims Act and qui tam litigation nationwide. For a free, confidential evaluation, call 770-988-5035 today.