(Note: This is an edited excerpt from an article by John W. Black, Samuel J. Buffone Jr., and Samuel Wenocur in the latest edition of New Jersey Labor and Employment Law Quarterly, a publication of the New Jersey State Bar Association Labor and Employment Law Section. To read the full article and issue, click here [login required].)
Over the past several decades, whistleblowers have proven to be the most effective tool in combating corporate misconduct, fraud, and corruption. Government agencies including the Department of Justice, IRS, and Securities and Exchange Commission have recovered billions of dollars based on information from whistleblowers—and paid billions of dollars in whistleblower awards as well.
Whistleblowers are often exactly the people employment lawyers help every day as they face retaliation in the form of unjustified or pretextual firings, demotions, harassment, or blacklisting across their industry.
Employment lawyers are well-versed in fighting a client’s employer, yet many practitioners fail to use U.S. government rules and resources to leverage both the protections of whistleblower statutes and the often-substantial awards for successful government investigations.
Here are a few of the most prominent and lucrative whistleblower programs to be aware of when weighing whether a client should come forward as a corporate whistleblower.
1. The False Claims Act
The federal False Claims Act is the Department of Justice’s primary tool in pursuing fraud against the government recovering $3 billion to $6 billion a year. Originally, FCA enforcement was focused on procurement or defense-related fraud, but, as federal health care spending expanded, FCA cases related to health care fraud (in its many forms) have skyrocketed, and now regularly accounts for 50% or more of DOJ’s FCA recoveries.
2. SEC Whistleblower Program
When an individual, such as an employee, is aware of corporate misconduct, practitioners should evaluate the circumstances of the employment case with federal securities laws. As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), Congress enacted the Securities and Exchange Commission Whistleblower Program designed to expand protections for whistleblowers and encourage individuals with knowledge of securities law violations to bring that information to the SEC.
3. IRS Whistleblower Program
The Tax Relief and Health Care Act of 2006 expanded the existing IRS whistleblower program to establish a dedicated office within the IRS to work with whistleblowers and to provide eligible whistleblowers with a share of government recoveries.
4. FIAFEA/FIRREA
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), passed following the savings and loan crisis of the 1980s, provides civil penalties for the violation of certain predicate criminal statutes, including mail and wire fraud, if the violation affects a federally-insured financial institution. DOJ has used FIRREA as a primary tool in combating financial fraud over the past 10 years—the multi-billion-dollar cases related to residential mortgage-backed securities (RMBS) fraud were all pursued by DOJ as FIRREA cases.
5. FinCEN Whistleblower Program
The newest whistleblower program is so new that it is not yet clear whether it is fully operational. As part of the Anti-Money Laundering Act of 2020 (AMLA), the government established within the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) a whistleblower program incentivizing whistleblowers to bring forward information about violations of the Bank Secrecy Act. Potential whistleblowers may include bank employees or victims of fraudulent schemes and often relate to failures by banks to have effective anti-money-laundering compliance and/or “know your customer” programs.