Between 1987 and 2013, the United States government recovered nearly $30 billion from cases brought by whistleblowers who reported fraud against the government. Although the exact numbers are confidential, many of the whistleblowers from these cases walked away with rewards anywhere between 15 percent and 25 percent of the amount recovered in their respective cases.
While the financial rewards of whistleblower lawsuits against companies can be immense, the risks and challenges whistleblowers must face on a personal level are just as large. Fortunately, several laws establish protections for whistleblowers who often suffer threats of retaliation from companies.
Learn more about protections for whistleblowers and how whistleblowers can earn rewards in qui tam lawsuits.
What is a Whistleblower?
“Whistleblower” is a term for an employee who alleges that his or her employer is violating the law, according to Cornell Law School1. The employer can be a public or private organization, and the whistleblower often tips off law enforcement or other government agencies of the wrongdoing.
A qui tam whistleblower is a private citizen who reports acts of fraud against the United States government. The Latin term qui tam is short for the phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” which means “who brings the action for the king as well as himself.”
These types of whistleblowers were defined under the qui tam statute of the False Claims Act. The qui tam provision also allows citizens who reported the fraud against the government to be rewarded with a percentage of the funds recovered by the government.
Who Qualifies as a Whistleblower?
Anyone with evidence that a company defrauded the government can qualify as a whistleblower under the False Claims Act. Some of the people who commonly file whistleblower lawsuits include current employees, former employees, competitors, consultants, contractors, auditors, and analysts.
A person must have knowledge of fraud and be able to provide hard evidence. The information must also be original and not gleaned from any public sources. Fraud against states or other companies does not qualify under the False Claims Act. However, most states have their own False Claims provisions.
According to the American Bar Association2, at least four actions can be considered violations under the False Claims Act.
- A company knowingly makes a false or fraudulent claim to the federal government for payment.
- A company uses a false record or statement to have a claim paid by the government.
- A company conspires with others to have a false or fraudulent claim paid by the government.
- A company uses a false record or statement to get out of paying money to the government.
The sectors where qui tam lawsuits come from range from the healthcare industry to the financial industry.
Purpose of Whistleblower Lawsuits
Whistleblowing in the United States May 19th, 2018s back to colonial times. Even when the country was in its nascent stages, the Continental Congress passed the first whistleblower law in 1778.
The qui tam provision wasn’t established until the False Claims Act was passed in 1863. Known as the Lincoln Law because it was passed under President Abraham Lincoln, the False Claims Act was designed to stop people from defrauding the Union military during the Civil War. At the time, contractors were selling old or faulty goods to the Union Army, and the war made resources for finding and prosecuting fraud against the government scarce.
Whistleblower lawsuits serve several goals. One of the overarching goals of these lawsuits is to help the government recover funds illegally taken by organizations and levy civil penalties against perpetrators. A qui tam lawsuit should also, in theory, prevent fraudulent conduct from happening again at the company and deter others by empowering whistleblowers.
Rewards & Risks of Whistleblowers
Reporting fraud is a practice with high rewards and high risks. If the government joins a qui tam case, a whistleblower can receive between 15 percent and 25 percent of what the government recovers. If the government decides not to join the case, a whistleblower may receive 25 percent to 30 percent of the money recovered.
This may sound like a small amount of money, but whistleblower cases often deal with millions of dollars. For example, in 2012, a whistleblower who accused subprime lender Countrywide Financial of fraudulent activity against the government helped recover $25 billion along with several other whistleblowers. He received a $14.5 million reward3.
Despite the potential for high rewards, whistleblowers also take great risks when pursuing qui tam cases. A spokesman for Taxpayers Against Fraud estimates that 80 percent of cases filed under the False Claims Act result in no rewards for whistleblowers4. In many cases, the federal government will not join in the lawsuit, putting more burden on the whistleblowers and their lawyers.
On top of all that, whistleblowers are often subject to retaliation.
Whistleblower Retaliation Examples
Retaliation against whistleblowers can manifest itself in different ways. If an employer finds out about a lawsuit, it might fire, demote, suspend, threaten, or harass the employee. For example, a supervisor might issue reprimands or reassign the employee to less desirable job duties.
More severe punishments are sometimes lawsuits against the whistleblowers for revealing information to the government.
Companies might also discourage other organizations from hiring an individual.
Whistleblower Protections Under the False Claims Act
Because whistleblowers serve an important role in society, several laws have provisions that protect them from retaliation by employers. Under the False Claims Act5, a whistleblower is entitled relief if they are “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment.”
Relief means the employee shall be reinstated with the same seniority status, issued extra back pay with interest, and given compensation for extra damages like attorneys’ fees.
The government wants to ensure that citizens feel compelled to reports fraud against the government without fear of retaliation. Congress strengthened the whistleblower protection provision in 1986 for this very reason.
“The Committee recognizes that few individuals will expose fraud if they fear their disclosures will lead to harassment, demotion, loss of employment, or any other form of retaliation,” a report at the time said6. “With the provisions in section 3434, the Committee seeks to halt companies and individuals from using the threat of economic retaliation to silence ‘whistleblowers’, as well as assure those who may be considering exposing fraud that they are legally protected from retaliatory acts.”
Examples of Whistleblower Lawsuits
Whistleblower lawsuits run the gamut — dealing with all types of industries. Here are a few examples of past whistleblower lawsuits.
— After the financial crisis of 2008, a former employee of a property appraisal company for Bank of America worked with federal prosecutors7 to bring a case against the bank. Robert Madsen claimed that the bank used improper appraisal practices to overstate the values of homes, costing the federal government billions. Madsen turned over thousands of pages of documents and sat down for multiple interviews with prosecutors.
Madsen’s work, along with the help of four other whistleblowers, earned the federal government a $16.65 billion settlement with Bank of America. As a result of his participation, he received a $56 million reward.
— In 2009, Northrop Grumman Corporation agreed to a $325 million settlement with the Justice Department over claims that it sold the government faulty satellites. TRW, which was later acquired by Northrop, tried to silence subcontractor and whistleblower Robert Ferro from disclosing his findings.
Ferro was awarded $48.8 million for bringing the faulty electronic components to the government’s attention8.
— Former employee James Holzrichter also filed a qui tam lawsuit against Northrop Grumman for defrauding the government. Although his complaint was filed in 1989, he did not receive a financial reward of $6.2 million until 20054.
— One of the quickest turnarounds for a whistleblower case came in 2011 when Sherry Hunt filed a lawsuit9 under the False Claims Act against Citigroup, one of the largest banks in the country. She was a vice president and quality assurance manager at the bank but was pressured to hide the truth about poor loans.
By 2012, the federal government had joined the lawsuit, and Citigroup agreed to pay $158.3 million to settle. Hunt received around 20 percent of the settlement money, which was $31 million.
— In the 2000s, Gulf War veteran and former sales representative John Kopchinski took on Pfizer with a few other whistleblowers. Kopchinski filed a qui tam lawsuit in 2003 over claims that the pharmaceutical giant was using illegal marketing tactics to sell the painkiller Bextra.
It took six years before the company agreed to pay $2.3 billion in civil and criminal penalties to the government10. Pfizer pleaded guilty to a felony charge for illegal promoting Bextra and 12 other drugs. Because of his role as a whistleblower, Kopchinski earned a $51.5 million reward.
How an Attorney Can Help
Navigating the world of whistleblower cases is complicated and stressful. Wrong moves along the way can result in cases being thrown out of court or prevent the federal government from involving itself in qui tam cases.
Employers might also feel emboldened to retaliate against employees who have filed lawsuits against them. Although this is illegal, an employee may not have the knowledge or experience to get their job back or receive additional relief.
If you are thinking about filing a whistleblower lawsuit, contact a qualified attorney immediately to learn more about next steps, all the risks involved, and possible reward amounts.