U.S. Whistleblower Protection Laws Canadians Can Use to Report Misconduct
Canadians who know of violations and report them in a timely fashion to the proper authorities may be eligible to submit a claim to receive a whistleblower informant award if their information led to a successful prosecution.
However, these filing procedures are extremely technical and failure to file a timely claim following the specific procedures outlined in each law can result in an otherwise qualified whistleblower losing his or her claim to a reward.
U.S. whistleblower protection laws that provide a reward to qualified whistleblowers:
False Claims Act — the False Claims Act’s qui tam provision empowers whistleblowers who have firsthand knowledge of frauds/violations against the U.S. Government to file a whistleblower lawsuit on behalf of the government. In return, if the whistleblower’s case is successful they may be awarded between 15% and 30% of what the government collects from the fraud.
Once a qui tam case is filed under seal, the U.S. government will investigate the claim and decide whether it will elect to “intervene” in the case. If the government “intervenes” it effectively takes over the case. However, even after intervening the government may want to work with the whistleblower and their attorney to successfully litigate the case.
The False Claims Act incentivizes whistleblowers to work with the government, with a right to a reward, which may be enforceable in court. The mandatory minimum payments, which are often in the millions of dollars, are essential for convincing otherwise skeptical potential whistleblowers to step forward.
Examples of False Claims Act and Qui Tam Violations:
- Overbilling the government for more than was provided;
- Kickbacks in relation to government programs such as Medicare;
- Fraud in obtaining a government contract;
- Providing defective goods to the government;
- False statements on customs forms;
- False statements to get a government lease;
- Failure to pay monies owed to the government;
Our law firm has written several Frequently Asked Questions and guides to help you better understand the False Claims Act:
The IRS Whistleblower Program — The Internal Revenue Code has a favorable tax whistleblower law that permits any IRS or tax fraud whistleblower to obtain between 15% and 30% of any collected proceeds received by the government as a result of the original information filed by the whistleblower.
An analyst in the IRS Whistleblower Office will consider the information provided by the whistleblower and has to decide if the case is worth pursuing. The entire process may take upward of a year or more depending on the complexity of the filing.
If the whistleblower disagrees with the outcome of the award claim, he or she can appeal to the Tax Court under 7623(b) within 30 days of determination. However, decisions under 7623(a) may not be appealed in Tax Court.
Examples of IRS Fraud:
- Offshore Tax Havens – knowingly moving money to a bank in another country to avoid reporting taxable income;
- Money Laundering – masking or concealing the source of illegally-obtained money by transferring it through bank accounts or legitimate businesses, for example;
- False Reporting – reporting incorrect information on tax returns, such as underreporting revenues or taxable income;
- Falsely Operating Under Tax-Exempt Status – claiming a tax-exempt status to receive tax credits or deductions;
- Pyramiding – withholding employee taxes and intentionally not remitting taxes to the IRS, then filing bankruptcy and starting another company;
- False Payroll Tax Returns – preparing false payroll tax returns understating the number of wages on taxes owed;
- Failure to Pay Payroll Taxes – failing to file employment tax returns to evade employment taxes, for example.
We’ve created a Frequently Asked Questions guide What Is Covered Under The IRS Tax Whistleblower Reward Program?, to help you better understand the types of misconduct and frauds are covered under the IRS Whistleblower Reward program.
The Securities & Exchange Commission Whistleblower Program — The Securities & Exchange Commission (“SEC”) is authorized by the U.S. Congress to provide monetary rewards to eligible individuals who voluntarily come forward with original information on securities violations that leads to a successful SEC enforcement action in which over $1 million dollars in sanctions is ordered. The award amount can range between 10% and 30% of the monies collected. Multiple whistleblowers can qualify for an award, but the total amount of the award can never total an amount higher than 30% of the sanctions.
The Office of the Whistleblower was established to administer the SEC’s whistleblower program. Tips, complaints and referrals should be submitted via the SEC’s Form TCR directly to the SEC in order for a whistleblower to be eligible for the program.
Securities Fraud Includes:
- Manipulation of a security’s price or volume;
- Insider trading;
- Fraudulent or unregistered securities offering;
- False or misleading statements about a company (including false or misleading SEC reports or financial statements);
- Bribery of, or improper payments to, foreign officials;
- Ponzi Schemes, Pyramid Schemes, or High-Yield Investment Programs;
- Theft or misappropriation of funds or securities;
- Fraudulent conduct associated with municipal securities transactions or public pension plans;
- Other fraudulent conduct involving securities.
Below is a short list of Frequently Asked Questions related to this program:
Commodity Futures Trading Commission Whistleblower Program — Like the SEC, the Commodity Futures Trading Commission (“CFTC”) is authorized to provide monetary rewards to eligible individuals who voluntarily come forward with original information on violations of the Commodities Exchange Act (“CEA”) that leads to a successful CFTC enforcement action in which over $1M in sanctions is ordered. The award amount can range between 10% and 30% of the money collected. Multiple whistleblowers can qualify for an award, but the total amount of the award can never total an amount higher than 30% of the sanctions.
Examples of CFTC Fraud Includes:
- Spoofing and other manipulation of commodities and derivatives markets;
- Insider trading;
- Foreign currency (Forex) fraud;
- Virtual currency fraud;
- Engaging in retail commodity transactions without registering with the CFTC
Internal controls violations, such as a bank’s failure to supervise traders;
- Precious metals fraud such as misrepresentations as to source, value, or quantity;
- Phony futures and options websites.
Learn more about the CFTC whistleblower program by reading our Frequently Asked Questions:
Foreign Corrupt Practices Act — whistleblower claims under the Foreign Corrupt Practice Act (“FCPA”) are initially filed with either the SEC or the CFTC and whistleblowers are eligible for awards for reporting FCPA violations through these offices’ whistleblower programs.
The FCPA prohibits U.S. persons (including publicly traded companies abroad) from paying anything of value to a foreign government official in order to obtain a business advantage. The FCPA also requires publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation.
The FCPA has widespread transnational application. Billions of dollars in fines have been collected by the United States as sanctions for bribes paid outside the United States by publicly traded companies. Indeed, since 2012 numerous whistleblowers represented by the attorneys at Kohn, Kohn and Colapinto, LLP have been paid over $350 million for cases that concern violations of law that occurred in Europe or other international jurisdictions.
U.S. citizens and non-U.S. citizens are equally eligible for whistleblower rewards for reporting violations of the FCPA.
Learn more about the Foreign Corrupt Practices Act by reading Frequently Asked Questions.