How to Qualify?
While the specific requirements of whistleblower laws vary, there are three general requirements for an individual to qualify for a whistleblower award.
First, a whistleblower must voluntarily provide their information to the government. If the government subpoenas the individual or in other ways reaches out for information, then their information will not be considered voluntary.
Second, a whistleblower must provide the government with original information about misconduct. Put simply, the whistleblower’s information must not be known by the government at the time of the disclosure. This means that if two individuals provide the government with the same information, only the information provided by the individual who made their disclosure first would be considered “original” and thus qualify for an award.
In certain cases, publicly available information can be original if the whistleblower uses independent analysis to reveal certain insights about misconduct that is not evident from the face of the public documents.
Third, the whistleblower’s information must contribute to the success of an enforcement action. This can take on many different forms. In some cases, a whistleblower’s information causes the government to open an investigation into the alleged misconduct. In other cases, a whistleblower’s information assists the government in an ongoing investigation.
In order for a whistleblower to qualify for an award the government must recover a certain amount of money in the enforcement action. For example, SEC whistleblowers must voluntarily provide original information that leads to an enforcement action with at least $1 million in groceries in order to qualify for an award.
What Laws Offer Whistleblower Awards?
The United States’ first whistleblower award law, originally passed during the Civil War and modernized in 1986, offers whistleblower awards to individuals who report government contracting fraud. Individuals who blow the whistle on false or fraudulent claims submitted to the federal government can qualify for awards of 15-30% of the sanctions collected by the government in connection with their disclosure. Common types of frauds covered by the False Claims Act include healthcare fraud, such as the illegal use of kickbacks or overbilling Medicare or Medicaid, and defense contractor fraud, such as fraud in obtaining a defense contract or providing defective goods to the government.
Passed in response to the financial collapse of 2008, the Dodd-Frank Act established whistleblower award programs for both the U.S. Securities and Exchange Commission (SEC) and Commodities Future Trading Commission (CFTC). Through these programs, qualified whistleblowers, individuals who voluntarily provide original information about securities or commodities fraud that leads to a successful enforcement action, are entitled to awards of 10-30% of the funds recovered by the government. Types of fraud covered by the SEC and CFTC whistleblower programs include Ponzi schemes, spoofing, insider trading, false reporting, and unregistered offerings.
The Internal Revenue Act established the IRS Whistleblower Program. Through the program, if the information provided by a whistleblower substantially contributes to an administrative or judicial action that results in the collection of proceeds, the IRS will pay an award of 15-30% of the proceeds. The IRS pays awards based on information concerning a variety of tax frauds, including offshore tax havens, shell accounts, and false reporting.
The Dodd-Frank Act added whistleblower award provisions to the Foreign Corrupt Practices Act (FCPA), the U.S.’s major anti-corruption bill. Whistleblowers can qualify for awards by reporting violations of the FCPA to either the SEC or CFTC Whistleblower Program. The FCPA prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. It also includes accounting provisions which require publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation in order to ensure that no bribes were paid.
Passed into law in January 2021, the Anti-Money Laundering (AML) Act of 2020 created a whistleblower award program for money laundering whistleblowers. Under the law, whistleblowers who provide authorities with original information about money laundering violations which leads to a successful enforcement action can qualify for an award of up to 30% of the sanctions collected by the government in the case.
The Act to Prevent Pollution from Ships (APPS) is a U.S. federal law enacted to implement the provisions of the International Convention for the Prevention of the Pollution from Ships treaty, otherwise known as MARPOL. Whistleblowers who report violations of APPS or MARPOL can be compensated with up to 50% of the monetary penalties that the U.S. government receives from the guilty parties.
Can International Whistleblowers Qualify for U.S. Awards?
U.S. whistleblower award laws are not restricted to U.S. citizens or residents. Numerous awards have been paid to whistleblowers located overseas who reported violations occurring overseas. Given the great dangers international whistleblowers often face, as well as the difficulties of navigating a foreign country’s laws, it is very important that international whistleblowers consult with experienced international whistleblower attorneys before making a disclosure.
Anonymity vs. Confidentiality
The Securities Exchange Act, the Commodities Exchange Act, and the Auto Safety Act each explicitly provide for anonymous filings. However, under each of these laws, whistleblowers must be represented by a licensed attorney to file a claim anonymously – the attorney applies on behalf of the whistleblower.
Under IRS whistleblower law, whistleblowers cannot file anonymously. However, the IRS has stringent rules protecting the confidentiality of whistleblowers. In practice, the IRS rules have proven to be as effective as the anonymity rules. To file an IRS claim, whistleblowers must personally sign the form under oath.
The False Claims Act permits whistleblowers to file a lawsuit under seal. The whistleblower’s identity is only known to the court and the U.S. government while the case is under seal. By court order, the whistleblower complaints and the whistleblower’s identity must remain confidential until the U.S. district court orders otherwise. Furthermore, initially, the complaint is not served on the defendant.
These provisions permit the government to initiate a confidential investigation. Once the government concludes its investigation or once the court lifts the seal, the whistleblower’s complaint typically become a matter of public record.
In most False Claims Act cases, the defendants eventually learn the whistleblower’s identity. And there are no firm rules governing confidentiality under the APPS, the Lacey Act, or the Endangered Species Act, so whistleblowers who utilize these laws should request confidential informant status.
Frequently Asked Questions
In most circumstances, US or foreign citizens who report fraud, misconduct, or abuse to the US government or appropriate regulatory agencies may qualify for a reward if the information they provide is credible, original, and timely. Not every whistleblower award program is the same, and in most countries, whistleblower awards do not exist. Therefore, whistleblowers should first learn about US whistleblower reward programs to gain a better understanding of their eligibility and reward potential.
Under the Dodd-Frank Act, whistleblowers who report securities, commodities, and foreign corruption may be eligible to receive rewards. Furthermore, those who report money-laundering, tax evasion, or the non-criminal underpayment of taxes may also be eligible under the IRS whistleblower reward program. Whistleblowers who report ship pollution and other crimes against the environment may qualify for rewards as well.
Current US whistleblower award laws support foreign whistleblowers, so long as the fraud, misconduct, or abuse being reported violates a specific law under regulation, or a US government contract. Given the complexity and danger foreign whistleblowers face, it’s advised international whistleblowers immediately seek legal assistance from an experienced whistleblower attorney before making a claim.