Reporting Fraud: A Guide for Whistleblowers
This guide empowers individuals with the knowledge and resources to report fraud, highlighting its devastating impact and the crucial role whistleblowers play. It explores legal avenues, protections, and incentives available to those who come forward, emphasizing the importance of reporting as both a civic duty and a means to reclaim justice.
Updated
May 7, 2025
Introduction
Fraud, the intentional act of deception for unfair gain, inflicts harm far beyond mere financial loss. It erodes trust, damages lives, and undermines the very fabric of society.
Many hesitate to report fraud, driven by fear of retaliation or a belief that their concerns will be dismissed. However, this inaction only perpetuates the problem. Those who report fraud, including whistleblowers, are crucial in exposing fraud, and the United States actively encourages reporting with incentives and robust protections.
The impact of fraud reverberates through communities, causing emotional, psychological, and health-related harm, and fracturing personal relationships. Reporting fraud is not just a civic duty; it’s an act of reclaiming justice and safeguarding our society.
Why report fraud? Because your voice matters.
Reporting prevents further victimization, fuels vital investigations, and holds perpetrators accountable. Whistleblowers, with their insider knowledge, are invaluable allies in this fight. Federal agencies offer substantial incentives and unwavering protection to those who step forward.
This guide empowers you to understand fraud, recognize its red flags, and navigate the reporting process. We’ll explore the legal avenues and resources available, starting with an examination of common fraud types and their telltale signs.
Why Reporting Fraud is Important
A modified version of the conclusion from Founding Partner Stephen M. Kohn’s new book Rules for Whistleblowers: A Handbook for Doing What’s Right
“The effectiveness of whistleblower programs hinges on understanding that individuals, like white-collar criminals themselves, are often driven by rational economic considerations,” asserts Stephen M. Kohn, author of the referenced study. “Modernized whistleblower award laws, like those in the Dodd-Frank Act, recognize this reality by providing financial incentives and robust protections, transforming whistleblowing, or reporting fraud, into a rational economic choice rather than solely a moral one.”
“This research revolutionizes our approach to detecting white-collar crime by applying economic theory not to the perpetrators, but to the potential reporters,” explains Kohn. “By aligning financial rewards with the risks associated with whistleblowing, we significantly increase the likelihood of uncovering complex fraudulent schemes. This approach acknowledges that while ethical motivations exist, economic incentives are critical for broader participation.”
“As this study demonstrates, the unique characteristics of white-collar crime, such as the class nature of its participants and its far-reaching societal impact, necessitate innovative detection strategies,” states Kohn. “Incentivizing whistleblowers through award programs is not just a matter of fairness; it’s a strategic imperative. When whistleblowing becomes a rational economic activity, we see a dramatic increase in reporting, leading to greater deterrence and prosecution.”
“The findings of this study, which are consistent with the OECD’s endorsements and the U.S. Strategy Countering Corruption, underscore the global significance of modernized whistleblower laws,” emphasizes Kohn. “By expanding protections and offering economic incentives, we create a powerful deterrent against international financial fraud and corruption. This approach aligns with the understanding that individuals, regardless of their location, respond rationally to well-structured incentives.”
“Ultimately, the success of any anti-corruption program depends on recognizing that most potential whistleblowers are rational economic actors,” concludes Kohn. “We must move beyond solely relying on ethical considerations and design laws that acknowledge this economic reality. By doing so, we not only increase the number of individuals willing to come forward but also foster a societal acceptance of whistleblowing as a vital tool in combating fraud and white-collar crime.”
Identifying Fraud
Financial fraud, often concealed within complex transactions, can inflict significant damage on individuals, companies, and the economy. Recognizing these schemes is crucial, especially for potential whistleblowers. Understanding the core areas of fraudulent activity is the first step towards prevention and reporting.
Frauds Primarily Covered by Specific Federal Whistleblower Programs
- Securities Fraud (SEC Whistleblower Program): This includes deceptive practices in the buying and selling of securities, such as insider trading (using non-public information for profit), Ponzi schemes (fraudulent investment operations), and false financial reporting (misrepresenting a company’s financial state). Violations of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act often fall under this category.
- Commodities Fraud (CFTC Whistleblower Program): This involves fraud within the trading of commodities, including market manipulation, spoofing (placing orders to manipulate prices without intent to execute), and other violations of the Commodity Exchange Act.
- Tax Fraud (IRS Whistleblower Program): This involves the intentional falsification of tax-related documents, such as underreporting income, claiming false deductions, and offshore tax evasion.
- Government Contract Fraud (False Claims Act – FCA): This involves fraud against the government in the procurement of goods or services, including false claims, bribes and kickbacks, and violations of the Anti-Kickback Statute.
Frauds Often Covered by the False Claims Act (FCA) and Other Federal Laws:
- Healthcare Fraud: This involves fraudulent billing to health insurance or government healthcare programs (Medicare, Medicaid), including billing for services not rendered, upcoding (billing for more expensive services), and violations of the Stark Law and Anti-Kickback Statute.
- Investment Scams: These schemes promise high returns with little risk, often targeting vulnerable investors, and include pyramid schemes and market manipulation. (Note: Depending on the investment type, this could also fall under SEC or CFTC jurisdiction).
- Bankruptcy Fraud: This occurs when individuals or businesses intentionally conceal assets or provide false information during bankruptcy proceedings, violating federal bankruptcy laws.
- Real Estate Fraud (can involve FCA): This involves fraudulent activities in real estate transactions, such as forged deeds, inflated appraisals, and mortgage fraud, especially when involving government-backed loans (FHA, VA).
Frauds Primarily Covered by General Federal Laws and State Laws:
- Cybercrime/Online Fraud (Federal laws and the FTC play a large role here.): This encompasses a wide range of fraudulent activities conducted online, including phishing, ransomware attacks, online auction fraud, e-commerce fraud, and business email compromise (BEC) scams. The Computer Fraud and Abuse Act (CFAA) is a key federal law.
- Intellectual Property Fraud (Federal copyright and trademark laws apply.): This involves theft or misuse of intellectual property, such as copyrights, trademarks, and patents, including counterfeiting and piracy, covered by the Copyright Act and the Lanham Act.
- Insurance Fraud (State and Federal Laws): This involves intentionally deceiving an insurance company for financial gain, including falsifying claims, staging accidents, and providing false information on applications. The McCarran-Ferguson Act grants states primary regulatory authority, but federal laws also apply.
- Charity Fraud (State and Federal laws): Charity fraud involves misrepresenting a charitable organization to solicit donations for personal gain, and is subject to state charity registration laws, and Federal laws regarding mail and wire fraud.
- Elder Fraud/Senior Scams (Federal and State Laws): Elder fraud targets elderly individuals, often exploiting their vulnerability, including investment scams, and is covered by the Senior Citizens Against Marketing Scams (SCAMS) Act.
- Telemarketing Fraud (FTC and Federal Laws): This involves fraudulent schemes conducted over the phone, including prize scams, sweepstakes scams, and fake tech support scams, and is subject to the Telephone Consumer Protection Act (TCPA) and the Telemarketing Sales Rule.
- Forgery and Counterfeiting (Federal Laws): This involves creating fake documents or products, including counterfeit money, fake IDs, and forged signatures, and is covered by federal laws against counterfeiting and forgery.
- Employee Fraud/Embezzlement (State and Federal Laws): This involves fraudulent activities committed by employees against their employers, including stealing company funds, falsifying expense reports, and creating fake invoices, and is covered by state theft laws and federal laws if mail or wire fraud is involved.
- Disaster Fraud (Federal and State laws): This occurs after natural disasters or other emergencies, where scammers exploit people’s vulnerability, including fake charities, fraudulent home repair services, and insurance scams, and is covered by federal disaster relief laws and state consumer protection laws.
- Consumer Fraud (FTC and State laws): This is a broad category that includes deceptive or unfair practices that harm consumers, including bait-and-switch tactics, false advertising, and defective products, and is covered by the Federal Trade Commission Act and state consumer protection laws.
Red Flags for Employees:
- Unusual or inconsistent financial statements.
- Lack of transparency in financial transactions.
- Pressure to meet unrealistic financial targets.
- Evidence of falsified documents or records.
- Sudden and unexplained wealth.
- Requests to circumvent normal company procedures.
Protecting Yourself and Reporting:
Maintaining meticulous records of any suspicious activity is paramount. Exercise caution when sharing sensitive financial information.
If you suspect financial fraud, it’s imperative to consult with legal counsel to understand your rights and options. Familiarize yourself with federal whistleblower programs such as those run by the SEC, CFTC, IRS, and under the False Claims Act (FCA).
If you believe you possess information regarding any of these fraudulent activities, seeking legal advice is strongly recommended.
How to Report Fraud
Reporting wrongdoing and seeking whistleblower protection is a courageous step, but it requires careful navigation to avoid retaliation and maximize your chances of success.
Understanding the best practices for reporting under each applicable federal program is crucial, and some even offer the option of anonymous filing, providing an additional layer of security.
Regardless of the specific laws governing your disclosure, the general process for reporting wrongdoing involves several key steps:
Seek Expert Legal Assistance
Given the complexity of most whistleblower cases, consulting with an experienced whistleblower attorney is paramount. A reputable attorney, often working on a contingency basis, can:
- Advise you on the specific laws applicable to your situation, ensuring you understand your rights and potential risks.
- Guide you on how to properly document evidence, a critical component of any successful case.
- Represent your interests throughout the reporting process, acting as your advocate.
- Protect your anonymity where possible, safeguarding you from retaliation.
- Ensure your reports are filed accurately and within crucial deadlines, preventing dismissal.
When selecting an attorney, prioritize those with a proven track record in whistleblower cases and experience in your specific industry or area of concern (e.g., financial fraud, environmental violations).
Document Evidence Meticulously
Your attorney will provide guidance on legally collecting and preserving evidence, as methods vary by jurisdiction. Generally, you’ll need to document:
- Dates, times, and locations of incidents, providing a clear timeline.
- Names and titles of individuals involved, establishing the chain of responsibility.
- Specific details of the wrongdoing, leaving no room for ambiguity.
- Copies of relevant documents (e.g., emails, memos, financial records), forming the foundation of your case.
- Any evidence of attempts to conceal the wrongdoing, demonstrating intent.
Remember to:
- Keep detailed, contemporaneous notes, preserving accurate records.
- Organize documents chronologically, creating a clear narrative.
- Make secure copies of electronic files, ensuring data integrity.
- Never remove original documents from your employer’s property, avoiding legal complications.
- Refrain from illegal evidence gathering, such as hacking, which can compromise your case.
Determine the Appropriate Reporting Channel
Depending on your concerns, your employer may have an internal compliance hotline or reporting system.
Consult with your attorney before using it, as internal reporting can strengthen your case if you later report externally but may also lead to retaliation.
For external reporting, your attorney will help you identify the relevant government agency (e.g., SEC, IRS, OSHA, EPA, Department of Justice) and assist in filing the appropriate tip or complaint form.
File the Report Accurately and Securely
Each agency has specific reporting procedures, and your attorney will ensure your report is complete, accurate, and accompanied by all necessary documentation. Meeting filing deadlines is critical, as missed deadlines can result in dismissal.
Maintaining strict confidentiality and anonymity at this stage is essential. Sharing information with colleagues, family, or friends can lead to leaks and retaliation. Your attorney will advise you on protecting your identity.
Cooperate Fully with Investigators
Once your report is submitted, cooperate fully with any government agency investigations. Your attorney will guide you through this process.
If you experience retaliation, document it thoroughly and contact your attorney immediately. They can help you file a complaint or pursue legal action.
To further enhance your understanding of your rights, familiarize yourself with the applicable whistleblower protection laws. Consider reading Rules for Whistleblowers: A Handbook for Doing What’s Right (Lyons Press, 2023) for a comprehensive overview.
Resources and Support
Federal Government Agencies (Whistleblower Programs & Fraud Reporting)
- U.S. Securities and Exchange Commission (SEC):
- Website: sec.gov
- Whistleblower Program: sec.gov/whistleblower
- Reporting Fraud: sec.gov/tcr
- Types of Fraud: Insider trading, Ponzi schemes, false financial reporting, violations of the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act.
- Contact: SEC Whistleblower Office (Contact information available on their website)
- U.S. Commodity Futures Trading Commission (CFTC):
- Website: cftc.gov
- Whistleblower Program: cftc.gov/whistleblower
- Reporting Fraud: cftc.gov/complaint
- Types of Fraud: Market manipulation, spoofing, and other violations of the Commodity Exchange Act.
- Contact: CFTC Whistleblower Program (Contact information available on their website)
- Internal Revenue Service (IRS):
- Website: irs.gov
- Whistleblower Program: irs.gov/compliance/whistleblower-office
- Reporting Fraud: Form 211
- Types of Fraud: Underreporting income, claiming false deductions, offshore tax evasion.
- Contact: IRS Whistleblower Office (Contact information available on their website)
- S. Department of Justice (DOJ):
- Website: justice.gov
- False Claims Act (FCA): justice.gov/civil/false-claims-act
- Reporting Fraud: justice.gov/usao/find-your-usao (Find your local U.S. Attorney’s Office)
- Types of Fraud: Government contract fraud, healthcare fraud involving government programs (Medicare, Medicaid), and other fraud against the government.
- Contact: U.S. Attorney’s Offices (Contact information available on their website)
- Federal Trade Commission (FTC):
- Website: reportfraud.ftc.gov
- Reporting Fraud: reportfraud.ftc.gov
- Types of Fraud: Cybercrime/online fraud, telemarketing fraud, consumer fraud, identity theft.
- Contact: Via the website or by phone.
- Consumer Financial Protection Bureau (CFPB):
- Website: consumerfinance.gov
- Reporting Fraud: consumerfinance.gov/complaint/
- Types of Fraud: Financial fraud related to consumer financial products and services, such as mortgages, credit cards, and loans.
- Contact: Via the website or by phone.
Non-Profit Organizations & Legal Support
- National Whistleblower Center:
- Website: whistleblowers.org
- Provides legal assistance and resources for whistleblowers across various types of fraud.
- Taxpayers Against Fraud (TAF):
- Website: taftaf.org
- Focuses on combating fraud against the government, particularly under the False Claims Act.
- Government Accountability Project (GAP):
- Website: whistleblower.org/
- Provides legal support, and advocacy for whistleblowers across a broad range of industries and fraud types.
Legal Resources & Information
- Rules for Whistleblowers: A Handbook for Doing What’s Right (Lyons Press, 2023):
- Rules for Whistleblowers
- This book is a valuable resource for understanding whistleblower rights.
- State Attorney General Offices:
- Contact information and fraud reporting can be found through your state’s government website. They handle many fraud cases at the state level, including insurance fraud, charity fraud, and elder fraud.
Online Fraud Reporting:
- Internet Crime Complaint Center (IC3):
- Website: ic3.gov
- Reporting Fraud: ic3.gov/complaint
- Types of Fraud: Internet-related crimes, including online scams, cybercrime, and business email compromise (BEC) scams.
Contact Our Firm
If you’ve been a victim of a fraud contact our law firm today for a free consultation. Our attorneys will determine whether the information you provide will trigger an investigation by one of the above organizations, and whether you qualify for awards and protection under their whistleblower award program.
Additionally, our attorneys provide comprehensive legal support beyond initial assessment, including strategizing information presentation to authorities, help you navigate complex regulations, and assist with award applications and appeals.
We act as an advocate, ensuring our clients’ rights are protected throughout the process.
Why Us?
Since 1988, KKC has offered the expertise, experience, and dedication necessary to effectively handle complex whistleblower fraud cases and protect the interests of whistleblowers.
Our strong track record of helping clients win, commitment to client advocacy, and deep involvement in the whistleblower community make us a trusted choice for individuals seeking legal representation in these matters. In many cases, our team works on a contingency basis, meaning we only get paid if we win your case.
Fill out the intake form below to get in touch with our firm and explore your legal options.
Our Firm’s Cases
Contract Fraud Exposed
Dr. Tommie Savage, a seasoned contracting officer at the Army Corps of Engineers, uncovered a web of systemic corruption within the agency's Huntsville, Alabama contracting office. Her unwavering commitment to ethical government practices led to a relentless campaign of retaliation that would test her resilience and courage.
$300 Million in Sanctions and Fines
Our firm and Athens-based Greek law firm of Pavlos K. Sarakis & Associates jointly represented Greek whistleblowers who proved that the multinational Swiss-based pharmaceutical company Novartis paid millions in bribes to illegally market drugs in violation of the FCPA. Novartis was required to pay $300 million in sanctions and fines.
$2 Billion Recovered
Wilkinson blew the whistle on a $230 billion Russian money-laundering scandal that moved rubles out of Russia, converted them to dollars at Danske Bank Estonia Branch, then to moved the dollars to New York. The largest money laundering scandal in history.
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