An employee who gives information to Department of Justice (DOJ) investigators is known as a whistleblower. Their complaint can be about shareholder fraud, government procurement, or violations of government contracts or benefits, financial mismanagement, and other illegal activities.
The most important thing employers must know about whistleblowers is that they are protected from employer retaliation by federal, and some state, laws. Employers who violate these provisions can be punished by fines and even prison sentences. Some industries are more at risk than others for federal whistleblower complaints, including the following:
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and Sarbanes-Oxley Act of 2002 (SOX) contain clauses covering strong protections for employees who make complaints about an employer's breaking federal laws about securities or shareholder fraud, or wire, mail, or bank fraud.
Even if the law does not require it, many companies have created complaint policies that specify how whistleblowers – or those with that potential – are handled. Many have also set up complaint hotlines, usually through their HR departments. But the question of whether a company can truthfully investigate itself, especially if laws have been broken, continues to plague internally-managed anti-corruption protocols. Some employees avoid making internal complaints, especially if their misgivings end up in a “black hole” where nothing is accomplished other than a potential government whistleblower's coming out of the closet.
Internal (or external “whistleblower&rdquo
complainants are protected even more with the addition of the American Recovery and Reinvestment Act of 2009. Retaliation may not be leveled against them in any form, involving:
Companies Sometimes Try to “Discourage” Whistleblowers
Some companies are taking imaginative countermeasures to potential whistleblowers who might consider going to the Department of Justice. One involves opening up company stock options to general employees who might be involved or possibly aware of illegalities – usually fiscal – within their company. It is clearly an incentive for them to keep quiet. And, at first glance, the ploy seems to be working, according to recent research.
Regardless of the fact that whistleblowers can be rewarded a cash amount valued anywhere from 10 to 30 percent of the monetary damages the government collects from the offending company, this stock option “reward” can be an especially effective deterrent to whistleblowers who consider “spilling the beans” purely for financial gain. But the real teeth in this corporate countermeasure to whistleblowing is that virtually all employee stock options have vesting terms which require them to wait for up to several years before they can exercise their options (and reap true financial gain for their silence). This “hush money” in the form of an eventual big payday has some real staying power for corporations that wish to hobble – without harassing – potential whistleblowers over extended periods of time.
Recent media reports indicate that the SEC is investigating other ways in which firms undercut potential whistleblowers. Some include the creation of severance contracts which prevent employees from contacting regulators or benefiting from government investigations they might initiate, and having employees sign increasingly restrictive confidentiality agreements that specifically address whistleblowing and qui tam actions. In this war of wits between the DOJ and companies that break financial reporting laws, both sides keep coming up with moves to counter the advantages of the other; and further feed the whistleblower’s quandary, “Do I tell, or turn a blind eye?”
And yet, whistleblowers still come forward. With their help, the DOJ collected $3.7 billion in settlements and judgments in fiscal year 2017 (October 1, 2015-September 30, 2016). Of that amount $3.4 billion involved lawsuits filed under the qui tam provisions of the False Claims Act.
Though Companies Push Back, Whistleblowers are More Important Than Ever
When one considers the vast amounts of money at stake in industries plagued by waste, fraud and abuse, it’s no surprise that some companies take the measures listed above. However, it’s clear that whistleblowers are still coming forward with important information and still reaping the rewards of recoveries.
Corruption doesn’t go away without a fight. Fortunately, neither do whistleblowers. In the case of the False Claims Act, a whistleblower often has the DOJ on their side. It is in the best interest of the Justice Department, taxpayers and whistleblowers to keep the False Claims Act strong in its reach and in its protection of whistleblowers.
In other words, the whistleblowers have the support of the public and the federal government on their side. That’s a powerful alliance and one that continues to be fruitful for the American people.
