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Whistleblowers and their Importance to Business Success

1. What is a Whistleblower?

A whistleblower is a person who, on behalf of the federal government, state government or governmental authority, reports illegal, fraudulent or dishonest conduct by a person or an organization.

2. Importance of Internal Whistleblowers:

Encouraging “watchdog” type behavior from your employees allows your management team to catch on to internal problems early, giving room to make the changes necessary to promote a healthy business model.

  • Fraud against the government is not a victimless crime. Like insurance fraud, everybody pays the price for fraud against the government.
  • Keep an honest business model.

3. Whistleblower Programs to Keep in Mind:

Program Benefits Common Cases/Schemes

False Claims Act (FCA)– “Lincoln’s Law” Can pursue your claims even if Justice Department turns you down as private individual; Receive a percentage of the award received, if there is one (15 to 30%) Mortgage Fraud; VA Refinance Fraud; Medicare/Medicaid; Fraud
Securities Exchange Commission (SEC) Created by Dodd-Frank Act Can receive award from SEC if the government authorities recover more than $1 million Issuance of false or misleading statements in financial reports; Insider trading; Ponzi schemes
Commodity Futures Trading Commission (CFTC) Created by Dodd-Frank Act Offers the most protection for whistleblowers who wish to remain anonymous (even to government until award received) Swap Markets
Internal Revenue Service (IRS) Pays award up to 15% of amount it collects; If the amount collected exceeds $2 million, the IRS will pay 15-30% of amount collected Off-shore accounts fraud; Corporate tax fraud; Employment tax fraud; Money laundering tax fraud; Filing false or misleading forms

4. What’s the procedure for bringing a whistleblower action?

A whistleblower files an action under seal and serves it on the government (for FCA only).

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