Whistleblowing 101

What do you think of when you hear the term “whistleblower”? My guess is you automatically have negative thoughts that brings back memories of your childhood on the playground – maybe the words “tattletale” and “snitch” come to mind. While those words have negative connotations that is not what whistleblowing is all about. Whistleblowing is about protecting the public. In fact, in the 19th century, the word whistleblower referred to law enforcement officials blowing a literal whistle to alert the public or fellow police or to people attempting to stop illegal or immoral activity by making a fuss.

Whistleblowing involves any action that reveals or reports unethical or illegal activities or information.” Such activities can include waste, fraud, abuse, corruption, or dangers to public health and safety. A whistleblower is a person who reports these activities to someone who is in the position to rectify the wrongdoing. A whistleblower might work inside the organization where the wrongdoing is taking place, or for other reasons, has information about wrongdoing that otherwise would not be known.

A History of Whistleblower Laws

Each year since 2013, the U.S. Senate and the U.S. House of Representatives have passed resolutions designating July 30 as National Whistleblower Appreciation Day to recognize the contributions whistleblowers have made preserving American democracy and the rule of law. While the Senate and House pass resolutions each year, there is not yet a permanently designated holiday. The date – July 30 – commemorates the passage of the first U.S. Whistleblower law, which passed on July 30, 1778.

The case that led to Congress enacting the first whistleblower law involved complaints about Continental Navy commander Esek Hopkins, whom the whistleblowers alleged had tortured British sailors imprisoned onboard the USS Warren.  When Hopkins was suspended and relieved of his command, he filed a libel suit against the whistleblowers, and two of them were arrested and jailed. The jailed whistleblowers sent a petition that was read to Congress on July 23 claiming they were “arrested for doing what they then believed and still believe was nothing but their duty.” In response, Congress enacted the first whistleblower law on July 30.  Congressional politicians, aware of the burdens the act placed on American civil servants, included in the act a provision for legal expenses in the event that whistleblowers were the subject of legal proceedings.

There are currently dozens of U.S. laws in place to protect whistleblowers, each with its own definitions and procedures. One such law is the False Claims Act (FCA), which was enacted in 1863 by a Congress concerned that suppliers of goods to the Union Army during the Civil War were providing substandard goods and services. Without money to hire inspectors, the federal government authorized the public to act as whistleblowers. The False Claims Act allowed private citizens to bring lawsuits on behalf of the federal government against those suspected of defrauding the government. If a court ruled against the contractor, the whistleblower received half the damages won by the government.

The FCA has been amended several times since its inception, but the whistleblower provision has remained consistent. This provision allows any individual or non-government organization to file a lawsuit on behalf of the U.S. government to expose fraud that resulted in a financial loss to the federal government. Amended in 1986 to add additional incentives for whistleblowers, the whistleblower actions comprise a significant percentage of the FCA cases that are filed. Whistleblowers filed 712 qui tam suits in fiscal year 2023, and this past year the DOJ reported settlements and judgments exceeding $2.3 billion in these and earlier-filed suits.

Congress enacted the Foreign Corrupt Practices Act (FCPA) in 1977 after uncovering corruption in the wake of the Watergate scandal. The FCPA prohibits U.S. firms and individuals from paying bribes to foreign officials to further business deals. The FCPA also contains a books, records, and internal controls provision that requires companies whose securities are listed in the U.S. to meet its accounting provisions to (a) make and keep books and records that accurately and fairly reflect the transactions of the corporation, and (b) devise and maintain an adequate system of internal accounting controls.

With its passage in 2010, the Dodd-Frank Act includes a Securities & Exchange Commission (SEC) whistleblower program that offers protections and rewards to individuals assisting the SEC in uncovering FCPA violations.  The SEC Whistleblower Program also rewards people who submit tips related to violations of the federal securities laws. The Dodd-Frank Act also established a whistleblower incentive program at the Commodity Futures Trading Commission to incentivize reporting of violations of the Commodity Exchange Act.

The Whistleblower Protection Act was designed to strengthen and improve protections for the rights of federal employees and to prevent reprisals. It outlines public employees’ right to speak out about misconduct, aimed at ensuring that all government employees can safely disclose “violations of laws, rules, or regulations, or mismanagement, gross waste of funds, abuse of authority and or a substantial and specific danger to public health and safety.”

Protections and Rewards

Whistleblowers can only be effective if they are protected from retaliation. Retaliation occurs when an employer fires an employee or takes another type of adverse action against an employee for engaging in a protected activity.

Most whistleblower laws protect whistleblowers by keeping their identities confidential. However, confidentiality does not always protect whistleblowers. For that reason, the U.S. Department of Labor enforces whistleblower and anti-retaliation laws through five agencies when employees exercise their rights. If retaliation does occur, the laws provide remedies, such as back pay, reinstatement of a former job, out-of-pocket expenses to find a new job, damages for pain and suffering, punitive damages, and attorney’s fees and court costs.

To encourage people to come forward with information, the laws also provide financial rewards for whistleblowing. For example:  

  • The False Claims Act requires payment to whistleblowers of between 15 and 30 percent of the government’s monetary sanctions collected if they assist with prosecution of fraud in connection with government contracting and other government programs;
  • The Dodd-Frank Act requires payment to whistleblowers of between 10 percent and 30 percent of monetary sanctions collected where the money collected is above $1 million if they voluntarily provide the SEC with actionable information to prosecute securities and commodities fraud; and
  • The IRS whistleblower law requires payment to whistleblowers of 15 to 30 percent of monetary sanctions collected if they assist with prosecution of tax fraud.

Whistleblowers around the world can report under a range of U.S. laws and receive financial rewards as long as the violation in question has a U.S. nexus or violates certain U.S. laws with transnational applications.

The Importance of Whistleblowers

Most importantly, whistleblowing combats fraud and other wrongdoing as the information provided by whistleblowers can lead to the apprehension of people involved in the misconduct.

Whistleblowing can prevent future wrongdoing as it sends a message to potential future wrongdoers that people are watching and the company or organization will not tolerate certain behavior. Often, the whistleblower is the only one with access to the information, and providing an outlet for reporting can expose fraud to those who can address it. By acknowledging the value of whistleblowers, companies and organizations can catch problems early on and deal with the concern immediately, before it escalates, potentially preventing serious harm or damage.

Whistleblowing allows citizens and employees to challenge dangerous situations, fraud, and other wrongdoing, the acknowledgment of which may save someone from harm or a company from financial penalties, legal prosecution, and a diminished reputation.   

You can read whistleblower stories here and here.

If you have information about unethical or illegal activities involving waste, fraud, abuse, corruption, or dangers to public health and safety, we can help. Contact us to speak with an attorney.

The information provided here is for general purposes and should not be considered as legal advice. 

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