Whistleblower protection under the Dodd-Frank act and QUI TAM actions practice

Are you a whistleblower reporting health care fraud? Military defense contractor fraud? Pharmaceutical fraud? Mortgage loan fraud? Or other forms of government overpayment or unlawful behavior by government contractors or recipients of government funds?

Federal and California laws create powerful rewards and protections to protect and encourage whistleblowers to continue to effectively report corporate wrongdoing and fraud.

What is the Dodd-Frank act?

In late spring of 2011, the federal Securities and Exchange Commission (SEC) published final rules creating a new whistleblower program under the Dodd-Frank Act. The program grants whistleblowers potentially significant rewards for providing useful information to the government about corporate wrongdoing.

Through the changes implemented under the Dodd-Frank Act and the protections granted to whistleblowers in qui tam actions under the federal and California False Claims Acts, potential whistleblowers have been given greater incentives to report unlawful behavior by their employers and stronger protection against retaliation by employers for reporting violations.

Understanding whistleblower protection under the Dodd-Frank act

The Dodd-Frank Act of 2010 brought significant changes to the U.S.’s financial regulatory system, and part of the legislation required the SEC to establish a whistleblower protection office. Accordingly, the SEC issued final rules on May 25, 2011, that significantly expanded the agency’s ability to accept reports from whistleblowers and to provide them with rewards for valuable information that leads to successful enforcement actions.

According to the SEC, an individual may receive a reward under the SEC’s new whistleblower program if he or she voluntarily provides the SEC with original information relating to a possible violation of the Securities Exchange Act that leads to the successful enforcement by the SEC of a federal court or administrative action resulting in the SEC obtaining monetary sanctions of more than $1 million.

Possible monetary rewards

If the whistleblower meets these requirements, he or she will be awarded 10 to 30 percent of the money obtained by the SEC.

Also, the whistleblower may receive an additional award from the SEC if another federal agency brings a successful enforcement action based on the same original information initially provided to the SEC by the whistleblower.

Similar provisions exist for reporting violations of the Commodities Exchange Act to the Commodities Future Exchange Commission. In addition, a similar program with the Internal Revenue Service grants rewards to whistleblowers who disclose cases of major tax fraud or underpayment to the IRS.

The reward granted to the whistleblower may be 15 to 30 percent of the money collected by the IRS, although the Attorney General has the discretion to cap the award amount at $250,000, so reporting under a different whistleblower program may be preferable for the whistleblower in some cases.

Protection against retaliation

To provide an even greater incentive to potential whistleblowers, the SEC’s rules also protect reporting employees from employment retaliation. As long as the whistleblower reasonably believes that the information he or she provides relates to a possible violation of the Securities Exchange Act, the rules state that it is unlawful for the employer to fire or refuse to promote the employee or change his or her work schedule, duties or conditions as punishment for blowing the whistle. Furthermore, the rules also state that it is unlawful for anyone to interfere with the whistleblower’s attempt to communicate with the SEC.

The rules issued by the SEC delineate specific procedures that must be followed when providing information through its whistleblower program. The agency’s award determinations regarding rewards to whistleblowers are final, so the assistance of an attorney with experience in whistleblower claims is useful to help whistleblowers properly follow the SEC’s procedures and present the information in the strongest way possible.

Federal and state QUI TAM actions

California also protects fraud reporting employees, the proverbial “whistleblower,” in federal defense contractors, pharmaceutical companies, health care companies, military defense contractors and other corporations.

In addition to the whistleblower programs established by the Dodd-Frank Act, the federal False Claims Act and a similar law adopted by California, the California False Claims Act, also provide whistleblowers with protected ways to report corporate wrongdoing.

Through a qui tam action, an employee of a company that works with the government may initiate an action to uncover fraud under the False Claims Act if the company knowingly made or used a false statement or document to obtain money or property from the government or to avoid giving money or property to the government.

If the government discovers fraud because of the whistleblower’s qui tam action, the whistleblower may be entitled to a portion of any money recovered by the government.

Qui tam actions are more common for workers in the health care industry working with patients on Medicare and Medicaid as well as employees of defense contractors with U.S. military contracts.

The laws on state and federal whistleblower programs and qui tam actions are complex. Therefore, if you suspect your employer is violating federal or state law, contact a knowledgeable whistleblower lawyer to discuss your situation and the best way to proceed.

Contact the Rubin Law Corporation

Contact a Los Angeles attorney at The Rubin Law Corporation by e-mailing us or calling 310-385-0777.

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