Dodd-Frank Act Lawyer in Los Angeles

The Dodd-Frank Wall Street Reform and Consumer Protection Act created a formal whistleblower program that rewards individuals who report securities fraud and related financial misconduct to federal regulators. A separate legal tool called a qui tam action lets employees and other insiders sue on the government’s behalf when a company defrauds a federal or state program, such as Medicare, Medicaid, or a military contract. Together, these laws give whistleblowers a way to report health care fraud, defense contractor fraud, pharmaceutical fraud, mortgage loan fraud, securities fraud, and other unlawful conduct by government contractors or recipients of government funds, along with legal protection against retaliation and, in many cases, a share of any money the government ultimately recovers.

Federal and California law create some of the strongest financial incentives and legal protections available to employees who come forward, but the rules for each program differ in important ways, from filing deadlines to reward percentages to how a claim must be submitted. Our Los Angeles whistleblower attorneys at The Rubin Law Corporation work with employees across health care, financial services, defense contracting, and other government-facing industries who want to understand their rights before they report suspected fraud.

What Is the Dodd-Frank Act’s Whistleblower Program?

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in July 2010 in response to the 2008 financial crisis, and Section 922 of the law directed the Securities and Exchange Commission to create a formal whistleblower program. The SEC adopted final rules in May 2011 establishing the SEC Office of the Whistleblower, which reviews tips from individuals who report possible violations of federal securities law. The program is designed to reward people who come forward with credible, original information that regulators would not otherwise have easily discovered on their own.

Whistleblowers who work with or for companies that interact with the government most often encounter fraud in a handful of recurring forms, including:

• Health care fraud: billing Medicare or Medicaid for services that were not provided, were not medically necessary, or were upcoded.
• Defense contractor fraud: overbilling the government or misrepresenting the quality or testing of equipment supplied under a military contract.
• Pharmaceutical fraud: off-label marketing, kickbacks to prescribers, or manipulated clinical trial data.
• Mortgage loan fraud: falsified loan applications, appraisal fraud, or misrepresented compliance with federally backed loan programs.
• Securities fraud: false statements to investors, insider trading, or accounting manipulation reported under the Dodd-Frank Act itself.

Each of these categories can give rise to a whistleblower claim, a qui tam action, or both, depending on which government agency or program was affected.

How the SEC Whistleblower Program Rewards Reporting

To qualify for an SEC award, a whistleblower must voluntarily provide original information about a possible securities law violation that leads to a successful enforcement action in which the SEC orders monetary sanctions of more than $1 million. When those requirements are met, the whistleblower may receive between 10 and 30 percent of the money the SEC collects, and the whistleblower may also be entitled to an additional award if another federal agency brings its own successful action based on the same original information.

By law, the SEC is required to protect the confidentiality of a whistleblower’s identity and generally will not disclose it during an investigation or enforcement action. The SEC’s own whistleblower program page reports that the agency has awarded almost $2 billion to nearly 400 whistleblowers since the program began accepting tips in 2011, including one individual award of $279 million, the largest issued to date. The SEC reviews every award claim individually, and the size of a particular award depends on factors such as the significance of the information provided, the level of assistance the whistleblower gave investigators, and whether the whistleblower tried to address the misconduct internally first.

CFTC, FCPA, and Sarbanes-Oxley Whistleblower Protections

The SEC’s program is the best known Dodd-Frank whistleblower provision, but it is not the only one. Section 748 of the Dodd-Frank Act created a similar whistleblower program at the Commodity Futures Trading Commission, commonly known as the CFTC, which oversees the Commodity Exchange Act and markets for futures, swaps, and other derivatives. A whistleblower who reports market manipulation, disruptive trading practices, or misappropriation of customer funds to the CFTC may receive an award using the same 10 to 30 percent framework the SEC applies.

The Foreign Corrupt Practices Act, which prohibits bribery of foreign officials to obtain or retain business, is enforced jointly by the SEC and the Department of Justice, and whistleblowers who report FCPA violations to the SEC can qualify for an award under the same Dodd-Frank whistleblower provisions that apply to securities fraud. Separately, the Sarbanes-Oxley Act protects employees of publicly traded companies from retaliation for reporting suspected securities or shareholder fraud internally or to a federal agency, even when no monetary award is available under that particular statute.

The IRS Whistleblower Program for Tax Fraud Reporting

A related but separate program allows whistleblowers to report major tax fraud or underpayment to the Internal Revenue Service. Under the IRS Whistleblower Office program, an individual who provides specific and credible information that leads to the collection of proceeds may receive an award of 15 to 30 percent of the amount collected, provided the disputed tax, penalties, and interest exceed $2 million and, for individual taxpayers, the taxpayer’s gross income exceeds $200,000 for at least one of the years at issue. Smaller claims that fall below those thresholds may still qualify for a discretionary award, though generally at a reduced percentage.

Financial irregularities that surface during tax season, such as unreported income, inflated deductions, or payroll tax fraud, can sometimes point to the same underlying misconduct that gives rise to a Dodd-Frank or qui tam claim, which is one reason it can help to have an attorney review a potential financial fraud whistleblower claim before deciding which program to pursue.

Confidentiality and Protection From Employer Retaliation

The Dodd-Frank Act and the SEC’s implementing rules make it unlawful for an employer to fire, demote, suspend, harass, or otherwise discriminate against an employee for providing the SEC with information about suspected securities violations. It is also unlawful for anyone to interfere with a whistleblower’s ability to communicate directly with the SEC, including through a confidentiality or severance agreement that attempts to restrict that communication.

An employee who experiences retaliation for whistleblowing may be able to pursue a separate employer retaliation claim, which can include remedies such as reinstatement, back pay, and reasonable litigation costs and attorney’s fees, in addition to any award available under the whistleblower program itself. A Dodd-Frank retaliation claim generally must be filed within six years of the retaliatory act, and that window can extend up to a total of ten years if the employee did not reasonably know the relevant facts right away, though it is best not to wait, since evidence and witness memories can fade over time.

One distinction worth understanding early is that Dodd-Frank’s anti-retaliation protection generally applies to employees who report directly to the SEC, while the Sarbanes-Oxley Act’s retaliation protections can extend to internal reports made within the company as well. Because retaliation claims and whistleblower award claims involve different procedures, different filing deadlines, and sometimes different government agencies, employees who believe they have been retaliated against often benefit from discussing both issues with an attorney at the same time, before deciding where and how to report.

Qui Tam Actions Under the Federal and California False Claims Acts

Separately from the Dodd-Frank whistleblower programs, the federal False Claims Act and its California counterpart, the California False Claims Act, allow a private individual, known as a relator, to file a qui tam action on behalf of the government when a company knowingly submits a false claim for payment or knowingly avoids paying money owed to the government. Qui tam actions are especially common among health care workers who see billing practices involving Medicare or Medicaid patients and among employees of companies holding defense or other government contracts.

A qui tam complaint must be filed under seal, which means it remains confidential from the public and from the defendant while the Department of Justice investigates the allegations. That investigation can take many months, and in some cases longer, depending on the complexity of the fraud and the volume of records involved. Under the False Claims Act, if the government intervenes and recovers money as a result of the case, the relator is generally entitled to between 15 and 25 percent of the recovery, and if the government declines to intervene and the relator continues the case independently, the relator’s potential share can rise to between 25 and 30 percent, in each case based on factors such as the significance of the information and how promptly it was reported.

Qui tam cases are not limited to health care and defense contracting. They can also involve customs and tariff fraud, misrepresented compliance with small business or veteran-owned contracting set-asides, and fraud against other federal grant or procurement programs. Because the law in this area continues to evolve, it can help to review recent developments in whistleblower protection and reward law before deciding how to proceed.

Who Can Bring a Whistleblower or Qui Tam Claim in California

California protects a broad range of employees who report fraud against the government, including workers in defense contracting, pharmaceutical manufacturing, health care, and mortgage lending. Qui tam actions are most common among employees in the health care industry who work with patients covered by Medicare or Medicaid, as well as employees of defense contractors holding contracts with the United States military, though any employee, independent contractor, or other insider with direct knowledge of the fraud can potentially qualify as a relator.

Employees who work in or around the health care industry face a particular set of reporting considerations, since health care billing and coding rules are complex and often overlap with federal privacy requirements. Our health care employment law practice regularly works with employees who have questions about how those overlapping rules affect a potential fraud report. The laws on state and federal whistleblower programs and qui tam actions are complex, so 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.

How an Attorney Can Help With a Whistleblower or Qui Tam Claim

Whistleblower award claims and qui tam actions each involve strict procedural requirements, from how a tip must be submitted to the SEC or CFTC to how a qui tam complaint must be drafted and filed under seal. Missing a filing requirement or disclosing information at the wrong time can affect a whistleblower’s eligibility for an award or, in a qui tam case, can undermine the confidentiality the law is designed to protect. An attorney who is familiar with these programs can help evaluate which program or programs apply to a given set of facts, help organize supporting documentation, and communicate with the SEC, CFTC, IRS, or Department of Justice on the whistleblower’s behalf.

You can learn more about The Rubin Law Corporation’s approach to whistleblower and qui tam matters and how our attorneys work with employees who are considering a report.

The Rubin Law Corporation is a Beverly Hills based employment law firm that represents employees throughout the Los Angeles area and Southern California in whistleblower, qui tam, and related employment matters. Our attorneys work directly with clients to review the facts of a potential fraud report, explain which federal or state program may apply, and help organize the documentation that regulators or the Department of Justice may need to evaluate a claim.

If you believe your employer, or a company you work with, is committing health care fraud, defense contractor fraud, pharmaceutical fraud, mortgage loan fraud, securities fraud, or another form of fraud against the government, it can help to speak with an attorney before you report. Hablamos español, y también puede visitar nuestro Centro Hispánico para más información. To discuss your situation confidentially, contact The Rubin Law Corporation today.

Frequently Asked Questions About the Dodd-Frank Act and Qui Tam Actions