On September 22, 2014, the Securities and Exchange Commission (SEC) announced that it awarded
a record $30 million to a whistleblower who provided original information that led to a successful
SEC enforcement action. SEC Press Release. As Sean McKessy, the Chief of the SEC’s Office of the Whistleblower,
stated, “Whistleblowers from all over the world should feel similarly incentivized to come forward with credible
information about potential violations of the U.S. securities laws.” What is a whistleblower, and why are they
important? Corporations or other organizations that attempt to defraud the government can cost American
taxpayers billions of dollars. Employees or members of an organization who are brave enough to come
forward and report fraud, corruption, or other violations to governmental authorities are known as
“whistleblowers.” In many instances, individuals who are aware of unlawful activity taking place may fear
retaliatory action if they report the misconduct. For this reason, federal and state laws protect whistleblowers
from such retaliation and also provide financial rewards under certain circumstances. Anyone who is
considering blowing the whistle on an employer or other entity’s governmental fraud should seek the advice of
Common Types of Whistleblower Actions
Different federal laws protect whistleblowers who expose different types of unlawful actions. The
following are some examples of laws that protect whistleblowers in the United States:
• False Claims Act (31 U.S.C. § 3729–3733)—This law includes a “qui tam” provision, which
gives certain rights to whistleblowers who report violations of the False Claims Act, which prohibits
fraud against federal government programs. The Act allows individuals to file a legal claim on
behalf of the government against an organization committing such fraud, thereby exposing the fraud.
The qui tam provision further allows the individual to receive part of the damages recovered by
the government—generally from 15% to 20% — depending on the extent of the whistleblower’s
assistance. Common qui tam actions arise from fraud involving military contracts, health care, or
other spending programs.
• IRS Whistleblower Law (26 USC § 7623)—Many companies and individuals try to pay as little
in taxes as possible, and some even go so far as to commit tax fraud in order to limit liability. If an
individual provides information about a party’s tax fraud and underpayments that exceed $2 million
and the IRS takes judicial action, the whistleblower may stand to receive 15% to 30% of the amount
the IRS collects.
• Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203)—This Act
created the SEC Whistleblower program, which rewards individuals who expose insider trading and
other securities fraud schemes. If a individual provides information and a successful legal action
worth more than $1 million results, the SEC Office of the Whistleblower is authorized to reward the
whistleblower 10% to 30% of the penalties recovered.
The above are only a few instances of whistleblower scenarios and laws that protect and reward
whistleblowers for their willingness to expose unlawful actions. At Punzalan Law, we understand
that whistleblowers have certain rights and deserve protection, and we provide the highest quality of
representation for each individual client. If you believe you have a case related to whistleblowing, please
do not hesitate to contact our office today.