In 2011, the S.E.C. created the Office of the Whistleblower to coordinate its new program, which can award 10 percent to 30 percent of any amount over $1 million recovered based on the information provided. The federal government is boasting its accomplishments in recovering money based on tips, and Congress seems poised to extend the incentives provided to those with information about unlawful activity.
The Justice Department has indicated a recovery of $5.69 billion, a record amount, in civil fraud cases under the False Claims Act in its last fiscal year. The two biggest contributors to the record recovery were $3.1 billion from banks for faulty mortgages that were federally insured and $2.3 billion for health care fraud under the Medicare and Medicaid programs.
Companies must be mindful in the way they deal with information on potential wrongdoing because of anti-retaliation protections under the Dodd-Frank Act for whistle-blowers. Thus, demoting or firing such a person can lead to a lawsuit or an S.E.C. enforcement action.
The acceptance of whistle-blowers is not restricted to false claims. The I.R.S. has amplified its program on tax cheats, and awarded one of the largest whistle-blower payouts of $104 million award in 2012 to Bradley C. Birkenfeld. His case also demonstrated the consequences of being a whistle-blower as he served nearly two and a half years in prison for his role in tax evasion schemes.
Whistle-blowing’s successful results are going to lead to new and expanded programs to encourage reporting misconduct to the government, with the incentive of a nice financial reward to spur on the informers.