WASHINGTON – A leading advocate for whistleblowers has warned that the large bounty rewards involved following settlements has the potential to erode public confidence for the practice.
Overall, it is the best of times and the worst of times for whistleblowing, according to Tom Devine, legal director for the Government Accountability Project (GAP), an advocacy organization.
"There has been a legal revolution at federal level in Congress," Devine said. "Whistleblowing rights have been reaffirmed, and that is completely revolutionary."
But Devine, who has been the business of advocating whistleblowing rights for 40 years, cautions that the sometimes huge sums involved can have an impact on public confidence.
"Morally, there is nothing the matter with commercialization of the whistleblower if the cover-up is threatening society," Devine said. "What is wrong with getting money if you are risking your professional life?"
But Devine is wary that the large amount of money involved could undermine confidence with whistleblowers and their actions. This is particularly sensitive for his organization as it is involved not just in legal issues but also public advocacy campaigns.
There is also the issue of the large sums that go to lawyers; up to 30 percent of the total money awarded to the whistleblower.
And this is embedded in the Dodd-Frank whistleblowing measures, which allow complete anonymity throughout the whole process largely because the reporter must have a lawyer.
Under the False Claims Act, that anonymity only remains while the federal government investigates and any claims are still under seal.
While Devine is a strong supporter of the Dodd-Frank legislation, he still believes the False Claims Act is a much more effective vehicle for reporting bad practices.
While the tide has changed in recent years in favor of whistleblowing, with 79 percent of the public believing in stronger rights, this creates its own problems, according to Devine.
"It is more dangerous because whistleblowers are a greater threat than ever before," said Devine, adding that those who do come across wrongdoing will ask whether it is safe at a time when the rates of retaliation, including suits, against employees is increasing.
"It has the power to make such a difference," Devine added.
Much of the whistleblowing under the False Claims Act relates to a monumental amount of health care fraud.
The National Heath Care Anti-Fraud Association estimates that health care fraud costs the country close to $70 billion annually.
According to the U.S. Department of Justice, some $3.4 billion relates to whistleblower, or qui tam suits, while whistleblowers were awarded $392 million last year in 2017, down from $519 milllion the previous year. There were 669 qui tam whistleblower lawsuits filed in 2017 down from 702 the previous year.
More than 2,000 health care providers have been charged in connection with Medicare fraud alone over the last 10 years.
Under the Dodd-Frank legislation, the U.S. Securities Exchange Commission (SEC) reported to Congress that during 2017, whistleblower awards of nearly $50 million were made to 12 individuals.
But that amount has already been surpassed this year as the SEC announced in March that two whistleblowers were jointly awarded nearly $50 million award and a third received more than $33 million.
"These awards demonstrate that whistleblowers can provide the SEC with incredibly significant information that enables us to pursue and remedy serious violations that might otherwise go unnoticed,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, stated in a March press release. “We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC.”
Lawsuits can also be filed under similar state laws, and some of these are being engineered by shell companies, according to a 2015 report in the Wall Street Journal.
And one of those was involved in setting them up was Harry Markopolos, who became famous for warning about Bernie Madoff long before the Ponzi scheme was publicly unmasked.
The paper reported that the Delaware-registered companies, Associates Against FX Insider Trading and FX Analytics, were formed shortly before bringing suits in Virginia and California. Investigations are ongoing in those and other states into whether banks used foreign exchange pricing to the detriment of customers.