Whistleblower Laws


Securities Fraud Attorneys Explain Whistleblower Laws

Qui Tam Actions and the Federal False Claims Act

The Federal False Claims Act is the predominate tool used to expose and combat fraud perpetrated against the federal government. The Act allows private individuals with knowledge of fraudulent activity to bring a “qui tam” action on behalf of the government. If damages are recovered in the case, the whistleblower is entitled to receive a portion of the recovery, generally 15-25%, as a reward for exposing the fraud.

The False Claims Act, also known as the “Lincoln Law,” was passed by Congress in 1863 in an effort to combat fraud perpetrated by businesses selling supplies to the Union Army. President Abraham Lincoln was a strong advocate for the passage of the Act which contained “qui tam” provisions. “Qui Tam” is an abbreviation for a lengthy Latin phrase and roughly means “he who brings the action for the king as well as for himself.”  The Act, as passed, permitted private citizens, on behalf of the government, to sue the businesses and individuals committing the fraud against government and be paid a percentage of the recovery.

A whistleblower, known as a “relator” under the False Claims Act, may bring a qui tam action when he or she has information that a person or organization has submitted fraudulent claims to the U.S. government. The government may elect to intervene in the action or decline the case. If the government decides to proceed, it will notify the defendants that a false claim action has been filed. Where the government declines to participate, the relator may proceed alone. If the relator prevails in this instance, he or she will receive a higher share of any recovery, typically 25-30%.

Securities Fraud: Dodd-Frank Wall Street Reform and Consumer Protection Act

In 2010, the United States government passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act established whistleblower programs for both the Securities & Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). These programs reward individuals for voluntarily reporting “original information” about fraudulent activities covered by the Act, including securities fraud, stock fraud, investment fraud, and insider trading. Under the Act, information is considered “original” if it is not known to the SEC and is discovered by a person’s independent knowledge or analysis.

If the information reported results in the collection of more than $1 million in SEC sanctions, the whistleblower is eligible to receive 10% to 30% of the recovery. The Dodd-Frank Act also protects covered whistleblowers from retaliatory actions. If the whistleblower is harassed, fired, demoted, suspended, discriminated against or threated in any manner, he or she may be entitled to recover damages for the retaliation. In these cases, the individual may sue for reinstatement, double back pay with interest, litigation costs, expert witness fees, reasonable attorney’s fees, and any other damages resulting from the retaliation.

The Dodd-Frank Act allows whistleblowers to remain anonymous when the whistleblower files his or her complaint through an attorney. This anonymity continues until the time the whistleblower is paid a cash reward. If and when a reward is paid, the name of the whistleblower must be disclosed.

Our Securities Fraud Law Firm Advises Whistleblowers

The investment arbitration lawyers at Zamansky LLC have decades of experience advising clients seeking to expose and combat fraudulent activity. Our securities fraud attorneys know that the decision to act as a whistleblower can be difficult. When a client decides to bring a whistleblower case, our lawyers are sensitive to the client’s special needs and concerns. We carefully advise our clients of their rights and options under the law and help them navigate each step of the process.

If you are considering pursuing a whistleblower claim, contact the attorneys at Zamansky LLC today. Our securities fraud law firm provides free initial consultations and responds to all calls within 24 hours.