The term whistleblowing refers to allegations of fraud perpetrated against the government, either by a government contractor or through some governmental program like Medicare.

In essence, the whistleblower sues on behalf of the government and gets a cut of the recovery if the whistleblower claim is successful.

Whistleblowing at the Federal Level

Generally, claims of fraud against the federal government fall under the “qui tam” provisions of the False Claims Act. This act was originally passed during the Civil War in response to concerns that suppliers to the Union Army had been defrauding the government in the course of performing their contracts.

Since then, whistleblowing under the False Claims Act been a useful tool in rooting out fraud among military contractors and more recently within the Medicare and Medicaid systems. The act refers to the whistleblower as the “relator.” Generally, anyone with evidence of fraud committed against the government can be a relator.

There are exceptions, though. For example, a person who has been convicted of criminal conduct related to their own role in the alleged fraud can’t be a relator. Also, a would-be relator can’t file a qui tam action if another whistleblower has already filed one based on the same allegations.

Qui tam actions are always filed under seal to keep the allegations confidential while the government gets a chance to investigate them. If the government is satisfied that the claim has merit, it may elect to intervene in the lawsuit, essentially taking the place of the relator as the party prosecuting the claim.

If the government decides not to intervene, the relator may continue to pursue the claim on their own. But the odds of success tend to be much higher in cases in which the government intervenes.

Filing a Whistleblower Lawsuit

Some of the persons most likely to have the inside information required to make an allegation of fraud are employees of the company involved. Many companies have an internal whistleblower policy that offers employees confidentiality and protection against retaliation if they present their evidence of wrongdoing to their employers through an internal process.

For employees not protected by an internal whistleblower policy, the False Claims Act provides certain protections from retaliatory action by their employers in response to their whistleblowing. These employees may be able to recover double back pay and the costs of litigating their claim, and they may be eligible for reinstatement if they were fired.

The incentive for the relator lies in getting a cut of the recovery. Successful whistleblowing can result in penalties for the defendant up to three times the amount defrauded from the government, plus fines of $5,000 to $10,000 for each fraudulent claim.

Of that recovery, how much the relator gets depends on whether or not the government intervened. In cases where the government does intervene, the relator can expect to get 15 to 25 percent of the recovery. The stakes are higher if the government does not intervene. In that case, the relator can get 25 to 30 percent of the recovery.

Since the federal False Claims Act has been so successful in rooting out fraud, many states have passed their own whistleblowing laws. These statutes offer successful claimants a “finder’s fee” for exposing fraud at the state, local and municipal levels.