August 14, 2024
Corruption and other forms of financial wrongdoing take a significant toll on our society, while lining the pockets of a few, whether that come in the form of fraudulent uses of federal or state taxpayer money, and violations of our nation’s securities and commodity futures laws, just to name a few. Individuals who courageously come forward with insider knowledge relating to these violations provide an immense benefit to taxpayers and victims of financial fraud in the form of redressing and deterring such acts of unjust enrichment of wrongdoers at the expense of so many.
In addition to the societal benefit that whistleblowers provide, they also can greatly benefit themselves through receipt of a significant financial reward for their whistleblower claim and/or submission. For over 150 years, the federal False Claims Act has provided financial rewards for whistleblower claims related to fraud targeting the federal government (and the California False Claims Act provides such rewards relating to state-level fraud), while in more recent years the federal government has established the SEC Whistleblower Reward Program and CFTC Whistleblower Program to provide financial rewards to whistleblowers reporting fraud in the context of securities and commodities future trading, respectively.
Whistleblower Rewards Under the False Claims Act
The FCA makes it a criminal and civil violation for an individual or organization to defraud the federal government. The FCA was originally enacted during the Civil War to combat unscrupulous military suppliers, and, since that time, FCA litigation has become commonplace. Each year many whistleblowers with knowledge of such fraudulent activity – most often in the form of Medicare and Medicaid fraud, customs fraud, and military procurement fraud – successfully pursue FCA lawsuits, with many individual whistleblowers collecting multi-million dollar rewards for doing so in the process.
A successful FCA plaintiff can obtain between 15% and 30% of the financial penalties imposed on the FCA defendant. Given that over $72 billion in financial penalties have been levied against defendants since the institution of the FCA – and the fact that individual FCA lawsuits have resulted in hundreds of millions of dollars in penalties – such whistleblowers may be in a position to earn a very significant financial reward for pursuing an FCA lawsuit.
Whistleblower Rewards Under the California False Claims Act
California’s False Claims Act (CFCA) was enacted into law in 1987 as a way of combating fraud perpetrated against local and state entities. Initially, there was little litigation based on the CFCA, but numerous CFCA claims have been brought in recent years.
Like its federal counterpart, the CFCA provides significant financial incentives for whistleblowers with knowledge of fraud targeting the state government, and which are actually more generous by percentage than those provided by the FCA. Under the CFCA, a whistleblower who pursues a successful claim can receive as a financial reward anywhere between 15% to 33% of the financial penalties and fines levied against a defendant where the state government is a party to the litigation, and between 25% and 50% of such penalties and fines when the state government does not choose to join the litigation.
Since the enactment of the CFCA, over $2 billion has been levied against CFCA defendants, thus the financial rewards available to those who pursue a successful CFCA claim can be significant.
SEC Whistleblower Reward Program
Since 2011, the SEC Whistleblower Program has paid out over $1 billion in compensation to individuals who have acted as whistleblowers in providing information to the SEC that led to successful SEC enforcement actions. While oftentimes a whistleblower is an employee of an organization where financial wrongdoing has taken place, even an outsider with evidence of wrongdoing may be eligible for compensation under the program.
A whistleblower who provides information to the SEC leading to a successful enforcement action leading to monetary sanctions exceeding $1 million is eligible to receive an award of between 10 and 30 percent of the monetary sanctions imposed in such an action. Past SEC enforcement actions have led to whistleblower rewards in the amounts of $114 million, $110 million, and $50 million, respectively.
Whistleblower Rewards Under the CFTC Whistleblower Reward Program
The Commodity Futures Trading Commission (CFTC) provides monetary rewards to whistleblowers who come forward with information related to violations of the Commodity Exchange Act (CEA) where the end result is a successful enforcement action resulting in monetary penalties in excess of $1,000,000. Similar to the SEC Whistleblower Program, whistleblowers who provide the CFTC with substantial information leading to an enforcement action are eligible to receive between 10 and 30 percent of the monetary sanctions collected.
According to the federal government, the Whistleblower Program has awarded approximately $380 million to whistleblowers in the first ten years since the program issued its first award in 2014, based on various enforcement actions that have resulted in sanctions totalling more than $3.2 billion. In one recent example in July 2024, the CFTC awarded over $8 million to a single whistleblower who helped the CFTC establish that one or more derivatives market participants deceived clients about key aspects of trades.
Contact a California Whistleblower Attorney today
If you believe you have a knowledge of fraud that may form the basis of a successful FCA claim, CFCA claim, or SEC or CFTC whistleblower submission, you are highly encouraged to work with experienced California whistleblower counsel to discuss and prepare your matter in a completely confidential environment.
