A whistleblower action is when someone exposes an organization’s fraudulent activities. Actions include providing information to the government or filing a lawsuit against the fraudster, and they are typically undertaken by a current or former employee of the company committing the fraudulent activity.
For example, in 1995 Northrup Grumman, an aerospace and defense company, was sued by one of its employees for selling faulty equipment to the federal government under the False Claims Act. In 2009, the company paid a $325 million settlement to the government, and the employee was awarded $48.7 million for participation in the case.
Whistleblower actions where the federal government is the victim of fraud fall under the Federal False Claims Act . The Act allows a person to sue the fraudster on behalf of the government, be entitled to between 15 percent and 30 percent of the money recovered by the government and be granted government protection from retaliation by the company.
The federal government has an array of programs to incentivize whistleblowers to come forward and expose fraud. Some of these programs include:
- SEC Whistleblower Program
- CFTC Whistleblower Program
- IRS Whistleblower Program
- Motor Vehicle Safety Whistleblower Program
- Banking Whistleblower Programs
- Wildlife Crimes & Environment
There are also various state and municipal whisleblower programs that mirror the Federal False Claims Act. Certain states also have unique whistleblower laws that specifically target and aim to prevent insurance fraud.