According to a new University of Iowa study, whistleblowers can have a demonstrably positive impact on how businesses operate. Though whistleblower advocates have long been aware of this concept, having it backed by data is a crucial step in the international fight to protect those with exceptional integrity. As 2016 comes to a close, the success of American’s primary whistleblower programs also helps to prove that rewarding integrity creates significant financial and ethical benefits for the country as a whole.
The False Claims Act in 2016
In fiscal year 2016, the Department of Justice recovered $4.7 billion through the False Claims Act. $2.5 billion of that amount was recovered in the healthcare sector, particularly from drug and medical device companies.
The largest recovery by far came from Wyeth and Pfizer, who paid $784.6 million to settle allegations of fraudulent price reporting. Wyeth, owned by Pfizer, was accused of giving massive discounts to hospitals for certain medicines, and then concealing those discounts from the government. As a result of the scheme, Wyeth allegedly defrauded hundreds of millions of dollars from Medicaid.
This recovery was made possible by two qui tam relators: Lauren Kieff, a former AstraZeneca sales representative, and physician William St. John LaCorte. Healthcare workers like Lieff and LaCorte are essential in many False Claims Act cases, as they can often provide detailed evidence of fraud schemes committed by hospitals and healthcare corporations.
Cases sparked by the mortgage fraud crisis also settled this year, which made the financial sector the source of $1.7 billion in recoveries. These settlements not only helped rectify false claims allegations, but also symbolized a moment of justice for the many companies that abused consumer trust and triggered the housing crisis.
In the 30th year of the False Claims Act amendments, these victories show that America’s oldest whistleblower law is stronger than ever. Though healthcare has been the source of the highest recoveries in recent years, False Claims Act cases can be brought in any industry involving government contracts, including defense, food safety, agriculture, and infrastructure construction.
SEC Whistleblower Program
Although the Securities and Exchange Commission’s Whistleblower Program is only a few years old, it has proven to be an effective means of rooting out securities fraud and rewarding those who report it. As of its 2016 report, the SEC awarded over $111 million to 34 whistleblowers since the beginning of the program.
The SEC issued $57 million in rewards in 2016, with one whistleblower receiving more than $30 million for reporting fraud.
Securities fraud robs investors and shareholders of their hard-earned money, so the success of the SEC’s whistleblower is a win for all those who put their trust in investments. The efforts of SEC whistleblowers have helped recover more than $584 million in financial sanctions, and were essential in repaying investors that had been defrauded.
The SEC program has also delivered on Dodd-Frank’s promises to protect whistleblowers from retaliation. The agency has already developed a strong track record of calling out and penalizing companies that tried to stifle whistleblower reports through unlawful confidentiality agreements.
In October 2016, the SEC issued a Risk Alert reinforcing the importance of corporate compliance with whistleblower rules. Companies that try to punish whistleblowers or even prevent whistleblowing can face financial penalties and other legal repercussions.
Financial industry fraud should be of concern to all Americans interested in avoiding another recession. Though there is corporate opposition to the laws that hold companies accountable for their securities practices, protecting the SEC Whistleblower program is just one way we as a nation can prevent catastrophic financial fraud.
Challenges Ahead for Whistleblowers
There’s no doubt that the United States has some of the strongest whistleblower laws in the world. Laws like the False Claims Act and Dodd-Frank are essential to the protection of taxpayer funding, public health, and our economic growth. There is much progress than can and should be made to strengthen protection for individuals who report fraud; replicating the successes of 2016 can only help us accomplish that goal.
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