2012 can be looked upon as  the year of the whistleblower as the US government was  on a trajectory to collect more than US$5 billion from cases that were initiated by private citizens.  “With the growth of multi-nationals, cross-border enforcement, complex financial products and the recent economic crisis, whistleblowing has become an integral part of compliance enforcement in the US,” said Jerry Martin, the US Attorney for the Middle District of Tennessee.  As a federal prosecutor, Martin works closely with counsel for private citizens who can, in some cases, initiate litigation on behalf of the government.

A protected species in the US

In the US, a myriad of laws protect whistleblowers from retaliation and some laws even reward whistleblowers with bounties where their efforts result in monetary recovery.  False Claims Acts at the Federal and State levels pay bounties as high as 30 per cent of the recovery, with an average payment of between 15 per cent and 20 per cent.   

While the federal False Claims Act dates back to 1863, in 2010, the US Congress, through the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanded the role of whistleblowers.  Now, whistleblowers providing information to the Securities and Exchange Commission or the Commodity Futures Trading Commission may be awarded a bounty.  The US Internal Revenue Service has its own whistleblower program and that agency recently paid out a bounty of US$104 million to a private citizen whose efforts led to the recovery of taxes from UBS.   

What is the motivation for whistleblowing?

The decision to blow the whistle is fraught with emotion and complex legal and factual analysis.  Who are these whistleblowers and why do they do it?

Meredith McCoyd was an Atlanta, Georgia sales representative for Abbott Laboratories before she filed her False Claims Act lawsuit against Abbott in 2007.  Her recovery led to a 2012 settlement between the government and Abbott totalling US$1.6 billion to resolve allegations that the company illegally marketed its antiepileptic drug Depakote.  For her part, Ms. McCoyd will receive a bounty which will pay her well into the millions of dollars.  Ms. McCoyd says she was “concerned about the widespread use of the drug to treat patients with Alzheimer’s and other psychological disorders that were not studied or approved by the FDA.”  She also realized that “the training we received from the company convinced many sales representatives, including me for a time, that marketing to these patients and paying doctors to prescribe was legal when it was not.” 
 
 

Whistleblowers don't have to work for the company

Not all whistleblowers are employees.  Lynn Szymoniak, a Florida attorney, whose original research and persistence led to exposure of the US mortgage robo-signing scandal, provided information to the government in 2010 and filed a suit under the False Claims Act.  Information generated from her case was a catalyst for portions of the government’s $25 billion bank settlement with five banks, including Bank of America and JPMorgan Chase.  Ms. Szymoniak, who herself had been a defendant in a foreclosure case, will reap a multi-million dollar bounty.

Whistleblowers often face the question of whether their concerns can be addressed by a company’s internal compliance programme.  Glenn Demott was one of the six whistleblowers whose litigation culminated in the government’s 2009 US$2.3 billion settlement with Pfizer.  And, as Mr. Demott will attest, not all whistleblowers have a smooth ride.  Mr. Demott initially resorted to internal compliance channels to raise concerns about the company’s marketing practices.  Only after he was met with a deaf ear, did he seek redress in court under the False Claims Act.  He alleged that the company’s unlawful marketing practices caused the government to spend precious healthcare dollars to pay for unnecessary prescriptions.  “I would blow the whistle again for a good cause if needed,” said Demott. 

A global model?

“The citizens of the United States are well served by an efficient government, and whistleblowers play an important role in eliminating fraud, abuse, and conduct that causes harm to the government and the public,” said William Nettles, the US Attorney for the District of South Carolina who was the chief lawyer for the government in Lynn Szymoniak’s case.  Demott, Szymoniak and McCoyd, in varying degrees, illustrate the role that whistleblowers play in the US legal system as the economy and the products that are produced become more complex.  While they are US citizens, US laws, including the False Claims Act, allow for non-citizens, even those living outside US borders, to blow the whistle and benefit from bounties.  Now, it will be interesting to see whether the US whistleblower model will be a recipe for compliance enforcement all over the world.