The U.S. Securities and Exchange Commission (SEC), in 2011, published final rules creating a new whistleblower program under the Dodd-Frank Act. This was a time when the housing bubble had burst and the stock market plummeted to near-record lows. The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law as a way to prevent reckless financial behavior and fraud. It also established crucial new measures to encourage, reward and protect whistleblowers who come forward with information about financial fraud to the SEC and the Commodity Futures Trading Commission.
The Dodd-Frank Act and the safeguards granted to whistleblowers in qui tam actions under the federal and California False Claims Acts offer potential whistleblowers greater incentives to report violations of the law by their employers. Notably, it also provides whistleblowers with stronger protection against retaliation by employers against employees who report unlawful activity.
How the Dodd-Frank Act Offers Protection to Whistleblowers
One of the most important parts of the Dodd-Frank Act was that it mandated the SEC to establish a whistleblower protection office. This considerably expanded the agency's ability to accept reports from whistleblowers and to reward them for information that paves the way for successful enforcement actions.
The agency says that a whistleblower may receive a reward under this program if they come forward with original information relating to a possible violation of the Securities Exchange Act, which leads to successful enforcement by the SEC resulting in monetary sanctions of more than $1 million.
Rewards for Whistleblowers
If a whistleblower meets the requirements specified under the Dodd-Frank Act, they will be awarded 10% to 30% of the money the SEC obtains. In addition they may receive another award from the SEC if a different federal agency brings a successful enforcement action based on the same information the whistleblower provided to the SEC. Similar provisions exist under the law for reporting violations of the Commodities Exchange Act to the Commodities Future Exchange Commission. The Internal Revenue Service also rewards whistleblowers who offer information about major tax fraud.
Protecting Whistleblowers from Retaliation
The SEC's rules also protect employees who are reporting fraud or illegal activity from employment retaliation thereby offering more incentive and safeguards for potential whistleblowers. If the person blowing the whistle reasonably believes that the information they provide relate to a possible violation of the Securities Exchange Act, the rules say that is against the law for the employer to retaliate against the employee. Some common forms of retaliation include firing the employee, demoting, passing them up for promotions or denying training opportunities. It is also against the law for employers to interfere with the whistleblower's attempt to communicate with the SEC.
There are specific procedures that must be followed when a whistleblower is providing information through this program. An experienced Los Angeles employment attorney can help whistleblowers correctly follow the SEC's procedures and present the information in the most powerful way possible.
Qui Tam Actions
The state of California also has strong laws protecting whistleblowers who report fraud. In addition to the whistleblower programs established by the Dodd-Frank Act, the federal False Claims Act and the California False Claims Act also provide safeguards for whistleblowers. If an employer deliberately defrauded the government, an employee may initiate a qui tam action to expose the fraud under the False Claims Act. If the whistleblower's qui tam action successfully uncovers fraud against the government, the whistleblower may be entitled to receive a portion of the money recovered by the government.
Dodd-Frank Versus the Federal False Claims Act
Here are some of the key differences between the Dodd-Frank Act and the federal False Claims Act:
- Dodd-Frank whistleblowers who uncover financial fraud don't file a complaint in court, but with the appropriate regulatory agency.
- Both Dodd-Frank and the False Claims Act require that whistleblowers provide the government with original information about the unlawful activity. However, the Dodd-Frank Act allows whistleblowers to earn rewards if they analyze public information to expose fraud that was previously not noticed or known.
- Dodd-Frank whistleblowers are guaranteed confidentiality or anonymity, as long as a lawyer is representing them. However, if a federal agency decides to file a lawsuit based on the whistleblower's complaint, the identity of the person blowing the whistle will likely be made public.
- With Dodd-Frank, the whistleblower will not have the right to take action independently if the relevant government agency decides not to go forward with the case. But, under the False Claims Act, the whistleblower may bring the case on behalf of the government against the employer.
Contacting an Experienced Los Angeles Employment Lawyer
There is no question that the laws on the state and federal whistleblower programs as well as qui tam actions can be extremely challenging and complex. If you suspect that your employer is engaged in fraud or other unlawful activities, it is critical that you contact an experienced Los Angeles whistleblower lawyer to analyze your options and determine the best path forward. The knowledgeable whistleblower attorneys at Kingsley & Kingsley Lawyers can help you better understand the process. Call us to schedule a free consultation and comprehensive case evaluation.
