Importance of Whistleblowers – Obstacles & Incentives When Internal Reporting Fails, Part 3

In a weeklong series, we have been exploring the assertions set forth in a recent study submitted to Congress by the National Whistleblower Center. The NWC is a non-profit, non-partisan group dedicated to helping whistleblowers stand up against corporate fraud and avoid unfair retaliation from employers. In its report, which studies ten key characteristics of whistleblower laws, it reveals startling statistics about workplace disclosure and the apprehension faced by many employees as they consider whether to come forward with their information. So far, we have examined the effectiveness of statutes like the False Claims Act in light of employees’ disclosure fears. In this post, we examine internal compliance programs and whether employees are more or less inclined to reveal allegations of fraud.


In a report by the New England Journal of Medicine, whistleblowers against big pharma companies cited feelings of altruism and public safety over money as the motivating factor to report.

NWC Rebuts Claims that Internal Reporting Procedures Should Preempt Disclosure Under the FCA

Earlier this year, we examined a report submitted to Congress by the Institution for Legal Reform, a group organized under the U.S. Chamber of Commerce. In that report, the ILR asserted that it was unfair for corporations engaged in fraud to face maximum penalties (which include triple damages) if that company has certain internal compliance procedures in place. It further asserted that any company with a compliance structure in place who self-reported to the government prior to a report made by a whistleblower (who would be held to a 180-day stay prior to being able to report) should face minimal penalties. In addition, the ILR believes incentivization of whistleblowers is the wrong approach and advocates for the incentivization of business to maintain internal compliance procedures. It further asserted that the FCA was out to get businesses having committed “honest mistakes” and triple damages should not be sustained against these situations when internal compliance can easily take care of the issue.

In rebuttal, the NWC asserts that the ILR has misinterpreted the purpose of the FCA as reiterated by the DOJ: mere submission of a false claim to the government does not, by itself, create a claim under the FCA. Nor do accidental or negligent mistakes in billing or invoicing. The FCA is truly after intentional, deliberate conduct devised under a premeditated plan to defraud the government of its (read: our) money. The NWC praises the use of internal controls in the former scenario as a way to combat accidental or negligent false submissions, however the unfortunate reality is that many of the biggest FCA offenders maintain internal compliance structures which are faulty and inept at detecting actual corporate fraud.

Effect of Qui Tam Provisions on Employees’ Likelihood to Report

In a study conducted over a four-year period, statistics reveal that over 90 percent of whistleblower plaintiffs who eventually filed a whistleblower lawsuit began their journey by reporting within. A similar study conducted by the New England Journal of Medicine with regard to whistleblower complaints against pharmaceutical companies revealed that “nearly all” of plaintiffs attempted to resolve disputes from within before working with a whistleblower attorney. Both studies showed that direct reporting by a whistleblower to the government of suspicious misconduct was very rare and reserved for special cases.

As the NEJM study showed, people have many reasons for reporting. “Reported motivations coalesced around four non–mutually exclusive themes: integrity, altruism or public safety, justice, and self-preservation.”  A person sees their company engaging in shady and unethical practices, and they feel personally indignant, a sense of outrage for the community, a desire to see justice, and, sometimes, fear that they can be in trouble even if they aren’t responsible.  The natural thing to do is to try to work it out internally, first.  But does that always work?

 We Understand Internal Reporting is Often for Naught

Not only is internal reporting of corporate fraud statistically unlikely to result in an ethical clean-up, it is more than likely to result in instances of retaliation, demotion or termination – which is discussed further in tomorrow’s post. If you are considering reporting fraud at your job but are afraid of the consequences, consider working with a whistleblower attorney from the beginning.

By | 2018-03-26T10:39:42+00:00 December 20th, 2013|False Claims Act Legal News|