Choosing Which Statute Under Which to Blow the Whistle: Various Statutes Available to Whistleblowers

Malecki Law’s New York whistleblower lawyers have a lot of potential options to choose from in determining the best statute under which to file you case. Moreover, these statutes typically also aim to protect you from retaliation. Experience matters.

Whistleblowers often have varied reasons to call attention to actions they believe are violative of state or federal laws. Whether for non-monetary or monetary reasons, these individuals may be protected by the anti-retaliatory provisions of New York Labor Law § 740 (“Section 740”), the Sarbanes-Oxley Act of 2002 (“SOX”), Internal Revenue Code 26 U.S.C.S. § 7623 (b) and possibly the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Though often described as a “whistleblower law,” Section 740 provides protection from retaliation for blowing the whistle but does not provide any incentives.

New York has a separate False Claims Act, and the Tax Department provides separate incentives for informing of potentially illegal conduct. SOX provides both incentives as well as retaliatory protection, as does Dodd-Frank. Malecki Law’s New York whistleblower lawyers are ready to guide you in finding the best laws under which to file your tip.

Dodd-Frank was enacted after the “Great Recession” that spanned 2007 through 2009 and the substantial “bailouts” received from banking entities that were termed “too big to fail.” Dodd-Frank provides rewards for individuals who provide “original information” to the SEC Office of the Whistleblower, DOJ or Commodities Futures Trading Commission relating to violations of the securities laws, Foreign Corrupt Practices Act or commodities laws. Malecki Law’s whistleblower lawyers in New York can help navigate the best strategies in drafting your tip (called a TCR) and in getting your claim noticed. We have a tried and true method. 

The oldest statute under which whistleblowers have been able to obtain an award is the Federal False Claims Act, first established in 1863 and significantly amended in 1986 to provide for more streamlined processing and more generous awards, among other changes. Under the current regime, individuals with “original information” called “relators” must first inform their local U.S. Attorney General of the eminent filing of their qui tam action, which they then file under seal in U.S. Federal District Court. If the U.S. Attorney decides to join the action on behalf of the U.S. Government, they are termed to have intervened, and will then prosecute the action. If they choose not to, the relator may prosecute the action on their own. The False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733.

New York has a statutory False Claims Act, N.Y. Financial Law §§ 187-194, which operates similarly to the Federal False Claims Act, imposing liability on any person who (1) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval to a state, (2) knowingly makes, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the state, or (3) conspires to defraud the state by getting a false claim allowed or paid. New York’s False Claims Act has been significantly limited to issues of workplace health, primarily, and health care more generally (Medicaid fraud, etc.).

• Selected State Laws Protecting Whistleblowers

SOX was enacted into law in 2002 after the very public corporate frauds involving Enron, WorldCom, and Tyco in an effort to protect investors and the markets that rely on accurate accounting to establish proper valuations. One of the most public events that predated SOX was the failure of Enron, where Arthur Andersen (one of the “big five” accounting firms at the time) helped perpetrate wide-spread fraud and was found guilty for criminal charges of crimes that were only realized upon Enron’s collapse. Malecki Law’s whistleblower law firm was at the forefront of bringing claims under this statute when it came out. 

SOX changed the corporate landscape by establishing, among other things, obligations on behalf of individuals with knowledge (including attorneys) to report up and report out to the U.S. Government accounting violations by publicly traded companies and certain other entities and individuals, who work for such companies. In exchange, SOX provides protection for these whistleblowers in certain circumstances, but provides no monetary incentives, creating a stick but no carrot situation.

Under section 7623(b) of the IRS Code, whistleblowers can be awarded between 15% and 30% (with a few exceptions) as an award in any case they provide original information on in which more than $2,000,000 are in dispute. There are no limits to how much an individual may collect. Subsection (a) addressed situations that do not qualify under (b). Cases handled under subsection (a) do not require that an award be issued, nor do they contain a statutory minimum percentage for any award. Awards under subsection (a) are handled at the discretion of the Internal Revenue Service. Under the IRC, the IRS does not pay awards until after all of the subject’s appeal rights have been exhausted which may take years.

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