Information about corporate fraud often implicates several laws handled by different government agencies. When one agency compensates whistleblowers and the other does not, the whistleblower law determines how much, if any, compensation will be paid.
A tip to a whistleblower program will often be passed on to related agencies. The Securities and Exchange Commission shares enforcement of the Foreign Corrupt Practices Act with the Department of Justice. The SEC will pay eligible informants for information leading to certain successful enforcement actions. The DOJ does not. So your tip to the SEC about an FCPA violation could result in enforcement by the Justice Department.
Even within the same agency, there can be issues with compensation for a tip. The government is not required to pursue litigation in the manner that would be most favorable for you. If you bring a civil lawsuit under the False Claims Act, for example, the Department of Justice could decide to initiate criminal charges against the defendant in lieu of pursuing your civil claims or in conjunction with the civil lawsuit.
Each statute has regulations governing when the agency will pay a whistleblower for information. It is necessary to examine the regulations carefully and remember that many of these issues have not yet been extensively litigated, so there are unresolved aspects to them. Please contact a McEldrew Young attorney to discuss your specific situation.
The FCA permits a relator to share in the recovery when the government “elect[s] to purse its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty.” 31 U.S.C. § 3730(c)(5). Unfortunately, the language, legislative history and judicial decisions on the alternative remedies subsection have resulted in a tremendous lack of clarity. Some courts have required the U.S. to decline intervention in order to entitle a relator to share in the alternate remedy. Others have declared that a criminal proceeding is not an alternate remedy to a civil proceeding like the one that is permitted by the FCA. The result is an area that will most likely need to be litigated based on the specific facts of the case.
The SEC program permits awards in related actions after a whistleblower is eligible for a reward in an SEC action. Once the informant’s tip results in a monetary sanctions of more than $1 million in an SEC enforcement action, a claim form must be submitted for any related actions that have led to sanctions at the same time as the. If monetary sanctions happen in the related action after the SEC claim form is submitted, then you have 90 days from the issuance of the final order imposing sanctions to submit the claim form. The SEC considers a related action a judicial or administrative action brought by (1) the Attorney General of the United States; (2) an appropriate regulatory authority; (3) a self-regulatory organization; or (4) a state attorney general in a criminal case.
The CFTC considers a related action a judicial or administrative action brought by (1) the Department of Justice; (2) an appropriate department or agency of the Federal Government acting within the scope of its jurisdiction; (3) a registered entity, registered futures association, or self-regulatory organization; (4) a state criminal or appropriate civil agency, acting within the scope of its jurisdiction; or (5) a foreign futures authority. The CFTC language on related actions is slightly different than the SEC. The definition of “related action” suggests that there is no requirement for monetary sanctions over $1 million. See §165.2(m)( … based upon the original information … that led to the successful resolution of the Commission action.). A successful enforcement action is any final judgement in favor of the CFTC or settlement of a judicial or administrative action brought by the CFTC under the Commodity Exchange Act. §165.2(n)(“successful resolution” has the same meaning as “successful enforcement”).
According to the Internal Revenue Manual, criminal fines cannot be used for payment of whistleblower awards because they must be deposited into the Victims of Crime Fund. Internal Revenue Manual § 220.127.116.11.7. The result is that you will not be rewarded with a share of any criminal sanctions received by the IRS.