Can a Government Employee Earn a Reward as a Whistleblower?

Whether an employee can collect a reward will depend on several factors, including the agency that they work for, their role and the law permitting an award.

  • The False Claims Act allow government employees to serve as relators but they are unlikely to qualify for a reward if there has been a public disclosure of the information they are reporting.

 

  • The SEC and CFTC programs allow certain government employees to qualify for awards, but it is a more limited set.

SEC & CFTC

Dodd-Frank bars certain government employees from receiving an award under the SEC and CFTC programs. It prohibits rewards to present employees as well as former employees if the information was acquired during the period of employment. Each program has a list of where you cannot work. The SEC list includes the Securities & Exchange Commission, Department of Justice, any law enforcement organization, the Public Company Accounting Oversight Board, or an appropriate regulatory agency or self-regulatory organization. Rule 21F-8(c)(1).  Employees of foreign governments, an instrumentality of a foreign government, or a foreign financial regulatory authority are also prohibited. Rule 21F-8(c)(2). The term foreign financial regulatory authority includes a foreign security authority, a government body or self-regulatory organization empowered to enforce certain laws, or a membership organization that regulates participation in the specified financial activities. 15 U.S.C. § 78c(a)(52).

The CFTC specifies employees of the Commodity Futures Trading Commission, the DOJ, the SEC, the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Board of Directors of the FDIC, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, any law enforcement organization and additional specified entities. § 165.6.

Brief Summary

  • Allows government employees except for certain armed forces lawsuits.
  • Employees in a fraud detection role generally can’t qualify if there has been a public disclosure since several courts will not consider them an original source.
  • The DOJ may oppose your status as a proper relator because you are a government employee.

The SEC bars employees of:

  • Securities & Exchange Commission;
  • Department of Justice;
  • any law enforcement organization;
  • the Public Company Accounting Oversight Board;
  • an appropriate regulatory agency or self-regulatory organization; and
  • foreign governments, an instrumentality of a foreign government, or a foreign financial regulatory authority.

The CFTC bars employees of:

  • Commodity Futures Trading Commission,
  • DOJ,
  • SEC,
  • Comptroller of the Currency,
  • Board of Governors of the Federal Reserve System,
  • Board of Directors of the FDIC,
  • Director of the Office of Thrift Supervision,
  • National Credit Union Administration Board,
  • any law enforcement organization; and
  • a few other additional specified entities.

False Claims Act

Current and former employees of the federal government have discovered fraud at private companies and served as relators in the past. In some cases, they have had their lawsuit dismissed because they worked for the government. Other times, they have been able to proceed.

The Department of Justice has historically opposed lawsuits under the False Claims Act by certain individuals who have worked on the government payroll. They have filed at least one amicus curiae brief arguing in a non-intervened case that the individual was not a proper relator. They have lobbied Congress to include specific language barring some government employees.  And they have contested whether a government employee qualifies as a person under the FCA. Two courts of appeals opinions have rejected this argument and adopted the plain text of the statute, permitting government relators. See Little v. Shell Exploration & Production Co., 690 F.3d 282 (2012); U.S. ex rel. Holmes v. Consumers Ins. Group, 318 F.3d 1199 (10th Cir. 2003).

Public Disclosure Bar

One frequent bar to government employees proceeding with a qui tam lawsuit is the public disclosure bar. If the allegations are public before filing of the complaint, the relator is only permitted to bring the litigation if they are the original source. The False Claims Act requires voluntary disclosure of information to the government in order to qualify as an original source.

This generally bars employees in a fraud detection role. It is difficult for a government employee whose job it is to report fraud to qualify as having “voluntarily” provided information to the Government.

However, a relator is required to be an original source only if there has been a public disclosure. Disclosures are considered public if they have been in a news media report or government hearings, audits and investigations.

This leaves open two possibilities for argument: either the lawsuit is filed before there has been a “public disclosure” or the employee was not in a fraud detection role that would require them to provide information to the government.

Armed Forces Exclusion

The text of the FCA provides only one instance where it is clear that someone on the government payroll cannot collect. Section 3730(e)(1) prohibits lawsuits brought by a present or member of the armed forces against a member of the armed forces related to their service in the armed forces.

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