What if a whistleblower is involved in the misconduct reported?

Individuals who report misconduct in which they participated generally have greater difficulty obtaining whistleblower awards, although they can still do so in certain circumstances.

Most whistleblower programs bar payment of awards to anyone convicted of a crime in connection with the reported misconduct. The False Claims Act (FCA) provides that such people must be dismissed from any suit and “shall not receive any share of the proceeds of the action.” Similarly, the SEC and anti-money laundering programs prohibit payment of an award to anyone “convicted of a criminal violation related to” government action caused by their disclosure.  

Even absent a criminal conviction, whistleblowers’ participation in misconduct can provide a basis for reducing the award they receive. The FCA, for example, authorizes reduction of the award paid to anyone who “planned and initiated the violation.”

Nonetheless, whistleblowers can sometimes obtain significant whistleblower awards for reporting misconduct in which they participated. In 2021, for example, the SEC awarded one whistleblower nearly $36 million even after reducing the award to account for that person’s involvement in the misconduct and delay in reporting.  In 2012, the IRS awarded $104 million to a whistleblower who disclosed tax evasion at a Swiss bank, even though the whistleblower was sentenced to thirty months in prison for his own wrongdoing. 

Whistleblowers who report misconduct in which they participated can also obtain potential non-monetary benefits. For example, the Department of Justice’s prosecution guidelines require prosecutors to consider and provide credit to whistleblowers who voluntarily disclose misconduct. Other regulatory agencies have adopted similar policies.

To learn more about the False Claims Act and other whistleblower programs, go to www.mololamken.com and follow us on LinkedIn.  “Brilliant lawyers with courtroom savvy” — Benchmark Litigation.  Copyright MoloLamken LLP 2023.