Adriaen Morse: Whistleblowers are people trying to do the right thing

Adriaen M. Morse Jr., a Partner of SECIL Law and Partner in the Washington, D.C., office of Arnall Golden Gregory LLP recently talked about whistleblowing and some of the most important things someone thinking about being a whistleblower should know.

Q: In your own words, what is a whistleblower?

A: Whistleblowers come in all shapes and sizes. My experience is most whistleblowers are people who are trying to do the right thing. They tend to be people with a strong moral foundation who are trying to make sure that their company or employer is also doing the right thing: abiding by the law, you know, acting in the right way, acting ethically and lawfully.

And these whistleblowers tend to be people who have really first usually tried to go through the channels within the company that employs them to fix the problem, the issue that they see, and a lot of times the company doesn't address the issue appropriately.

And a typical whistleblower, that's sort of when they get frustrated, and start looking for other avenues to report what they think is either a crime or some sort of improper behavior by senior managers or sometimes middle managers in a company. But like I said, they come in all shapes and sizes, but those traits are pretty similar across the board.

Q: What words would you use to describe a whistleblower?

A: I think the adjective I like the best to describe a whistleblower is moral. They tend to have a strong moral foundation, they have a character of integrity. So I think that in terms of the personal attributes they have is often courage, integrity, honesty.

Q: What is the single biggest mistake a whistleblower can make?

A: I think that the biggest mistake a whistleblower can make is trying to handle the issue on their own. Because without knowing what laws and regulations really apply to the conduct, you can either end up reporting something that isn't actually illegal. It may not be the best way of handling something, but it may not be a crime or regulatory violation. And at that point, a whistleblower has basically revealed their hand, so to speak, and may get in trouble for something that really turns out not to be a violation in the first place.

So I often will tell a whistleblower to talk to a lawyer, make sure you understand what it is that the company should be doing, before attempting to report the company for doing something inappropriate. I used to be in-house, I was a head of a compliance function, and the chief litigation counsel at a couple of public companies, and I dealt with whistleblowers from the inside. And even as in-house counsel, I occasionally would retain an external law firm to independently represent the whistleblower, because I wanted them to have legal advice in understanding the parameters of what they were reporting, as the process was going through, and also because I would end up wanting to speak to them and interview them. So I want to I wanted them to have a little have a lawyer, and I was in-house.

So now as somebody who deals with companies who are not necessarily straightforward or ethical from the outside, you definitely need a lawyer in particular if the company is not really intending to do the right thing.

Q: What is the risk to a whistleblower who does not have legal protection?

A: Well, one risk is that the whistleblower is exposed to their employer as a malcontent, potentially. And we've seen whistleblowers get fired, demoted, in some cases threatened by the employer for bringing forward issues. And one thing about interacting with a lawyer is we understand the statutes and regulations that are out there to protect whistleblowers and also to safeguard their rights if the employer ends up taking some kind of retaliation against them, which does happen, unfortunately, many pretty often, I should say.

We think of whistleblowers historically going back to Daniel Ellsberg and the Pentagon Papers. He was one of the original whistleblowers. It is not necessarily government employees. Whistleblowers are regular employees in a company, whether it's a public company or private company, that that have spotted a fraud, or some kind of impropriety or illegality and want to report it. And there are statutes out there to protect whistleblowers in various contexts. Now, they can be somewhat tricky. For example, after [passage of the] Sarbanes-Oxley [Act of 2002], there's whistleblower protection under the securities laws, but you have to be reporting what is in essence a securities law violation. If what you're reporting is in fact a tax fraud, the securities law is not where you go for the whistleblower protection. It would be a different statute.

Q: At what point, does a whistleblower have protection?

A: That depends on the statute. In most cases, as soon as they report it to the government authorities is when the protection would kick in. They are not protected, for example, if they report things internally in their company through a hotline or something like that. That by itself will not be the hook for the legal protection, because the statutes are geared toward making sure that whistleblowers report things to government agencies. And the reward of protection, so to speak, or the protection that's afforded because of that, comes from reporting it to the government, not reporting it to the to the company. Now there may be some employment laws that might kick in, depending on the jurisdiction. There are some jurisdictions that that provide protections independent of a reporting statute, but for the most part, in the U.S. anyway, most protections for whistleblowers are kicked in by reporting to the government.

The first step should definitely be contacting a lawyer. A good way to do that is through the Ethic Alliance website. There’s a methodology that they follow to get you in touch with a lawyer who has the right expertise for your issue. And so what whistleblowers need to know is first, reach out to either Ethic Alliance or a lawyer who's knowledgeable in this area, not just any lawyer, but somebody who knows how to do this, and who knows how to protect you in order to start down the road of setting things right.

The great thing about reaching out to the media is the story gets out there. The bad thing about reaching out to the media is a lot of these statutes, if you're not the original source of the information to the government agency, then you don't get a reward for having spoken up. Even if you report it after you speak to the press. So, you know, speaking to the press can be a useful thing to do. But generally it should not be done before reporting to the government agency. Because you want the government agency to have no doubt who was the actual original source of the information they used to begin their investigation. Because that's the criteria where at the end of the case, they'll come back and say, ‘Okay, well, where did this information come from?’ If they read it in a newspaper article before you reported it to them, you’re not the original source, that newspaper article was.

One of the things that you can do is, once the report has been made, and if the whistleblower wants to make sure that the media is also aware of a bad action or bad activity, that's certainly something that a lot of lawyers, including us, will facilitate. And it's helpful, again, to make sure that they are properly prepared, they know what to say and what not to say. Because you also, when you talk to the media, you don't want to do anything to jeopardize the government investigation. Because if you then become a problem for the government investigation, then you know, you’re a) defeating the purpose and b) not exactly engendering goodwill.

I've had a lot of different experiences as a lawyer. I've been in the government. I've been in-house. I've been in the private practice. I've seen people reporting on wrongdoing from a number of different angles. And you know, what I would say is whistleblowing is an important component. And it is a growing component in the United States, especially of holding companies who do something wrong to account. And I think it serves a positive social purpose. Every company's primary motivation should be, and must be, to be a law-abiding citizen of the society in which it operates. And if they are not, whistleblowers serve the purpose of bringing that to the attention of the proper authorities. And I think that's a very positive thing to be doing.

Q: Can whistleblowers remain anonymous?

A: A whistleblower can remain anonymous, and they usually should remain anonymous, if possible. And the reason is for self preservation, if nothing else. There are protections for whistleblowers, but anonymity is actually the best protection. One of the things we'd like to mention to clients is, even though you have these “protections” under the statute, employers don't necessarily see it that way. And they may go ahead and fire you or demote you or take some other type of action against your employment status, regardless of the fact that you may, in fact, be entitled to protection. And then the only way to deal with it is you have to take the employer to court, which is costly. They have a obviously an advantage in terms of having the budget to defend themselves against claims of retaliation, or violating whistleblower laws. And it doesn't help you as a whistleblower pay the bills in the meantime, right? You may lose your employment. So anonymity is the best way to avoid having that retaliation take place. And many of the statutes, even for example, the SEC [Securities and Exchange Commission] whistleblower regulations, allow a whistleblower to report and never give up their anonymity, ever. So the SEC will not reveal who they are. The they will never publish anything have referencing them. They will take actions to make sure that the employer does not know where the information comes from. All to protect the identity of the whistleblower all the way up through the reporting process, the investigation, bringing a case against the company, and then potentially rewarding the whistleblower with a payout. None of that involves revealing the whistleblower's identity. And other statutes have similar protections. So it's important to know what statute you are reporting under, what the anonymity availability is, and then safeguard it to the extent you can.

Government folks, once you take action to say ‘we are reporting this anonymously’, they may want to speak eventually to the whistleblower, but they will not reveal that person's identity to anybody else.

Q: Can you explain qui tam laws?

A: Qui tam laws are under the False Claims Act. This is when a company or an individual who has a contract with the government for services or for providing something to the government, when they are overpaid or they underdeliver on the contract, this can result in a false claim where the government can sue to recoup the amounts that were fraudulently paid over to the contractor. The government can do that independently. So if they themselves uncover the wrongdoing, and they themselves investigate it, the government will bring its own action.

A qui tam is under the False Claims Act, a provision that allows for where individual citizens who have knowledge of the fraud can bring a lawsuit in the name of the United States. And so what it means is that somebody in the name of the United States is bringing a False Claims Act lawsuit against the corporation. Now, the way that ties in with anonymity is qui tam suit suits are filed under seal initially. So when it's initially filed in court, nobody but the court and the U.S. Attorney's office that that court sits in gets notice of it. But the company against whom, or the individual against whom, the claim is being brought is not made aware of it initially. And what happens is the U.S. Attorney's office has a chance to conduct its own investigation behind the scenes. And often the first time a company will hear that there might be a qui tam suit out there (although they won't know that it's a qui tam) is they'll get a subpoena from the US Attorney's office requesting production of documents and information, and maybe depositions testimony. And the U.S. Attorney's office conducts this entire investigation, and then makes a decision whether or not to step in and assume the prosecution of the lawsuit on its own on behalf of the government.

Until they unseal the qui tam lawsuit all of that is conducted under the cloak of anonymity. Now, in the qui tam process, you do lose your anonymity, once the government decides to intervene, or decides not to intervene, and the court unseals the complaint. And once it's unsealed, then everybody knows who the qui tam “relator” is. And so that's how it works under the False Claims Act. It provides this this period of shelter where oftentimes the company is trying to figure out who's making these allegations and who's out there, which is another reason for the seal to protect their anonymity for a while at least.

Q: Can you highlight some of the monetary rewards?

A: I'll talk about the False Claims Act first. Under the False Claims Act, basically, there's a presumption that if the qui tam complaint that is filed leads to a recovery for the government, then whatever the recovery is, there are treble damages by the way under the False Claims Act. And then there are also statutory damages, which I think they're up to $11,500 per false claim that was submitted to the government. So each invoice, for example, could be a separate false claim. And each of those can be fined at $11,500 apiece, so that can mount up very quickly.

And then there's the damages to the government for having not received the full value of the services or not having gotten the services at all or maybe the there was some fraud in the contract formation, which means that the contractor never should have gotten the contract in the first place, in which case, possibly the entire amount of the contract can be forfeited, and [damages] trebled. So if it was a million dollar contract, there could be $3 million in damages plus the statutory damages on top of that. And so basically, whatever that full number is, then the qui tam relator is entitled to up to 30%, depending on a couple of different procedural ways that it could work its way through the system. It's a slightly lower percentage if the government takes over and pursues the case on its own. And it's slightly higher if the government declines to intervene. And then the intervener continues on his or her own for following the case to its end.

Likewise, under the CFTC (the Commodity Futures Trading Commission) and the SEC (the Securities and Exchange Commission), under their rules, a whistleblower can receive anywhere from 15% to 30% of whatever award, whatever remedy the government ends up recovering from the entity. There's a whistleblower statute or a reporting statute under the IRS where if the government was defrauded by more than $2 million, and the IRS recovers more than $2 million, then you can receive up to 30% of that recovery, whatever it is. So you have to go by statute and go by claim to figure out exactly what recovery is available and which agency to go to. But there are a number of different ones out there.

Across all the statutes, one way of putting it is there's usually about 30% recovery available to whistleblowers whose claims ultimately succeed.

Q: In your experience, do whistleblowers come forward because it’s the thing to do or because of the monetary awards, or both?

A: In my experience, whistleblowers often come forward even without a monetary reward. I haven't represented any who are solely motivated by the financial reward that's available. And being a whistleblower is not an easy thing. You're taking risks, you're often not able to share with coworkers or other people what it is that's going on. There's a lot of worry, there's a lot of frustration involved in taking this route. And I do think it's fair that the whistleblower be rewarded for having come forward. Now, like I said, I in my experience, most of them are not primarily motivated by some pot of gold at the end of the rainbow. Most of them are motivated by doing the right thing. But I will say that having that reward available is a real positive, because it is not a quick and easy road for most whistleblowers. They're all putting their jobs on the line. And in some cases they're putting their lives on the line. That does happen.

Q: What are the risks involved in becoming a whistleblower?

A: The risks of being a whistleblower are many. A lot of employers will view a whistleblower as somehow being a bad employee or dishonest employee. So they will seek to fire them if they can figure out who they are, or demote them, take them out of the their career path. They will often seek material to make the whistleblower seem less credible, because a lot of times they hear about the whistleblower when the government comes knocking. And then they want to tell the government ‘Well, this guy or this gal is really a bad actor, look at all these bad things they've done.’ So there's reputation risk from the employer. Sometimes other employees don't appreciate a whistleblower. They may think that a whistleblower is basically harming their ultimate employer, and that It's not great for everybody. So there is risk from co-workers sometimes. And then of course, there are some instances of harassment by law firms that are hired by the company. And, and in some cases, people have been beaten or killed. Which goes back to why you need to preserve anonymity as much as possible.

Q: What do you think about the Ethic Alliance and its mission?

A: I think Ethic Alliance is a great step in the right direction. I think whistleblowers many times have no idea where to go. They don't know what the first step should be in pursuing the issues that they're concerned about. And I think Ethic Alliance provides a good first step to get you going down the path of retaining a lawyer, preserving anonymity, analyzing the issues. And it's a great place to start as a clearinghouse for potential issues that whistleblowers may face. And also the website has a lot of resources on it. Informative resources so people can explore for themselves and get an understanding what the process might be like. And I think that's very, very helpful.