In the past, the primary whistle blower act in place has been the Federal False Claims Act, which was enacted during the Civil War to combat fraud against the federal government by suppliers to the Union Army. Also commonly called “Lincoln’s Law”, the False Claims Act was rarely used until it was completely overhauled in 1986. The 1986 amendments were prompted by publicized reports of abuses in the defense contracting industry, in which the government was being exponentially overcharged for household items. During the revamp, more financial incentives were put into place and barriers to actions against those who allegedly submitted false claims to the government were reduced. Since the new 1986 amendments were passed, the False Claims Act has become the government’s most effective and successful tool in combating unneeded or fraudulent federal spending.
From 1986 to 2015, this Act has retrieved over $48 billion as an outcome of cases filed under Lincoln’s Act. Although this Act proved to be quite successful with federal fraud, it cannot pursue cases of financial fraud that do not involve the government. The Act does not protect against those who blow the whistle against financial companies or corporations unless the federal government is somehow also experiencing some financial loss. With the Great Recession, came ample motive to enact a new law protecting whistle blowers of financial institutions.
In 2010, shortly after the housing bubble burst, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. This act was implemented to prevent any future reckless financial behavior as well as to incite, reward, and protect whistle blowers. This act protects those who can provide novel insider evidence of financial fraud to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. If a whistle blower, also called a relator, brings original insider information forward and the agency can successfully have a suit against the accused, the relator can potentially receive 10 to 30 percent of the total fines the accused is charged with. In addition to this financial incentive, the Dodd-Frank Act also protects whistle blowers from those trying to retaliate, such as the whistle blower’s boss or company. The Act allows the relator to take those seeking retaliation to court. The overall success of the False Claims Act has been due to the whistle blowers responding to the qui tam provisions of the Act. These provisions essentially allow any person to file a case on the behalf of the federal government. Qui tam provisions make it easier to sift through false claims made to the government. Continue reading