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A whistleblower is a person who reports that an organization, usually one the person is a part of, is involved in some form of misconduct. Whistleblower lawsuits can be brought against organizations, including government entities, that violate a law or regulation. Furthermore, there are laws designed to protect whistleblower rights including laws to ensure that a whistleblower is not retaliated against by the organization he or she has reported.
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Any individual who witnesses corporate wrongdoing can file a complaint or "blow the whistle" to launch a lawsuit and hold the party accountable for its actions. Typically, the whistleblower receives a percentage of the lawsuit settlement funds and federal laws protect whistleblowers from unnecessary retribution such as wrongful termination.
Other whistleblower cases can involve stock/securities fraud, money laundering, health threats, safety violations, malpractice, corporate corruption, and more. Each year, hundreds of whistleblower cases are filed and many are settled for millions of dollars. Whistleblower cases are designed to hold public entities accountable while protecting and compensating the victim(s) and/or the whistleblower.
Stocks and Securities
Stock and securities fraud happens when the issuer of a stock or security makes false claims about that stock or security. A whistleblower may come forward to identify either the stockbroker or the brokerage firm that is engaging in securities fraud.
The Sarbanes-Oxley Act of 2002, sometimes referred to as the "Corporate and Auditing Accountability and Responsibility Act" is a federal law that sets standards for all US public companies. Among the regulations included in Sarbanes-Oxley are individual responsibility for accurate and complete financial reports (on the part of senior executives), external auditor independence, enhanced financial disclosures and corporate fraud accountability. Sarbanes-Oxley also established new protections for corporate whistleblowers.
Among the protections offered to whistleblowers by Sarbanes-Oxley are employment-based protections prohibiting companies from wrongfully firing whistleblowers; the creation of internal and independent "audit committees," which include procedures for employees to file whistleblower complaints; regulations requiring attorneys in certain circumstances to become whistleblowers against their client; regulations making it illegal for a company or executive to retaliate against an employee who becomes a whistleblower; and a section allowing the SEC to enforce the Sarbanes-Oxley act, including the whistleblower provisions.
The SEC also has provisions protecting securities whistleblowers. The Dodd-Frank Wall Street Reform and Consumer Protection Act, July 21, 2010, established provisions requiring the SEC to pay an award to eligible whistleblowers who give the SEC information about a violation of securities laws. The same act makes any retaliation against whistleblowers illegal.
Health Threats and Safety Violations
Companies might take part in numerous activities that pose a health threat or safety violation. These include acts such as illegal dumping of waste or illegal storage of toxic materials, which could affect the general public, or improper safety procedures that affect the health of employees. Large-scale whistleblower lawsuits involving health threats include lawsuits against the tobacco industry.
Qui Tam laws allow whistleblowers to take the place of the government and seek damages on behalf of the government. These laws, adopted by 20 states, also allow whistleblowers who successfully file a qui tam action to receive between 15 percent and 30 percent of the money recovered for the government. The qui tam laws also protect the individual from retaliation for filing or investigating a potential qui tam lawsuit. Such situations might arise when a company overbills the government, evades taxes, commits accounting fraud, falsely bills Medicare or the military or submits other fraudulent invoices to the government.
Whistleblower malpractice lawsuits can be filed alleging that a professional has committed misconduct. Examples of whistleblower malpractice suits include allegations that doctors performed unnecessary procedures, improperly sterilized their equipment or that administration at hospitals and medical centers ignored complaints of wrongdoing on the part of medical staff.
Whistleblower lawsuits may also involve corporate corruption. Allegations against corporations include anticompetitive practices, failing to pay taxes, lying about debt and other misconduct.
Whistleblowers who report corporate fraud or other misconduct to the government could receive sizable cash awards under new rules adopted in May 2011 by federal regulators. Tipsters would be eligible if they give the Securities and Exchange Commission information that leads to an enforcement action resulting in more than $1 million in penalties. The SEC would pay up to 30 percent of the money it recovers from a company or person.
There are a number of laws that protect whistleblowers from retaliation for their actions These include the Occupational Safety and Health Act, Sarbanes-Oxley Act, Surface Transportation Act, Toxic Substances Control Act and the Safe Drinking Water Act, to name a few.
Some states have their own laws regarding whistleblowers. For example, New Jersey has the Conscientious Employee Protection Act, to protect employees who report or threaten to report illegal activity on the part of the employer. California has the False Claims Act, which prevents employers from retaliating against employees who have disclosed information to the government.
However, the statute of limitations for whistleblower lawsuits varies, depending on the circumstances. For example, environmental whistleblowers have 30 days to make a written complaint to the Occupational Safety and Health Administration whereas employees may have up to 300 days to file a discrimination case against their employer. Meanwhile, whistleblowers reporting false claims against the federal government may have up to six years to file a civil lawsuit.
The most noteworthy whistleblower case involved a former FBI official who leaked information about President Richard Nixon's association with Watergate. The informant's identity was kept secret for 30 years until he identified himself in 2005.
In 2001, Vice President of Enron, Sherron Watkins blew the whistle on Enron's major accounting cover-up. The company and its auditors, Arthur Andersen, hid billions of dollars in debt, lied to their shareholders, and avoided paying federal income tax for years.
Depicted in a Hollywood film, The Insider shows the real-life story of how CBS reporters uncovered the malpractice and corruption of the tobacco industry and attempted to push past the corporate politics to have it aired on 60 Minutes.
Other whistleblower cases have involved misconduct in the FBI, the failure of government officials to protect the environment, illegal storage of hazardous waste, dumping of raw sewage and wastewater violations, nuclear accidents, corporate cover-ups, and more.
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Updated on Oct-29-12
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