A corporate whistleblower can create more financial, organizational, and reputational damage to an employer by using the federal False Claims Act (FCA), 31 U.S.C. § 3729-33, than by using any other “whistleblower” law. While the FCA contains no requirement that the whistleblower be an employee to create the damage, most FCA whistleblowers are employees, and almost all of them bring the problem to their management or human resources department before they suffer an adverse employment action. Management often does not hear the whistle blowing when the damage is still avoidable.

Take the case of the pharmaceutical representative who reported to his management in 2010 that illegal kickbacks were tainting the sale of some of the company’s blockbuster drugs. Management declined to act on his report and discouraged him from further reporting. Ten years later, the United States Department of Justice announced that the whistleblower lawsuit the pharmaceutical representative filed in 2011 resulted in a $678 million FCA illegal kickback settlement. For his reporting, evidence gathering (including wearing a wire for the government investigators against his managers) and 10 years of patience, the whistleblower received more than $100 million.

High-dollar, meritorious cases are not the only ones that present problems for employers. Many human resources managers and in-house attorneys have experienced the marginal performer with a bad attitude and a distrust for authority who claims fraud just before the manager presents a performance improvement plan. In the pharmaceutical or healthcare industries, managing such employees can be time-consuming, disruptive and expensive. If employees manage to convince a lawyer that their claims of fraud are meritorious, the problems multiply. The courts dismiss dozens of FCA cases every year, but the expense and disruption to the defendants in these cases is significant.

Employment lawyers should understand the basics of the FCA, from the fraud provisions that define the structure of the statute to the nuances of the whistleblower protection provisions.

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