Whistleblowing: What Compliance Professionals Need to Know

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1 Whistleblowing: What Compliance Professionals Need to Know Tom Beimers Jacqueline Mrachek Kathy Noecker Whistleblowing Protections False Claims Act Fraud Enforcement and Recovery Act of 2009 Patient Protection and Affordable Care Act of 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act Sarbanes-Oxley Act Securities and Exchange Act Title VII of the Civil Rights Act (and other anti-retaliation provisions of employment discrimination laws: e.g., ADEA, ADA, NLRA, USERRA, FLSA) Occupational Safety and Health Act Consumer Product Safety Improvement Act Food Safety Modernization Act 1

2 3 The U.S. Health Care System Total U.S. Health Care Spending $3.1 trillion (2014 CME est.) 17.9% of GDP (2011) 51% private 49% public (2011) 21% Medicare 17% Medicaid & CHIP 11% other 2014 DOJ civil fraud recoveries Total: $5,690,000,000 Health Care: $2,300,000,000 ROI: 8 to 1 (DOJ est.) : $14.5 billion from health care fraud 700+ Qui Tam suits filed in each of the years 2013 and

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4 Source: US DOJ Annual HCFAC Reports False Claims Act By The Numbers 95% of government s civil health care fraud cases are filed by whistleblowers Government does not intervene very often (80% declined) Declined cases are generally dropped (80% of time, but changing) Only FCA cases a year are resolved by adjudication Typical resolution is settlement or dismissal Cases take an average 38 months to resolve (but may take a decade) If government intervenes 15 to 25% of the recovery to relator If government does not intervene 25 to 30% of the recovery 8 4

5 Qui Tam/Whistleblower Provisions The federal civil False Claims Act contains qui tam, or whistleblower, provisions. Qui tam is a mechanism in the law that allows citizens to sue, on behalf of the government, in order to recover damages. 31 U.S.C. 3730(b). Disgruntled employees (or former employees) Unhappy patients Competitors Estranged spouses Citizens fed up with fraud 9 Public Companies: Dodd-Frank Bounty Program An individual who provides SEC with original information of a possible violation of federal securities law is eligible to receive 10-30% of any monetary sanctions obtained by the SEC in excess of $1 million Protected conduct includes activities the employee reasonably believes constitute a violation of federal fraud laws, any SEC rule or regulation, or any other federal law relating to fraud against shareholders Fraud Lack of financial controls Misstatement of financial results 10 5

6 How To Be A Whistleblower! Many resources exist for potential whistleblowers For information and advice on becoming a whistleblower: see The National Whistleblowers Center, the Whistleblower s Handbook, and newsletter at For law firms seeking to represent whistleblowers, see Global resources are available, see 11 Common Triggers For Whistleblowing They discounted my concerns I wasn t treated respectfully My concerns weren t taken seriously They did nothing about it I never heard back from anyone 12 6

7 Encouraging Internal Reports Maintain multiple avenues for reporting misconduct, including anonymous reports Provide regular training to managers and employees Ensure regular communications from leadership about compliance expectations Highlight reports and action where possible Demonstrate prompt and effective action when any reports are received Conduct exit interviews that seek information regarding suspected fraud, other wrongdoing, compliance culture 13 What Activities Are Protected? Protected activities may include Reporting suspected wrongdoing Internal complaints and concerns to HR, manager, compliance/audit personnel, anonymous hotline Reports to government agencies Providing information about suspected wrongdoing Participating in investigation or other proceeding Filing a formal claim or lawsuit Giving testimony 14 7

8 Dealing with the Whistleblower Employers must not impede or interfere with external whistleblowing by employees Threats or retaliation Confidentiality, non-disparagement agreements Covenants not to sue or file claims Employers must not retaliate because of whistleblowing actions Discipline or discharge Material adverse change in job duties or work conditions Cut in pay, bonuses or benefits Denial of promotion or material opportunity 15 Managing Whistleblower Performance Apply consistent standards of performance and behavior Articulate objective issues and describe job-relatedness that has no relationship to whistleblowing issues Review any proposed negative employment actions with HR and legal Discipline Job reassignments Performance evaluations Denial of benefits or promotion Discharge Document carefully 16 8

9 Whistleblowing: What Compliance Professionals Need to Know Tom Beimers Jacqueline Mrachek Kathy Noecker 9