What the Wells Fargo scandal and Edward Snowden have in common

Corporate greed, evidenced by the Wells Fargo scandals, and government wrongdoing, like that disclosed by Chelsea Manning (formerly known as Bradley Manning) and Edward Snowden, illustrate the need for increased understanding and improvement of our nation’s whistleblower and false claims laws.

Whistleblower laws. The first federal whistleblower law was passed in 1778 to protect sailors who were arrested after reporting incidents of torture committed by their superior officer. Current federal statutes protect government employees, and private employees who work in certain regulated industries, from employer retaliation for reporting improper acts. Employees must follow procedures carefully or risk losing protection. Employees have a short timeframe in which to report alleged retaliation. Misconduct may be reported internally to an inspector general or compliance officer, or externally to a law enforcement officer, regulatory agent or member of Congress.

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Depending on the applicable statute, employees who skip those approved avenues and go directly to the press or publicize disclosures themselves may not be protected. Specific laws also determine the remedies available to whistleblowers. Most federal whistleblower laws grant back wages and compensatory damages. A few, including the Sarbanes-Oxley Act, include bounty awards that can range from 10 percent to 30 percent of fines imposed against noncomplying companies. In 2015, $37 million was paid to whistleblowers under the act.

The specificity of whistleblower laws works against the employer as well as the employee. In Department of Homeland Security v. McLean (2015), the Supreme Court ruled in favor of a federal air marshal who was fired after releasing sensitive information to a newspaper because the Homeland Security Act did not explicitly prohibit such disclosures. Chief Justice Roberts wrote: “Although Congress and the President each has the power to address the Government's concerns, neither has done so. It is not our role to do so for them.”

Separate laws apply to members of the military and intelligence community employees. People in military service are protected from retaliation when they report misconduct either through the chain of command, to the inspector general or to a member of Congress. Since 2012, government whistleblowers employed by intelligence agencies also are granted protection from retaliation. Employees of private intelligence contractors are not protected from employment retaliation for disclosing wrongdoing. Procedures are in place, however, for those employees, as well as military and government agents, to report wrongdoing even when it involves classified information. The misconduct must be of “urgent concern,” may be disclosed only to the appropriate inspector general or a member of Congress and must be transmitted through approved couriers or a security officer. Violation of these procedures could result in prosecution under the Espionage Act.

False Claims. The False Claims Act applies to all federal government spending and permits anyone, not just an employee, who has evidence of fraud to bring a qui tam action (legal Latin shorthand for “he who brings a case on behalf of our lord the King, as well as for himself”). The person who brings the action is called a relator and can be granted up to 30 percent of any judgment against the wrongdoer. Procedural aspects of the law “present many interpretive challenges,” which is why the Supreme Court has taken three False Claims Act cases since 2015. Many more may be on the way, as qui tam claims are on the rise. In 2015 they brought in $2.8 billion to the federal coffers and earned relators almost $6 million. The Court of Appeals for the Fifth Circuit has held that federal employees may bring qui tam actions, but proceedings that risk exposure of classified information will be dismissed.

Whistleblower laws and the False Claims Act encourage reporting of fraud and misconduct, but awareness of their procedures and additional protection for those who deal with sensitive government information can be improved. The inclination to bring wrongdoing to light needs an effective legal outlet; without one, we discourage disclosure, endanger society and risk persecuting the just.

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