Memo to Whistleblowers: Ignore Michael Douglas

by Kurt Schulzke

Who should a whistleblower see first: an attorney or the FBIMichael Douglas says the FBI.  Why would the FBI hire Douglas — who is not an attorney — to broadcast legal advice to whistleblowers?   Maybe because Douglas did such a great job convincing cinema audiences that he was Gordon Gekko.  Whatever their motives, Douglas and the FBI are wrong.  In the vast majority of cases, whistleblowers are better off getting legal counsel before contacting law enforcement.  Why might this be true?

First, attorneys who know the whistleblower process are best positioned to evaluate, package and communicate the whistleblower’s information in a way that attracts the most attention from courts and government investigators.  With thousands of False Claims Act, SEC and IRS whistleblower* claims filed each year, only those that really stand out are likely to get investigative attention.

Second, many whistleblowers are close enough to the fraud that they may become targets of any resulting investigation.  As the Miranda Warning goes, “Anything you say may be used against you in a court of law.”  With this risk in mind, it is safest to get legal counsel first before communicating with law enforcement.  Along similar lines, a whistleblower attorney is best prepared to help a prospective whistleblower assess other potential risks and rewards in a particular situation.  For a variety of reasons, it may be best to wait to blow the whistle or simply walk away from the environment in which the fraud is occurring.  Thoroughly evaluating these risks and rewards requires an understanding of the rules and political dynamics of the whistleblower arena that few non-attorneys possess.

Third, the FBI itself has no formal whistleblower reward program and no duty to inform whistleblowers about their rights to rewards.  I have personally encountered whistleblowers who have worked for years helping law enforcement only later discovering that their award-eligibility — about which they were never informed — has expired for failure to timely file a claim.  This is not to say that the FBI or other law enforcement routinely fail to inform whistleblowers of their right to an award.  But it happens.  So-called “sub (h)” claims for retaliatory behavior are similarly time-sensitive.  Bringing the case to an attorney is the best way to avoid the unhappy result of ending up on the wrong side of a statute of limitations (lawyer speak for “filing deadline”).

Bottom line:  In nearly all circumstances, whistleblowers with information about fraud — whether false claims and contracting fraud, SEC fraud or tax fraud — should reach out for legal advice first before taking any information to the FBI or other law enforcement.

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*At this point — as recently noted by fellow TAF member Erika Kelton — it’s not clear that any whistleblower case will get meaningful attention from the IRS until the agency undergoes major internal reform, but that’s another story.

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