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The Savvy Whistleblower - A False Claims Act Whistleblower Blog

Prepping for the CFE

cpe-logoFor the last few months, I have been diligently prepping for the CFE exam. Before that, I prepped not so diligently.  It’s the kind of exam that requires a lot of energy and focus.  If you don’t take it seriously, you aren’t going to pass.

CFE is short for Certified Fraud Examiner. To get those initials behind my name, I have to absorb two huge manuals of information about fraud, have a certain amount of professional experience in anti-fraud work, get recommendations from three anti-fraud professionals, and pass this test.  Everything’s done, except for the test.

There are four sections for the test – Financial Transactions and Fraud Schemes, Fraud Prevention and Deterrence, Investigation, and Law.  Topics range from studies about why people commit fraud to what has to be done to protect electronic records when one is seizing a computer.  There’s a lot of emphasis on how to function as an expert witness.  As an attorney with a CFE, I don’t expect to testify as an expert witness much, but the information is helpful for generating ideas for dismantling opposing experts when they cross my path.

My biggest problem is remembering some of the formulas for analyzing spreadsheets.  I’m doing timed practice exams now; the software allows one minute and fifteen seconds for each question, not a lot of time.  I like to write the formula out on paper and then match it up with the correct answer.  That takes too long, so I have to memorize these things, but tricky wording and hasty reading usually combine for an incorrect answer.  Bother…..

I will get the designation of CFE soon.  I’ve been a CFS, Certified Fraud Specialist, for a few years, and I’ve passed more bar exams than most attorneys will ever choose to take.  I just need to figure out how to improve my recall of those formulas.  After the CFE, I’m done with adding letters to my name for a while.  I’ve got all the letters I need.



Focus on Defendants’ Wrongdoing against Government & Shareholders, not Against You.

The biggest problem that I have when dealing with inquiries about whistleblower rewards is getting the whistleblower to focus on what the potential defendant did to defraud the government and/or the shareholders.  The whistleblower would rather talk about what the defendant did to him or her.


Here’s how these talks go:


Whistleblower:  So, about three months after that, the boss gives me a bad performance appraisal. It was retaliation because I made that report.


Me:  What did you report?


Whistleblower:  I told them it was illegal, and right after that, my boss sent me an email telling me I shouldn’t be abrasive.  That wasn’t a problem before.


Me:  What was illegal?


Whistleblower:  It’s RETALIATION!


Me:  I meant your report….the report that caused the retaliation.  What was the company doing that you thought was illegal?


Whistleblower: Well, they were overcharging, so I wrote the email, and then, right after that my boss had my office moved.


Me:  Who was being overcharged?  The government?


Whistleblower:  Yeah, of course.  The boss just didn’t want to hear it.   And, I was the only woman there, so I think I upset the good ol’ boys.


Me:  Okay, what were they overcharging?


You get the idea.


I know it’s difficult when one is still reeling from office bullying and retaliation, but to make a whistleblower reward claim possible, the potential claimant has to shift focus.  The question is NOT what bad things did your boss do to you; it’s how did the company cheat the government or mislead the shareholders?


If you’re serious about trying to get a whistleblower reward, focus on the wrongdoing against the government and/or the shareholders.  Put your own situation aside – at least for the moment.

New York’s FCA Provides Unique Incentives for Whistleblowers

In an attempt to capitalize on the success of the federal False Claims Act, many states have enacted their own version of a qui tam statute. Through the many state FCAs, a whistleblower with a meritorious claim can help state governments recapture state funds and receive a reward for their efforts.

The most robust state False Claims Act went into effect in New York in 2010. Unlike other states that focus primarily on health care fraud, New York included false state tax claims as part of its program. The NY Attorney General Office has formed a Taxpayer Protection Unit, led by Randall Fox, Bureau Chief.

The NY FCA creates the possibility of a “perfect storm” for whistleblowers attempting to fight finance industry misconduct. New York is the home of many financial giants and the Martin Act, a vigorous securities law. The combination of these three factors in the New York whistleblowing arena – the potential to use the Martin Act as an underlying violation, the state tax qui tam opportunity, and whistleblower friendly FCA provisions – makes contemplation of filing a New York state False Claims action worthwhile for most whistleblowers that are serious about enacting systems change.

The SEC Whistleblowers Award Program

On July 21, 2010, the “Dodd-Frank Wall Street Reform and Consumer Protection Act” established a whistleblower program that enables the SEC to pay an award, under regulations prescribed by the SEC and subject to certain limitations, to eligible whistleblowers who:

 voluntarily provide the SEC

 original information

about a violation of the federal securities laws

in writing

that leads to the successful enforcement of a covered judicial or administrative action,

or a related action resulting in monetary sanctions

exceeding $1 million.

The award amount is required to be between 10 percent and 30 percent of the total monetary sanctions collected in the Commission’s action or any related action such as in a criminal case. Awards will be paid out of the statutorily-created Investor Protection Fund, which has a balance in excess of $450 million as of August 2, 2011.

On May 25, 2011, the Securities and Exchange Commission adopted Final Rules to implement the Dodd-Frank whistleblower program. The Final Rules will be effective on August 12, 2011. After August 12, 2011, individuals wishing to be considered for an award under the Whistleblower Program will be required to submit the online TCR questionnaire or the newly approved Form-TCR. The updated online questionnaire and Form-TCR will be accessible on this website beginning on August 12, 2011.

Anonymous Reporting

The SEC allows whistleblowers to submit information anonymously. However, if the whistleblower wants to be considered for an award from the whistleblower program while remaining anonymous, the program requires that the information be submitted through an attorney who stands in for the whistleblower, in addition to providing the whistleblower with legal advice.

Anti-retaliation Protection

The Act expressly prohibits retaliation by employers against individuals who become whistleblowers under SEC rules, even if they do not recover a whistleblower award, and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers in violation of the Act.

Could Lindsay Lohan and Stephen Baldwin Have Been Nabbed by Tax Whistleblowers?

If you read something about a seizure and Lindsay Lohan this week, no, it wasn’t some drug and alcohol induced problem.  The IRS seized Lindsay’s bank accounts for unpaid taxes.  Lohan owes about $234,000 in back taxes.  The New York Post says that Lindsay was “freaking out” and wants it known that the failure to pay the debt was not her fault.  The article went on to say that Lohan’s managers are addressing the problem and expect to have it resolved by the end of the year. Continue reading

The Return of Snake Oil Pitches?

Working off-label marketing cases opened my eyes to some really disgusting and frightening prescription writing practices.  Off-label marketing is the practice of selling a drug for purposes for which it is not approved by the FDA.  While off-label marketing of medication is often compared to the old time practice of selling “snake oil,” today’s version is far more dangerous.  And no one is immune. Continue reading

But it’s not Fraud, is it?

While I was listening to the audience respond to my presentation at a fraud specialist convention, I realized that some folks have a more narrow definition of fraud than I do.  Many accountants believe fraud is a criminal act only.  They could be missing out on whistleblower rewards. Continue reading