Why Steven Solomon Is Wrong About False Claims Act Whistleblower Awards

FCAOn December 30, 2014, the New York Times “DealBook” section posted a column by Professor Steven Solomon slamming whistleblower awards for rewarding wrongdoers who engage in fraud, likening the awards to giving bank robbers a cut of the loot. Solomon’s column, “Whistle-Blower Award Lures Wrongdoers Looking to Score,” suggests that whistleblowers are criminals who set up fraudulent schemes to make millions by flipping the script and reporting the very fraud that they initiated.

This was evidently Solomon’s “first thought” when he read that the United States had recovered a remarkable $5.7 billion in 2014 from False Claims Act (“FCA”) cases. Rather than praise the incredible impact of recovering nearly $6 billion of stolen taxpayer money, Solomon argues for reduced whistleblower awards and defends his “first thought” with anecdotal, incomplete examples of two whistleblowers who helped the government recover billions of dollars.

First, Solomon did get some things right: the FCA did return nearly $6 billion to the United States in 2014. The United States did pay more than $430 million of that money to the whistleblowers who played a critical role in bringing the fraud to light. And the rise of the whistleblower does provide critical, invaluable resources to overworked, underfunded government agencies. But, beyond that, Solomon is wrong on nearly every other count.

Despite Solomon’s primary concern that the law needs to be rewritten to prevent wrongdoers from profiting, the FCA already includes protections that limit a wrongdoer’s ability to recover a whistleblower award. An “architect of the fraud,” as the term is known by FCA practitioners, faces a reduced relator’s share award if the person “planned and initiated the violation” and no award if the person is convicted of criminal conduct relating to his role in the fraud. Solomon does not, and cannot, offer any argument as to why these protections are insufficient; rather he ignores that they exist at all, probably because they don’t fit his narrative.

Instead of acknowledging the protections, Solomon supports his theme with two incomplete anecdotes about Robert Madsen and Bradley Birkenfeld, whom he categorizes as “bad people.” I don’t know either man, and I hazard a guess that Solomon doesn’t either. It is far beyond me, and should be beyond him, to characterize either one as a “bad person.” Whatever their character may be, what’s clear is that neither was an “architect of the fraud.”

As one Wall Street Journal article noted, Madsen’s “bosses started cutting his hours after he raised concerns about properties potentially being overvalued at the expense of borrowers and investors,” and that he pursued his case, although it was a longshot that would require him to live a double-life for more than four years, because he knew that the fraud that he witnessed “undermines virtually every bond, every tranche, every investment instrument out there.”

As for Birkenfield, his own lawyers “acknowledged their client wasn’t above reproach,” but he did not plan or initiate the fraud orchestrated by the massive company he worked for, and the information he provided was instrumental in bringing down many Swiss protections for wealthy tax evaders. Since his case was resolved, more than 33,000 individuals have confessed to tax fraud and the United States has recovered more than $5 billion in taxes and penalties.

Soloman zealously quotes from Matt Levine’s column in the Bloomberg View to cast the whistleblowers in a negative light, yet conveniently doesn’t include Levine’s conclusion that the Bank of America whistleblowers that Levine highlighted “couldn’t have expected” the huge payday since the “whole process is random and time-consuming.”  In fact, he noted that, “[y]ou’d have to be quite a diabolical genius to go to work doing bad things just to one day reap the whistle-blowing rewards.”

But more importantly, Solomon’s two examples are not representative of the thousands of courageous whistleblowers who sacrifice so much to do good.  He doesn’t mention the pharmaceutical sales representative who spent years working undercover for the government, only to be forced into early retirement because of health consequences from the relentless stress. He doesn’t mention the school admissions representative who walked away from his job out of sheer disgust with the empty promises made to students leading to oppressive and non-dischargeable student debt.  He doesn’t mention the school dean who took every dime of her recovery and donated it to her church while she continued to work to support her family.

These people aren’t bank robbers trying to get a cut of the money they stole. They are the innocent bystanders who walked in on a bank robbery and want to help make sure the bank gets its money back.

In seven years of representing whistleblowers, I have seen a common thread among each client who sat in front of me for an initial interview, their eyes stressed and often brimmed with tears: they don’t want to do this. They don’t want to keep secrets from family and friends and potentially jeopardize their careers. They most certainly did not seek out or initiate fraud in hopes of winning the lottery.

Rather, they have to do this.  They have a relentless moral compass that will not allow them to turn their back on the harm being done to the United States and other taxpayers. They know that whether they walk away wealthy or with nothing, they will have a clear conscience.

Whether intended or not, Solomon’s article serves as a mouthpiece for business-oriented groups like the Chamber of Commerce that would have the FCA eviscerated so that corporations can keep the money they steal from taxpayers. Instead of hoping for an even greater recovery in 2015, Solomon inappropriately casts doubt on whistleblowers’ motives. I can tell you that the people who come to our office to expose fraud are typically incredibly hard-working, career-driven, motivated individuals who have tried everything they can do to fix the problems they’ve encountered at their jobs and have been forced to find another way to right the wrongs.

I make sure to say “thank you” to every single client because there were nearly six billion reasons in 2014 alone why the United States needs more people like them.

Whistleblowers put it all on the line for American taxpayers – including me and Professor Solomon — and for that, they deserve our admiration.

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