Whistleblowers and Cybersecurity Fraud
In October 2021, the U.S. Department of Justice launched a Civil Cyber-Fraud Initiative, aimed at using the False Claims Act to pursue government contractors and grant recipients who engage in cybersecurity-related fraud. The Initiative targets businesses that knowingly
- provide the government with deficient cybersecurity products or services, or
- misrepresent their cybersecurity practices or protocols, or
- fail to monitor and promptly report cybersecurity breaches.
The Initiative is designed to encourage whistleblowers to come forward and report misconduct that threatens the security of the government’s sensitive information and data systems. Such misconduct puts at risk not only U.S. national security information but also the vast amounts of personal, financial, and health-related information collected by the government from U.S. individuals and businesses — much of which is shared with government contractors and others in the private sector.
When businesses and individuals fail to meet their cybersecurity obligations — by providing the government with deficient cybersecurity products or services, or by neglecting to safeguard sensitive information within their own data systems — the government is entitled to seek financial penalties and treble damages for losses incurred as a result. Under the False Claims Act, whistleblowers who uncover such misconduct are entitled to share in the government’s monetary recovery.
As it does in other areas, the government relies heavily on insiders who come forward as whistleblowers. The government has emphasized:
The Civil Cyber-Fraud Initiative will utilize the False Claims Act to pursue cybersecurity related fraud by government contractors and grant recipients. The False Claims Act is the government’s primary civil tool to redress false claims for federal funds and property involving government programs and operations. The act includes a unique whistleblower provision, which allows private parties to assist the government in identifying and pursing fraudulent conduct and to share in any recovery and protects whistleblowers who bring these violations and failures from retaliation.
The potential rewards for whistleblowers in this area are illustrated by a case involving Aerojet Rocketdyne Inc. Aerojet provided propulsion and power systems for launch vehicles, missiles, and satellites to the Defense Department, NASA, and other federal agencies. The whistleblower in that case, a former senior director of cybersecurity at Aerojet, alleged that the company had misrepresented its compliance with the government’s cybersecurity requirements. In July 2022, Aerojet agreed to pay $9 million to settle the allegations, and the whistleblower received $2.61 million as his share of the recovery.
In other recent cases, the government settled claims against a contractor for failing to secure the electronic medical records of government personnel serving in Iraq; a contractor that failed to secure personal information in a federally funded children’s health insurance website; and a contractor that provided federal agencies with an information technology service that failed to meet certain cybersecurity requirements.
Because the False Claims Act has a “first-to-file” rule, a whistleblower’s claim may be barred if another whistleblower has previously filed the same or a similar claim. To guard against that result, it is important to consult promptly with experienced False Claims Act counsel if you have information that may be of interest to the government.
Getnick Law is one of the nation’s preeminent whistleblower practices, having recovered more than $1 billion for the government and record awards for its clients. Learn more about our Whistleblower Law and Litigation practice, including claims and cases brought under the federal False Claims Act, the New York False Claims Act, the SEC and CFTC Whistleblower Programs, the IRS Whistleblower Program, and the Anti-Money Laundering and Kleptocracy Whistleblower Programs.
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