Corporations as Whistleblowers: Stopping Fraud and Promoting Business Goals
At a recent Federal Bar Association webinar, Michael Granston, Deputy Assistant Attorney General in the Department of Justice, observed that the False Claims Act qui tam whistleblower law is more than a highly effective anti-fraud tool – it is also a tool against anti-competitive conduct.
The concept is simple: honest companies trying to compete in a marketplace that is corrupted by fraud can be whistleblowers too. Often, they are best-positioned to understand the detail and complexities of fraud by competitors that is causing a loss of business. Using the False Claims Act qui tam law could not only achieve stability in the marketplace, but could earn the honest company a generous financial reward.
Getnick Law wrote about this concept back in 1995 in an article in the New York Times entitled: “Corporate Heroes for Uncle Sam.” At the time, we represented a medical device distributor who blew the whistle on competitors who were flooding the market with lymphedema pumps that were billed to Medicare at vastly inflated prices. After scores of phone calls to Medicare in an effort to stop the fraud, our client learned about the False Claims Act qui tam law. A settlement and whistleblower award soon followed, and the scam stopped. In the Times article, we pointed out that corporations blowing the whistle on rivals can “make money for themselves and be seen as heroes that clean up their industries and recoup taxpayer dollars . . . . The False Claims Act permits companies that adhere to the law to level the playing field . . . . It does so not only with an eye to bottom line profitability, but to the greater public good.”
So why aren’t companies doing this all the time? To be sure, there have been False Claims Act settlements in which companies blew the whistle on competitors, but the opportunities have not been widely embraced.
The first step in that direction is to change the whistleblower paradigm. Whistleblowers are not necessarily individuals — or the enemy. Whistleblowers are rational actors seeking to stop fraud for their own benefit and for the public good. Thus understood, smart companies suffering a competitive disadvantage due to fraud will do well to write the False Claims Act into their business plans.
Read more about our whistleblower and business integrity practices.