Understanding Whistleblower Compensation Award

Learn About the Federal Laws that Provide for Whistleblower Compensation

There are several reasons to come forward when you have information about a violation of federal law, regulation, or rule. Fraud and other abuses cost taxpayers hundreds of billions of dollars annually, while bribery, corruption, securities law violations, and other crimes undermine confidence in U.S. government institutions both domestically and abroad. As a result, coming forward is unquestionably the right thing to do, and whistleblowers are entitled to strong protections under federal law.

Whistleblowers are also entitled to receive compensation awards in some cases. While individual whistleblower rewards vary, these awards are often substantial. In recent years, the Internal Revenue Service (IRS) and U.S. Securities and Exchange Commission (SEC) have paid multiple whistleblower awards in excess of $100 million, and the U.S. Department of Justice (DOJ) pays hundreds of millions of dollars to qui tam relators under the False Claims Act each year.

When Are Federal Whistleblowers Entitled to Compensation Awards?

Not all federal whistleblower statutes include provisions for a whistleblower reward. In fact, in comparison to the total number of federal whistleblower statutes, the number of statutes that include compensation provisions is relatively small.

But, those that include compensation provisions apply in a wide range of circumstances. As a result, many, if not most, federal whistleblower complaints have the potential to result in a compensation award if the government’s enforcement efforts are successful. This includes whistleblower complaints filed with, or investigated by, the following agencies:

Internal Revenue Service (IRS)

The IRS is authorized to pay whistleblower compensation awards under Section 7623 of the Internal Revenue Code. As the IRS’s Whistleblower Office explains, “An award worth between 15 and 30 percent of the total proceeds that IRS collects could be paid, if the IRS moves ahead based on the information provided. Under the law, these awards will be paid when the amount identified by the whistleblower (including taxes, penalties and interest) is more than $2 million. If the taxpayer is an individual, they must have at least $200,000 in gross income.”

As explained in Section 7623(b)(1) of the Internal Revenue Code, when a whistleblower is entitled to an award for reporting information to the IRS, “[t]he determination of the amount of such award by the Whistleblower Office shall depend upon the extent to which the individual substantially contributed to such action.” Additionally, Section 7623(b)(3) clarifies that awards may be limited or denied in cases where whistleblowers are implicated in the underlying violation or convicted of a crime as a result of the government’s enforcement efforts. However, these circumstances are rare, and our whistleblower lawyers can help you make informed decisions if you have concerns about facing scrutiny from the IRS if you decide to come forward.

U.S. Commodity Futures Trading Commission (CFTC)

The CFTC is authorized to pay whistleblower compensation awards under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). To become eligible for an award from the CFTC, a whistleblower must follow the CFTC’s specific whistleblower complaint procedures, which include initiating the process by filing a Form TCR – Tip, Complaint, or Referral with the Commission.

Under the Dodd-Frank Act, whistleblower awards can range from 10 to 30 percent of the amount that the CFTC collects through an enforcement action based on the information a whistleblower provides, provided that the CFTC collects at least $1 million. Here, too, the percentage that a whistleblower is entitled to receive is based on the extent to which he or she assists with the government’s investigation and enforcement efforts.

U.S. Department of Justice (DOJ)

The DOJ compensates whistleblowers who come forward with information about fraud, waste, and abuse (FWA) under the False Claims Act. The False Claims Act is unique from other federal whistleblower statutes in that it requires whistleblowers (or “qui tam relators”) to file their complaints in federal court instead of filing with the DOJ directly.

The False Claims Act is extremely broad in scope, and a significant percentage of all whistleblower complaints filed with the federal government each year are filed by qui tam relators. This includes most complaints filed against federal contractors (including defense contractors), healthcare providers that bill Medicare and Medicaid, and federal grantees. In qui tam cases under the False Claims Act, relators are entitled to receive between 15 and 30 percent of the government’s recovery, with the specific percentage determined based on the substantiality of their contributions during the process.

U.S. Securities and Exchange Commission (SEC)

The SEC whistleblower program also awards compensation to whistleblowers under the Dodd-Frank Act. Similar to whistleblowers who file their complaints with the CFTC, those who file with the SEC’s Office of the Whistleblower are entitled to receive between 10 and 30 percent of the government’s recovery, provided that the government’s recovery exceeds $1 million. The SEC has issued the federal government’s largest-ever whistleblower awards, and its whistleblower program is among the most active within the federal government.

While the SEC issues awards under the Dodd-Frank Act, award eligibility is not limited to whistleblowers who disclose violations of this statute. The SEC also compensates eligible whistleblowers who disclose violations of the Securities and Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, SEC Rule 10b-5, and other laws and regulations falling within the SEC’s enforcement jurisdiction.SEC awards are made from the Investor Protection Fund.

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55th Speaker, U.S. House of Representatives (ret.)

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John W. Sellers

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Nicholas B. Johnson

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Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

Additional Information About Federal Whistleblower Compensation Awards

For individuals who are considering blowing the whistle with the federal government, it is important to understand that securing a compensation award requires substantial contributions to the government’s enforcement efforts—and, even when a whistleblower makes substantial contributions, a compensation award is not guaranteed. As a result, prospective whistleblowers should be prepared to move forward irrespective of the possibility of being compensated for their time and effort.

With that said, at Oberheiden P.C., we can assess your likelihood of receiving a compensation award before you commit to moving forward. Not only do our federal whistleblower lawyers have extensive experience representing whistleblowers, but many also have prior experience handling federal investigations and prosecutions at the DOJ. For an overview of the awards the CFTC, DOJ, IRS, and SEC have issued to whistleblowers in recent years, you can read our breakdown of the average whistleblower settlement.

FAQs: Payments to Federal Whistleblowers from the CFTC, DOJ, IRS, and SEC

Speak with a Federal Whistleblower Lawyer at Oberheiden P.C. in Confidence

If you have questions about serving as a federal whistleblower, we invite you to schedule a complimentary initial consultation at Oberheiden P.C. We represent federal whistleblowers nationwide. To speak with one of our senior lawyers in strict confidence, please call 888-680-1745 or tell us how we can contact you online today.