How do you know when a whistleblower remedy is effective? When it drives employers to avoid violations, and establish internal protections for whistleblowers, that would be a good clue. That is what has happened with Sen. Claire McCaskill's amendment to the American Recovery and Reinvestment Act (ARRA). The McCaskill Amendment provides whistleblowers with a right to jury trials, compensatory damages, and investigations by Inspectors General.
The management-side law firm, Epstein Becker & Green, issued a "Client Advisory" last week to warn employers about their enhanced liability to whistleblowers under the McCaskill Amendment. Here is what they are telling corporations who receive government contracts under the stimulus package:
Employers receiving covered funds should take proactive steps now to prevent whistleblower claims under ARRA. As part of a comprehensive compliance program, it may be worthwhile to assure appropriate procedures are in place to prevent and detect mismanagement, fraud, waste, situations creating public danger, abuse or unlawful activity concerning covered funds. Broadening existing hotline or other reporting channels and complaint procedures to cover matters under ARRA may be in order.†ARRA also may occasion review and updating of policies and related orientation, training and monitoring programs, with specific regard to employee whistleblower issues that accompany the receipt of covered funds.
This is precisely the impact we hope for from enacting strong whistleblower provisions. There were no such warnings issued after Congress passed billions of dollars in TARP spending. Only when employers know that their employees are being encouraged to detect and report fraud – and when those employees have effective legal protections and rewards – will employers start the reforms necessary to change their culture. That will save the taxpayers billions of dollars.
Taxpayers will save even more money if Congress acts promptly to:
1. Make the current ARRA protections permanent and apply them to all taxpayer spending;
2. Extend the whistleblower remedies to all employees – including federal employees; and
3. Fix procedural defects in the current False Claims Act so that all employees are strongly encouraged to expose waste, fraud and corruption in the spending of taxpayer dollars.
Disclosures by employee-insiders (namely, whistleblowers) are the single most important factor in detecting fraud. Stephen M. Kohn, President of the National Whistleblowers Center issued the following statement: “The stimulus whistleblower provision has already begun to have an effect on the internal corporate culture which may significantly reduce fraud and create an environment where employees are encouraged to tell the truth.”