• Industries - Whistleblower Violations

The SEC and CFTC whistleblower programs include anti-retaliation provisions that protect whistleblower employees and allow for complete anonymity with the help of experienced counsel.  The Dodd-Frank Act specifically states that employers may not fire, demote, suspend, threaten, harass, or discriminate against an individual who provides information to or assists the SEC or CFTC. Whistleblowers who suffer from employment retaliation may sue for reinstatement, back pay and any other damages that occurred. Read more about these anti-retaliation and anonymity provisions.

The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1 million in sanctions is ordered. The range for awards is between 10% and 30% of the money collected. Whistleblowers will receive a reward of 10 percent to 30 percent based on the amount the SEC and CFTC collects as a result of the whistleblower’s information, if more than $1 million is collected. Once the SEC recovers more than $1 million, recoveries in related cases by other agencies also are counted toward the whistleblower award. Certain factors will be considered in determining the whistleblower’s reward:

  • The significance of the information provided by the whistleblower.
  • The assistance provided by the whistleblower and the whistleblower’s attorney.
  • The “programmatic interest” of the SEC “in deterring violations of the securities law.”

Government employees and employees of self-regulatory organizations are not eligible for rewards, nor is anyone criminally convicted for the violation that she reports. Moreover, both the SEC and CFTC whistleblower program rules prohibit officers, directors, and those involved in audit and compliance functions from receiving an award, unless the individual has reported internally and the company has failed to take action within 120 days, or if the individual reasonably believes that investors will be substantially injured or that the entity is engaging in conduct that will obstruct the Commission’s investigation. Rewards also cannot be paid for information derived from public disclosures, unless the person was the source of the information.

For these and other reasons, it is important to consult with an experience attorney who is familiar with the SEC Whistleblower Program before filing a whistleblower claim with the SEC.

To qualify for an award under the SEC Whistleblower Program, you must submit information regarding possible securities law violations to the Commission in one of the following ways:

  • Online through the Commission’s Tip, Complaint or Referral Portal; or
  • By mailing or faxing aForm TCR to:

SEC Office of the Whistleblower
100 F Street NE
Mail Stop 5631
Washington, DC 20549
Fax: (703) 813-9322

Likewise, the CFTC relies on the public as an important source of information in carrying out its regulatory and enforcement responsibilities. If you have information about a violation of the Commodity Exchange Act or Commission regulations, you may either file a tip or complaint under the CFTC whistleblower program by filing a Form TCR, or report such violations or other suspicious activities or transactions to the Division of Enforcement.

Kenney & McCafferty whistleblower attorneys have represented many whistleblowers in filing these types of claims and can assist you in filing your claim. If you have knowledge of a securities violation, please contact our SEC and CFTC whistleblower lawyers today. Kenney & McCafferty attorneys will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys during these consultation services are confidential and protected by the attorney-client privilege.

Like the IRS Whistleblower Program, the SEC and CFTC whistleblower programs allow whistleblowers to proceed without an attorney. However, there are important considerations when deciding how to proceed with an SEC or CFTC whistleblower claim. While the exact percentage received by a whistleblower is in the sole discretion of the SEC, the SEC will consider a variety of positive and negative factors. Accordingly, to maximize any potential monetary award, whistleblowers are encouraged to consult with a lawyer familiar with the guidelines and protocols. Moreover, many individuals are concerned they may be complicit in the fraud. An experienced attorney can work with you and with the SEC to help minimize your exposure while working with the SEC.

Please note that if you choose to submit your information anonymously under the SEC Whistleblower Program, i.e., without providing your identity or contact information, you must be represented by an attorney in connection with your submission in order to be eligible for an award. Thus, you may report fraud anonymously, as long as you have retained a lawyer to represent you.

If you have knowledge of securities law violations and would like to discuss the possibility of a whistleblower award under the SEC or CFTC whistleblower programs, please contact our SEC whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation.

Whistleblowers who report securities law violations are entitled to a reward if the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), or any other government entity or regulatory authority recovers funds as a result of the whistleblower’s information.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), commonly known as the financial reform bill. The Act contains provisions that create SEC and CFTC whistleblower reward programs.

The SEC and CFTC whistleblower programs provide for the following:

  1. Whistleblower Rewards: Under the Dodd-Frank Wall Street Reform Act, the SEC and CFTC will pay a whistleblower reward to individuals who provide original information to the SEC or CFTC which results in monetary sanctions exceeding $1 million. The award will range from 10-30% of the amount recovered, and the amount of the award will be determined by the SEC or CFTC. Factors affecting the value of the whistleblower reward include:
  • The significance of the information provided by the whistleblower
  • The degree of assistance provided by the whistleblower and the whistleblower’s counsel
  • The programmatic interest of the SEC in deterring violations of the securities law
  • The extent to which the whistleblower cooperated with the internal compliance department of his or her employer

However, certain whistleblowers are not entitled to receive a reward. These include:

  • Officers or employees of certain government or self-regulatory organizations or those who were officers or employees at the time the information was learned
  • Whistleblowers who are convicted of a criminal violation related to the action for which they supplied the information
  • Whistleblowers who gained the information through performance of an audit required under the securities laws
  1. Job Protection: The new law contains provisions that protect whistleblowers from retaliation state that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. If such retaliation occurs, the whistleblower may sue for reinstatement, back pay, and any other damages that were incurred.
  1. Confidentiality: The new law allows whistleblowers to report fraud anonymously, provided that they have secured legal representation. In certain instances, the whistleblower’s identity may not be revealed to the SEC or the CFTC until it is time to pay the whistleblower reward. No other federal whistleblower program, including the Tax Whistleblower Program and the qui tam provisions of the False Claims Act, safeguard the whistleblower’s confidentially this strongly.

The tax whistleblower attorneys at K&M are committed to protecting your identity from disclosure. Any information you provide to us is protected by attorney-client privilege and cannot be disclosed to anyone outside our firm without your approval. The IRS is also committed to protecting your identity under the Tax Whistleblower Program. If you decide to proceed with your tax whistleblower claim after our free case evaluation, the IRS will keep any information you provide confidential. Unlike some other whistleblower statutes, such as the qui tam provisions of the False Claims Act, the IRS Whistleblower Program does not require the filing of a civil lawsuit. Therefore, there is nothing filed with the court that must be protected from disclosure.

IRS Notice 2008-4 states that the IRS will protect the identity of a claimant to the fullest extent under law. In the rare circumstances where the IRS must reveal the identity of an informant, they will make every effort to let the whistleblower know before proceeding. The Whistleblower Office has also stated that it will strongly consider dismissing any case in which the informant’s identity will be disclosed.

There are certain circumstances which may require your identity to be disclosed:

  • You are called as a witness in a civil or criminal tax fraud case where you are a whistleblower
  • If detailed information you provide is used in a search warrant affidavit that is later disclosed to the taxpayer, your identity may be discernible based upon the information provided in the affidavit

Our tax whistleblower attorneys will analyze these disclosure risks based on the nature of the case, the evidence in your possession, and our discussions with IRS personnel. If we believe there is a strong likelihood that your identity will not remain confidential, we will advise you accordingly before moving forward with your claim. In some instances, there may be additional steps that we can take to lessen the likelihood of your identity being disclosed.

K&M attorneys can answer any questions you have regarding confidentiality under the Tax Whistleblower Program. Our firm is committed to protecting the identity of whistleblowers from public disclosure.

The decision to become an IRS whistleblower can carry serious consequences and should be taken only after careful consideration of potential risks. Those risks can include an impact on the whistleblower’s career, potential civil liability for any improper or illegal conduct associated with whistleblowing activities, and potential criminal liability.

Civil Tax Liability

Any potential tax liability to the whistleblower for the tax underpayment that is being reported must be assessed. There should also be a review of the whistleblower’s status for tax liability unrelated to the whistleblower claim. The IRS will not pay a whistleblower reward until all outstanding tax claims against the whistleblower have been satisfied.

If the IRS determines that the whistleblower has a tax liability, it could choose to pursue a tax claim against the whistleblower without pursuing the whistleblower’s claim.

The whistleblower should also review with counsel the manner in which any documents in support of the claim were obtained. In certain instances, a whistleblower could be subject to a claim for civil liability by the taxpayer if the whistleblower illegally obtained documents to support the claim.

Criminal Tax Liability

Moreover, if the whistleblower participated in a criminal tax fraud scheme that is being reported, the whistleblower could face criminal prosecution as a result of the fraud that is reported. Any potential criminal exposure should be thoroughly evaluated before submitted.

Recently, high profile whistleblowers have been sentenced to prison because of their involvement in the scheme in which they blew the whistle. It is of paramount importance that you select a firm experienced in criminal tax prosecution and criminal defense if there is any issue as to your potential criminal liability.

K&M employs both a former federal tax prosecutor and a former IRS Revenue Agent, giving us the knowledge and experience necessary to provide you with sound advice regarding any potential criminal liability you may face.

Breach of Fiduciary Duty Claims

If you are a lawyer or accountant, the submission of your whistleblower claim may violate certain ethical duties you owe to the taxpayer. In order to safeguard the future of your career, it is crucial that your whistleblower attorney carefully analyze this matter before advising you on whether to proceed with your claim.

This analysis should include whether any attorney-client privilege or accountant-client privilege applies to the information submitted to the Whistleblower’s Office and whether any exception to the privilege applies to the information submitted. The IRS Whistleblower Office has set forth specific procedures addressing the submission of potential privileged information. Without obtaining proper advice on this matter, you may place your law or public accounting license in jeopardy.

Internal Revenue Code Violations

There are also specific sections of the Internal Revenue Code that address the propriety of disclosure of information by tax practitioners. I.R.C. section 7525, enacted in 1998, governs the nature of information considered to be privileged between federally authorized tax practitioners and their clients. Communications related to tax advice between a client and his tax adviser are protected when they would be considered privileged information between the taxpayer and his attorney.

I.R.C. section 7216 makes it a misdemeanor for a tax p

ractitioner to “knowingly or recklessly” disclose information provided in connection with the preparation of tax returns, or to use this information for any other purpose.

These provisions are constantly evolving as the courts and the IRS handle a growing number of whistleblower cases. Therefore, it is important that you consult an experienced tax whistleblower attorney who is aware of the current interpretations of these provisions as well as their legal ramifications.

If you have knowledge of tax underpayment totaling more than $2 million, please contact our tax whistleblower attorneys to ensure that your interests are protected before moving forward with your claim. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.

Under the Tax Whistleblower Program, you will receive a reward if you bring information about tax fraud or underpayment to the attention of the IRS and your information results in the recovery of unpaid tax revenue by the IRS.

How much money can I receive as part of my tax whistleblower reward?

Under the Tax Relief and Health Care Act of 2006, tax whistleblowers may receive a reward ranging from 15% to 30% of the total taxes, penalties, and interest collected by the IRS. The actual percentage awarded to you is based on your contribution to the case.

The Tax Whistleblower Program applies to cases of tax fraud and underpayment totaling at least $2 million. In cases where the taxpayer is an individual, his gross annual income must exceed $200,000. You may still receive an award for cases that do not meet this minimum threshold; however, the amount of your reward is covered by the IRS Form 211 reward program under which rewards are discretionary and the maximum reward is 15 percent.

In general, only the first person to file a tax whistleblower claim will be eligible to receive a reward. Therefore, it is in your best interest to file your claim as soon as possible. Once a determination of an award has been made by the Whistleblower Office, you are entitled to review the basis for the Whistleblower Office decision. If upon review you believe the amount of the reward is inadequate, an appeal challenging the amount of the reward can be filed with the United States Tax Court. The IRS can reject a claim for several reasons, and it typically will not give specific information about why it will not pursue a claim. If a claim is rejected, we will use our experience to assess whether or not an appeal is warranted, and if so, we will represent you in an appeal.

 

What is the timeframe for filing a tax whistleblower claim?

The statute of limitations on tax whistleblower claims is three years from the date the tax return was filed. However, this timeframe extends to six years if the claim involves an omission in excess of 25% of the gross income stated on the tax return filed with the IRS. The statute of limitations does not apply if a false or fraudulent return was filed with the IRS in an attempt to evade taxes.

How long will the claim process take?

IRS investigations generally take years to complete. Though the IRS is expediting the whistleblower process, it has estimated that historically whistleblower claims have taken on average seven years to complete. The IRS investigates the claim, and if taxes are owed, it must either settle the matter with the taxpayer or take legal action. The taxpayer has rights and can appeal any decision made by the IRS. The IRS does not generally pay rewards until the claim has been completely resolved and all unpaid taxes, penalties, and interest has been collected. However, in some circumstances the whistleblower may successfully petition for a partial reward before the case is complete under the partial payment provisions of the Internal Revenue Service Manual. In some cases, substantial partial payments can be made years before final resolution of the case. You should discuss with your lawyer whether your claim may qualify for a partial payment.

Can I appeal the amount of the reward?

Yes. Once a determination of an award has been made by the Whistleblower Office, you are entitled to review the basis for the Whistleblower Office decision. If upon review you believe the amount of the reward is inadequate, an appeal challenging the amount of the reward can be filed with the United States Tax Court.

What if the IRS rejects my claim?

The IRS can reject a claim for several reasons, and it typically will not give specific information about why it will not pursue a claim. If a claim is rejected, we will use our experience to assess whether or not an appeal is warranted.

Do I have to be a United States citizen to be eligible for a tax whistleblower reward?

No, you do not have to be a United States citizen to receive a tax whistleblower reward. The Tax Whistleblower Program is open to foreign whistleblowers who provide information resulting in the recovery of unpaid taxes totaling at least $2 million.

Yes, many states have passed their own False Claims Acts to discourage frauds perpetrated against state governments. Qui tam lawsuits may be filed by whistleblowers under certain state false claims laws if the fraud involves Medicaid funds or money from state and local agencies.

The existence of these state statutes raises several important issues which must be analyzed by your attorneys when deciding where to file your claim. Fraud may apply to state or municipal funds but not to federal funds. In these cases, you may have a valid qui tam claim under your applicable state statute, but you may not have a claim under the Federal False Claims Act.  Or, fraud may apply to both federal and state funds. In these cases, you may be entitled to recover under both the federal False Claims Act and the applicable state False Claims Act. This is common in cases involving Medicaid fraud. Since Medicaid is funded by both the federal and state governments, claims regarding Medicaid fraud schemes may be brought in both federal and state court.

Even if your state does not have a False Claims Act, you should ask your lawyer about the possibility of other state False Claims Acts applying to your particular case. Fraudulent schemes committed against the government are often perpetrated throughout multiple states. Therefore, it may be possible to file a qui tam claim in another state with a statute that applies to your case.

Pursuing applicable state claims as well as federal claims can provide an important means of recovery. By leveraging both federal and state statutes, you may be able to substantially increase the amount of your whistleblower reward.

To encourage individuals to report unlawful activity under the False Claims Act, certain legal protections are afforded to whistleblowers. The two most important protections are the protection from retaliatory action and the provision of conditional anonymity.

Whistleblower Protection from Retaliation

Subsection (h) of the False Claims Act provides legal grounds for litigation against the whistleblower’s employer or former employer if he or she was discharged, demoted, suspended, threatened, or harassed by his or her employer in retaliation for pursuing a qui tam claim. Legal action based on subsection (h) is separate from the original qui tam suit and damages recovered are owed directly to the whistleblower; no percentage of the damages is taken by the government.

Therefore, it is crucial that you inform your attorney at the start of the case if there is any potential for a subsection (h) claim. Furthermore, your qui tam lawyer should be informed of any change in your employment status during the investigation or prosecution of the case so that your original Complaint can be amended to include a subsection (h) claim.

Employers who violate subsection (h) are liable for “special damages” the whistleblower suffers due to retaliation, twice the back pay owed with interest, and reinstatement without loss of seniority. Sometimes subsection (h) claims are litigated or settled well after a settlement has been reached in the original Complaint. This means that you should have a qui tam attorney that can pursue subsection (h) damages without assistance from the Justice Department.

Conditional Anonymity

Qui tam complaints remain under seal for a minimum of 60 days, during which time the whistleblower’s identity remains confidential and the contents of the Complaint are only made known to the Court and to government investigators. As long as the investigation continues, the government often requests that the seal be extended in order for the whistleblower to retain anonymity until the investigation is complete. Investigations into False Claims Act violations can often last for two to three years, but the whistleblower’s anonymity and the seal on the Complaint are not guaranteed to last beyond the 60 day minimum.

The defendant is not informed of the qui tam Complaint’s existence until the seal is lifted. However, defendants often learn of the investigation and the complaint through other means before that time.

If the government, through the Department of Justice, decides to intervene in the qui tam action, the Complaint is served on the defendants, who then learn the identity of the whistleblower. If the Department of Justice does not join the case or intervene, the whistleblower may continue litigating without government assistance or give up the case.

If a whistleblower decides to continue litigation after the government has declined to participate, the seal on the Complaint will be lifted and the Complaint served on the defendant. However, if the whistleblower discontinues litigation, the Complaint could potentially remain sealed, maintaining the anonymity of the whistleblower and preventing the defendant from discovering the Complaint. Even if the seal is lifted after the case is dropped, the Complaint will be a document in the public record and will not be served on the defendant. In this case, the defendant may never learn the whistleblower’s identity.

If the government attempts to negotiate a settlement with the defendant, the Department of Justice may request a court order to partially unseal the Complaint. Generally, in these cases the whistleblower’s identity can be redacted from the documents provided to the defendant. However, depending on the nature and specificity of the Complaint, the defendant may infer or deduce the identity of the whistleblower.

No whistleblower should file a Complaint expecting permanent or even long-term anonymity. Usually, the whistleblower’s identity is kept secret for a temporary period after the Complaint is filed. In successful qui tam cases, the whistleblower’s identity is always revealed once a judgment or settlement is reached. While there can be no guarantee of anonymity after the conclusion of an unsuccessful qui tam action, the whistleblower often remains undiscovered by the defendant or the public.

The Privacy Rule included in the 1996 Health Insurance Portability and Accountability Act, commonly known as HIPAA, came into effect in 2003. This portion of HIPAA protects the confidentiality of individual health information and imposes criminal and civil penalties for noncompliance. While HIPAA is recognized as relatively effective in protecting patient privacy despite the cost of implementation and compliance, the Privacy Rule has also had the unfortunate side effect of discouraging some potential whistleblowers from reporting healthcare fraud. These whistleblowers fear that they might incur some of the harsh penalties for noncompliance with HIPAA.

However, HIPAA actually addresses this problem by allowing an exemption for whistleblowers under specific circumstances. Under the Permitted Use/Disclosure section of the Privacy Rule, individuals who believe that a “covered entity” has behaved unlawfully, violated professional/clinical standards, or has endangered someone, may disclose protected health information to a “health oversight agency,” “public health authority,” or an attorney retained to determine the whistleblower’s legal options regarding the misconduct she wishes to report.

This is a very important exemption to HIPAA’s Privacy Rule because often the disclosure of key documents is necessary for proving illegal activities, such as Medicare fraud, pharmaceutical kickbacks, intentional upcoding, and Stark Statute violations, which would otherwise be restricted by HIPAA.
If you have knowledge of healthcare fraud of any kind but are worried about violating HIPAA requirements, the qui tam attorneys at Kenney & McCafferty can explain the whistleblower exemption for you and discuss the merits of a potential qui tam lawsuit under the False Claims Act.

Blowing the whistle on healthcare fraud is an important public service that physicians and other healthcare professionals can provide. Uncovering fraud saves millions in taxpayer dollars that can be used to provide healthcare for Medicare and Medicaid recipients, and it can be done while protecting patient privacy and maintaining HIPAA compliance. In addition, the federal government offers significant whistleblower rewards for those with the courage to report Medicare fraud and other forms of healthcare malfeasance.

Under the False Claims Act, whistleblowers receive a portion of the amount recovered in a qui tam lawsuit, usually between 15% and 30%. The percentage typically depends on the significance of the contribution the whistleblower makes to the case’s prosecution.
If the government intervenes in the case and recovers funds through a settlement or a trial, the whistleblower, or “relator,” is entitled to 15 percent to 25 percent of the recovery. If the government does not intervene in the case and it is pursued by the whistleblower team, the whistleblower reward is between 25 and 30 percent of the recovery. After a successful case is concluded, the whistleblower negotiates the percentage with the government with assistance from her qui tam attorney. The court is charged with assigning the whistleblower reward if an agreement cannot be reached.

However, not all whistleblowers are entitled to the minimum 15% share of the recovery. Whistleblowers convicted of a crime tied to the fraud they are reporting receive no reward at all. Moreover, a whistleblower whose case is based on publicly available information or who is held to have “planned or initiated” the fraud may receive substantially less than 15% of the recovered sum.
Under the False Claims Act, convicted defendants in qui tam actions are liable for triple the government’s loss plus an additional fine ranging between $5,500 and $11,000 per false claim. However, the government may reach a settlement with the defendant that is substantially less than the maximum possible penalty, usually forgoing the punitive fines and accepting between two and three times the government losses. The percentage for whistleblower compensation is taken from the settlement amount, not from the maximum penalty. If you believe the settlement reached is unreasonable, you may object, but the likelihood of successfully challenging the government settlement is very small except under rare, egregious circumstances.
According to the Department of Justice, the average whistleblower reward in successful qui tam cases is around 17%.

If you have information regarding fraud against the government, we urge you to step forward.  We have the knowledge and experience to represent you in claims governed by the False Claims Act.  Contact Us.

In the event that the government is being defrauded, the False Claims Act permits private persons to individuals to file lawsuits on the government’s behalf in order to recover financial damages. These lawsuits are known as “qui tam” actions, and the person bringing the case is known as a “relator.”

For instance, let’s say that a healthcare provider intentionally submits claims to Medicare for services that are not covered and receives payment for those claims. If this fraud action is exposed, the healthcare provider can be held liable in court under the False Claims Act.

If you have knowledge of this type of fraud against the government, you can file a whistleblower claim against the defrauder. This law provides you with a strong incentive to do so. Under the provisions of the False Claims Act, the whistleblower can receive 15% to 30% of the amount recovered by the government. The amount rewarded varies, depending on several factors — including whether or not the government decides to intervene in the case.

The tax whistleblower attorneys at K&M are committed to protecting your identity from disclosure. Any information you provide to us is protected by attorney-client privilege and cannot be disclosed to anyone outside our firm without your approval. The IRS is also committed to protecting your identity under the Tax Whistleblower Program. If you decide to proceed with your tax whistleblower claim after our free case evaluation, the IRS will keep any information you provide confidential. Unlike some other whistleblower statutes, such as the qui tam provisions of the False Claims Act, the IRS Whistleblower Program does not require the filing of a civil lawsuit. Therefore, there is nothing filed with the court that must be protected from disclosure.

IRS Notice 2008-4 states that the IRS will protect the identity of a claimant to the fullest extent under law. In the rare circumstances where the IRS must reveal the identity of an informant, they will make every effort to let the whistleblower know before proceeding. The Whistleblower Office has also stated that it will strongly consider dismissing any case in which the informant’s identity will be disclosed.

There are certain circumstances which may require your identity to be disclosed:

  • You are called as a witness in a civil or criminal tax fraud case where you are a whistleblower
  • If detailed information you provide is used in a search warrant affidavit that is later disclosed to the taxpayer, your identity may be discernible based upon the information provided in the affidavit

Our tax whistleblower attorneys will analyze these disclosure risks based on the nature of the case, the evidence in your possession, and our discussions with IRS personnel. If we believe there is a strong likelihood that your identity will not remain confidential, we will advise you accordingly before moving forward with your claim. In some instances, there may be additional steps that we can take to lessen the likelihood of your identity being disclosed.

K&M attorneys can answer any questions you have regarding confidentiality under the Tax Whistleblower Program. Our firm is committed to protecting the identity of whistleblowers from public disclosure.

The decision to become an IRS whistleblower can carry serious consequences and should be taken only after careful consideration of potential risks. Those risks can include an impact on the whistleblower’s career, potential civil liability for any improper or illegal conduct associated with whistleblowing activities, and potential criminal liability.

Civil Tax Liability

Any potential tax liability to the whistleblower for the tax underpayment that is being reported must be assessed. There should also be a review of the whistleblower’s status for tax liability unrelated to the whistleblower claim. The IRS will not pay a whistleblower reward until all outstanding tax claims against the whistleblower have been satisfied.

If the IRS determines that the whistleblower has a tax liability, it could choose to pursue a tax claim against the whistleblower without pursuing the whistleblower’s claim.

The whistleblower should also review with counsel the manner in which any documents in support of the claim were obtained. In certain instances, a whistleblower could be subject to a claim for civil liability by the taxpayer if the whistleblower illegally obtained documents to support the claim.

Criminal Tax Liability

Moreover, if the whistleblower participated in a criminal tax fraud scheme that is being reported, the whistleblower could face criminal prosecution as a result of the fraud that is reported. Any potential criminal exposure should be thoroughly evaluated before submitted.

Recently, high profile whistleblowers have been sentenced to prison because of their involvement in the scheme in which they blew the whistle. It is of paramount importance that you select a firm experienced in criminal tax prosecution and criminal defense if there is any issue as to your potential criminal liability.

K&M employs both a former federal tax prosecutor and a former IRS Revenue Agent, giving us the knowledge and experience necessary to provide you with sound advice regarding any potential criminal liability you may face.

Breach of Fiduciary Duty Claims

If you are a lawyer or accountant, the submission of your whistleblower claim may violate certain ethical duties you owe to the taxpayer. In order to safeguard the future of your career, it is crucial that your whistleblower attorney carefully analyze this matter before advising you on whether to proceed with your claim.

This analysis should include whether any attorney-client privilege or accountant-client privilege applies to the information submitted to the Whistleblower’s Office and whether any exception to the privilege applies to the information submitted. The IRS Whistleblower Office has set forth specific procedures addressing the submission of potential privileged information. Without obtaining proper advice on this matter, you may place your law or public accounting license in jeopardy.

Internal Revenue Code Violations

There are also specific sections of the Internal Revenue Code that address the propriety of disclosure of information by tax practitioners. I.R.C. section 7525, enacted in 1998, governs the nature of information considered to be privileged between federally authorized tax practitioners and their clients. Communications related to tax advice between a client and his tax adviser are protected when they would be considered privileged information between the taxpayer and his attorney.

I.R.C. section 7216 makes it a misdemeanor for a tax p

ractitioner to “knowingly or recklessly” disclose information provided in connection with the preparation of tax returns, or to use this information for any other purpose.

These provisions are constantly evolving as the courts and the IRS handle a growing number of whistleblower cases. Therefore, it is important that you consult an experienced tax whistleblower attorney who is aware of the current interpretations of these provisions as well as their legal ramifications.

If you have knowledge of tax underpayment totaling more than $2 million, please contact our tax whistleblower attorneys to ensure that your interests are protected before moving forward with your claim. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.

Under the Tax Whistleblower Program, you will receive a reward if you bring information about tax fraud or underpayment to the attention of the IRS and your information results in the recovery of unpaid tax revenue by the IRS.

How much money can I receive as part of my tax whistleblower reward?

Under the Tax Relief and Health Care Act of 2006, tax whistleblowers may receive a reward ranging from 15% to 30% of the total taxes, penalties, and interest collected by the IRS. The actual percentage awarded to you is based on your contribution to the case.

The Tax Whistleblower Program applies to cases of tax fraud and underpayment totaling at least $2 million. In cases where the taxpayer is an individual, his gross annual income must exceed $200,000. You may still receive an award for cases that do not meet this minimum threshold; however, the amount of your reward is covered by the IRS Form 211 reward program under which rewards are discretionary and the maximum reward is 15 percent.

In general, only the first person to file a tax whistleblower claim will be eligible to receive a reward. Therefore, it is in your best interest to file your claim as soon as possible. Once a determination of an award has been made by the Whistleblower Office, you are entitled to review the basis for the Whistleblower Office decision. If upon review you believe the amount of the reward is inadequate, an appeal challenging the amount of the reward can be filed with the United States Tax Court. The IRS can reject a claim for several reasons, and it typically will not give specific information about why it will not pursue a claim. If a claim is rejected, we will use our experience to assess whether or not an appeal is warranted, and if so, we will represent you in an appeal.

 

What is the timeframe for filing a tax whistleblower claim?

The statute of limitations on tax whistleblower claims is three years from the date the tax return was filed. However, this timeframe extends to six years if the claim involves an omission in excess of 25% of the gross income stated on the tax return filed with the IRS. The statute of limitations does not apply if a false or fraudulent return was filed with the IRS in an attempt to evade taxes.

How long will the claim process take?

IRS investigations generally take years to complete. Though the IRS is expediting the whistleblower process, it has estimated that historically whistleblower claims have taken on average seven years to complete. The IRS investigates the claim, and if taxes are owed, it must either settle the matter with the taxpayer or take legal action. The taxpayer has rights and can appeal any decision made by the IRS. The IRS does not generally pay rewards until the claim has been completely resolved and all unpaid taxes, penalties, and interest has been collected. However, in some circumstances the whistleblower may successfully petition for a partial reward before the case is complete under the partial payment provisions of the Internal Revenue Service Manual. In some cases, substantial partial payments can be made years before final resolution of the case. You should discuss with your lawyer whether your claim may qualify for a partial payment.

Can I appeal the amount of the reward?

Yes. Once a determination of an award has been made by the Whistleblower Office, you are entitled to review the basis for the Whistleblower Office decision. If upon review you believe the amount of the reward is inadequate, an appeal challenging the amount of the reward can be filed with the United States Tax Court.

What if the IRS rejects my claim?

The IRS can reject a claim for several reasons, and it typically will not give specific information about why it will not pursue a claim. If a claim is rejected, we will use our experience to assess whether or not an appeal is warranted.

Do I have to be a United States citizen to be eligible for a tax whistleblower reward?

No, you do not have to be a United States citizen to receive a tax whistleblower reward. The Tax Whistleblower Program is open to foreign whistleblowers who provide information resulting in the recovery of unpaid taxes totaling at least $2 million.

Tax whistleblower claims can raise complex legal and accounting issues that require the assistance of an experienced whistleblower attorney to ensure that you maximize your tax reward.  It is in your best interest to engage a knowledgeable attorney to ensure that your initial and subsequent submissions to the IRS be thorough and compelling.  Our firm will provide a free case evaluation of your claim as part of this process. To learn more, click here.

A tax whistleblower can proceed without representation. However, there are a number of important considerations when deciding whether to obtain representation. The Whistleblower Office receives thousands of claims annually and most are not acted upon. The first service counsel can provide is to ensure that the claim is submitted in the most compelling and persuasive format, including an analysis of all appropriate documentary support of the claim as part of the submission.

Counsel should also evaluate any potential civil or criminal tax liability that could apply to the whistleblower as well any potential civil liability that could arise as a result of the whistleblower improperly obtaining documents or potentially breaching any fiduciary duties to the clients. In performing such an analysis, counsel should be aware of the laws governing fiduciary duties, attorney-client privilege, accountant-client privilege, and the law governing theft of company materials. These are all issues that can arise during the course of an investigation.

The IRS also does not want to have attorney-client or accountant-client materials presented to them in support of a whistleblower claim because it can potentially taint their investigation. Counsel should analyze all documentary evidence and testimony presented to ensure that it is not breaching the rules established regarding privileged information.

Once the claim is submitted, experienced counsel and experienced tax accountants can increase the likelihood of success of the claim and help maximize your tax reward by ongoing cooperation with the investigation. Kenney & McCafferty’s forensic accountant is an experienced former Revenue Agent who is familiar with all elements of an audit plan, and in some cases the IRS has accepted proposed subpoenas to assist their investigation.

Once the case is complete, your counsel should make a presentation to the Whistleblower Office setting forth the reasons the reward should be maximized. It is important that a record of all contributions to the case be maintained over the course of the investigation so that it can be referenced at the conclusion of the case. Once the award is made, counsel can review the Whistleblower Office’s rationale for the reward and if it is necessary, appeal the Whistleblower Office’s determination to the United States Tax Court. Counsel should be admitted to the U.S. Tax Court and be prepared to pursue an appeal if necessary.

The passage of the Tax Relief and Health Care Act of 2006 by Congress made significant alterations to the previously existing tax whistleblower program, providing informants with much greater incentive to report knowledge of tax fraud to the IRS. Prior to 2006, the IRS had full discretion on payouts, and you could not appeal its determination of your reward. The new law substantially raised the maximum potential reward and creates an appeals process to ensure these awards are fairly determined. To learn more, click here.

The SEC and CFTC whistleblower programs include anti-retaliation provisions that protect whistleblower employees and allow for complete anonymity with the help of experienced counsel.  The Dodd-Frank Act specifically states that employers may not fire, demote, suspend, threaten, harass, or discriminate against an individual who provides information to or assists the SEC or CFTC. Whistleblowers who suffer from employment retaliation may sue for reinstatement, back pay and any other damages that occurred. Read more about these anti-retaliation and anonymity provisions.

The Commission is authorized by Congress to provide monetary awards to eligible individuals who come forward with high-quality original information that leads to a Commission enforcement action in which over $1 million in sanctions is ordered. The range for awards is between 10% and 30% of the money collected. Whistleblowers will receive a reward of 10 percent to 30 percent based on the amount the SEC and CFTC collects as a result of the whistleblower’s information, if more than $1 million is collected. Once the SEC recovers more than $1 million, recoveries in related cases by other agencies also are counted toward the whistleblower award. Certain factors will be considered in determining the whistleblower’s reward:

  • The significance of the information provided by the whistleblower.
  • The assistance provided by the whistleblower and the whistleblower’s attorney.
  • The “programmatic interest” of the SEC “in deterring violations of the securities law.”

Government employees and employees of self-regulatory organizations are not eligible for rewards, nor is anyone criminally convicted for the violation that she reports. Moreover, both the SEC and CFTC whistleblower program rules prohibit officers, directors, and those involved in audit and compliance functions from receiving an award, unless the individual has reported internally and the company has failed to take action within 120 days, or if the individual reasonably believes that investors will be substantially injured or that the entity is engaging in conduct that will obstruct the Commission’s investigation. Rewards also cannot be paid for information derived from public disclosures, unless the person was the source of the information.

For these and other reasons, it is important to consult with an experience attorney who is familiar with the SEC Whistleblower Program before filing a whistleblower claim with the SEC.

To qualify for an award under the SEC Whistleblower Program, you must submit information regarding possible securities law violations to the Commission in one of the following ways:

  • Online through the Commission’s Tip, Complaint or Referral Portal; or
  • By mailing or faxing aForm TCR to:

SEC Office of the Whistleblower
100 F Street NE
Mail Stop 5631
Washington, DC 20549
Fax: (703) 813-9322

Likewise, the CFTC relies on the public as an important source of information in carrying out its regulatory and enforcement responsibilities. If you have information about a violation of the Commodity Exchange Act or Commission regulations, you may either file a tip or complaint under the CFTC whistleblower program by filing a Form TCR, or report such violations or other suspicious activities or transactions to the Division of Enforcement.

Kenney & McCafferty whistleblower attorneys have represented many whistleblowers in filing these types of claims and can assist you in filing your claim. If you have knowledge of a securities violation, please contact our SEC and CFTC whistleblower lawyers today. Kenney & McCafferty attorneys will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys during these consultation services are confidential and protected by the attorney-client privilege.

Like the IRS Whistleblower Program, the SEC and CFTC whistleblower programs allow whistleblowers to proceed without an attorney. However, there are important considerations when deciding how to proceed with an SEC or CFTC whistleblower claim. While the exact percentage received by a whistleblower is in the sole discretion of the SEC, the SEC will consider a variety of positive and negative factors. Accordingly, to maximize any potential monetary award, whistleblowers are encouraged to consult with a lawyer familiar with the guidelines and protocols. Moreover, many individuals are concerned they may be complicit in the fraud. An experienced attorney can work with you and with the SEC to help minimize your exposure while working with the SEC.

Please note that if you choose to submit your information anonymously under the SEC Whistleblower Program, i.e., without providing your identity or contact information, you must be represented by an attorney in connection with your submission in order to be eligible for an award. Thus, you may report fraud anonymously, as long as you have retained a lawyer to represent you.

If you have knowledge of securities law violations and would like to discuss the possibility of a whistleblower award under the SEC or CFTC whistleblower programs, please contact our SEC whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation.

Whistleblowers who report securities law violations are entitled to a reward if the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), or any other government entity or regulatory authority recovers funds as a result of the whistleblower’s information.

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), commonly known as the financial reform bill. The Act contains provisions that create SEC and CFTC whistleblower reward programs.

The SEC and CFTC whistleblower programs provide for the following:

  1. Whistleblower Rewards: Under the Dodd-Frank Wall Street Reform Act, the SEC and CFTC will pay a whistleblower reward to individuals who provide original information to the SEC or CFTC which results in monetary sanctions exceeding $1 million. The award will range from 10-30% of the amount recovered, and the amount of the award will be determined by the SEC or CFTC. Factors affecting the value of the whistleblower reward include:
  • The significance of the information provided by the whistleblower
  • The degree of assistance provided by the whistleblower and the whistleblower’s counsel
  • The programmatic interest of the SEC in deterring violations of the securities law
  • The extent to which the whistleblower cooperated with the internal compliance department of his or her employer

However, certain whistleblowers are not entitled to receive a reward. These include:

  • Officers or employees of certain government or self-regulatory organizations or those who were officers or employees at the time the information was learned
  • Whistleblowers who are convicted of a criminal violation related to the action for which they supplied the information
  • Whistleblowers who gained the information through performance of an audit required under the securities laws
  1. Job Protection: The new law contains provisions that protect whistleblowers from retaliation state that employers may not fire, demote, suspend, threaten, harass, or discriminate against a whistleblower. If such retaliation occurs, the whistleblower may sue for reinstatement, back pay, and any other damages that were incurred.
  1. Confidentiality: The new law allows whistleblowers to report fraud anonymously, provided that they have secured legal representation. In certain instances, the whistleblower’s identity may not be revealed to the SEC or the CFTC until it is time to pay the whistleblower reward. No other federal whistleblower program, including the Tax Whistleblower Program and the qui tam provisions of the False Claims Act, safeguard the whistleblower’s confidentially this strongly.

 

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