As a quick history: the IRS has had a whistleblower program in place for many years.  It is a relatively unknown, unused, and unloved program.  It gave huge discretion of the IRS on who qualified as a relator and how much, if anything, a relator would be paid for their information.  In 1998 at the height of IRS abuse allegation, the Senate started examining the program.  Senator Harry Reid then named the unknown program "Rewards for Rats". 

Isn't it interesting how time and a revised frame can color the lens of what is happening.  In 1998 the frame was overly aggressive IRS.  People believed the IRS auditor and investigators were unjustifiably harassing the poor citizen/public for minor tax inconsistencies.  This led to some internal reforms at the IRS for better public relations. 

However, time changes the lens.  By 2005 people realized major corporations were creating illegal schemes to avoid paying taxes.  New efforts were placed into reviving the unknown whistleblower program  for the IRS.  The effort was led by the well-loved patron saint of whistleblowers and strong anti-fraud Republican Senator Charles (Chuck) Grassley.  Senator Grassley felt that a whistleblower was a patriot infused with the courage to risk losing their jobs by "exposing fraud, waste and abuse in an effort to protect not only the health and safety of the American people but the federal treasury and the taxpayer dollars." (Senator Grassley's floor statement at National Whistleblower Week 2007).  Now that is a far cry from Senator Reid's "Rate" analogy.

With words like that, who could resist passing a new program (created in 2006) to encourage the patriotic act of blowing the whistle on tax cheats?  Well, they didn't want to prosecute just your basic low value tax cheat.  The IRS wants to go after high value tax cheats.  Therefore, they put some parameters on the new program that would keep low value claims at a minimum.  The threshold is that the tax fraud must add up to more then $2,000,000.00 and the net earnings of the tax cheat must be in excess of $200,000 in the year the fraud occurred.  This threshold will hopefully keep nutty neighbors from reporting other nutty neighbors just to be vindictive of some dog droppings on the one neighbor's lawn.

As it turns out, the IRS is already prosecuting these claims.  The program rolled out and the regs were supposed to be done by the end of August, which didn't happen.  Mr. Whitlock assured the TAF conference attendees that he and his team were working on them.  However, until that time, he and three other national processors are reviewing the claims and dolling out the work to IRS field agents.  In fact, they have already paid some pretty big claims out to relators in the past year.

After his seminar speech I found myself with a new respect for the IRS and their agents.  I found that if the agency is as sincere and bright as Mr. Whitlock, that this program is going to work well. 

Actually trusting the IRS.  Now that is Stranger than Fiction.

Brian

In response to this new legislation, Whistleblower Center President Stephen M. Kohn is quoted as as saying "The majority of all civil fraud recoveries in the US are based on whistleblower disclosures. Because of the effectiveness of the False Claims Act, powerful corporate interests have aggressively attacked the law in court, creating loopholes which have undermined the law and cost the taxpayers billions of dollars. The False Claims Act Correction Act is badly needed legislation to stop the hemorrhaging of the public treasury by unscrupulous beltway bandits.”

Important Highlights from the Bill include:

Makes corrections to 31 U.S.C § 3729 removing the requirement that false claims be presented to a government employee.

Amends the FCA to clarify the dismissal of parasitic claims filed based upon publicly disclosed information.

Clarifies that false or fraudulent claims against non-U.S. Government funds under the trust and control of the U.S. Government are subject to recovery under the FCA.

Clarifies a split between Circuit Courts of Appeal as to when a government employee may act as a qui tam relator under the FCA. 

Makes technical and clarifying amendments to the statute of limitations in FCA cases.

Senator Grassley gave a passionate speech when he addressed the Senate introducing the False Claims Correction Act 2007 legislation. In his speech, Senator Grassley states  " the FCA again faces a situation where it may not be as effective as intended. Recent decisions by federal courts have limited the FCA in a way that was not envisioned when I authored the 1986 amendments. ". He goes on to highlight the following three influential FCA cases and their impact on future cases: ex rel. Totten v. Bombardier Corp, Rockwell International Corp. et al. v. United States, and FCA is ex rel. DRC, Inc. v. Custer Battles, LLC.

In ex rel. Totten v. Bombardier Corp, Senator Grassley states that "false claims presented to government grantees, in this case employees at Amtrak, were not actually presented to the federal government. As a result, the government was precluded from recovering money lost to fraud and abuse perpetrated against Amtrak."

In Rockwell International Corp. et al. v. United States, Senator Grassley states that "the court interpreted an area of the False Claims Act, known as the “public disclosure bar,” which prohibits a FCA case from moving forward if the case was based upon publicly disclosed information, such as a government report, unless the whistleblower filing the case was the “original source” of the information. Here, the Supreme Court held that a qui tam whistleblower was barred from receiving a share in any money recovered unless they were the “original source” of all claims ultimately settled. This may not sound like a troublesome decision. However, the impact is that often times a case is brought by a whistleblower on a certain set of facts and then expanded by the Department of Justice who ultimately settles on other grounds. As a result, this case creates a disincentive for a whistleblower to bring forth information about fraud as they may not get to share in any part of the recovery."

In FCA is ex rel. DRC, Inc. v. Custer Battles, LLC,  Senator Grassley states that "a jury found that a defense contractor had defrauded the government of $10 million. However, the judge overturned the jury verdict finding that the money lost was not U.S. Taxpayer money, but was instead Iraqi money under the control of the U.S. Government. As a result of this case, the U.S. Government may not recover for any fraud committed against the U.S. Government if the funds are not American funds, even if the U.S. Government has been entrusted with the management of those funds."

It is refreshing to see a Senator take on the establishment and be the voice for the taxpayers and whistleblowers, even those blowing the whistle against the government.  Earlier this year, we celebrated Whistleblower Week, May 14 - May 18, 2007. At the beginning of the week, Senator Grassley, gave a moving speech to the Senate regarding the importance of Whistleblowers to our country.  This means a lot coming from the man that has been involved with getting critical legislation such as  the Whistleblower Protection Act, the Sarbanes-Oxley Act, and the False Claims Act passed. Also, it is important to note that he is the co-sponsor of  the original S.274, the Federal Employee Protection of Disclosures Act, which provides updates to federal whistleblower protections. As a result of key legislation such as the False Claims Act, the federal government has recovered nearly $20 billion since 1986. This is not a paltry sum of money to ignore. It goes to show you that whistleblowers make a difference, not only on a moral level but also on the bottom line.

Senator Grassley is quoted as saying "I would like to see the President of the United States have a Rose Garden ceremony honoring whistleblowers. This would send a message from the very top of the bureaucracy about the importance and value of whistleblowers. They deserve it, and we all ought to be grateful for what they do and appreciate the very difficult circumstances they often have to endure to do so, sacrificing their family's finances, their employability, and the attempts by powerful interests to smear their good names and intentions." Can you imagine the President of the United States honoring these brave men and women each year?  What a message it would send to corporate America and the branches of government.

The Senator is correct in his assessment that whistleblowers bear a heavy burden, when they stand up for what is right.  Hopefully, he will find supporters in the Senate that will stand with him in passing additional key legislation that will do more to protect Whistleblowers at large around the country.  We can only hope for the best and do everything in our power to ensure that  Senator Grassley has all the support that he needs in this fight for Whistleblower rights. We can start by  contacting our local legislators and encouraging them to support Senator Grassley in his efforts to pass critical Whistleblower legislation. To find your local Senator go to www.senate.gov and type in your state. You can call, write or send an email to express your views on whistleblower legislation. Remember this is a bi-partisan issue and that whistleblower rights affect everyone.