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Whistleblower Blog

IRS Whistleblower Rewards to Convicted UBS Whistleblower Birkenfeld? The Rule of Law Will Sort It Out.

In “Protecting Whistleblowers from Criminal Prosecution,” we expressed our amazement at how UBS “whistleblower” Brad Birkenfeld got himself prosecuted for a federal felony while attempting to set himself up for rewards through the new IRS Whistleblower Program. Birkenfeld’s case is highlighted in recent articles by Lynnley Browning in Friday’s New York Times and by Martha Brannigan in Saturday’s Miami Herald.

To attorneys with prosecution experience who represent whistleblowers, it is shocking that Birkenfeld apparently missed a clear opportunity to avoid prosecution altogether by simply “coming clean” and telling the whole truth about his own actions at the outset.

We have a much different take on Birkenfeld’s case than those who suggest it should scare away potential IRS whistleblowers. Whistleblowers who are willing to tell the truth from the start can easily avoid Birkenfeld’s fate, so long as they follow the law and counsel’s advice to disclose all. At the same time, we take issue with critics who say Birkenfeld should not even be considered for an IRS Whistleblower reward, since the “rule of law” should determine the answer to that question.

First, Birkenfeld’s case should make other potential IRS whistleblowers careful about pursuing IRS whistleblower claims, but not fearful. Most IRS whistleblowers face no realistic chance of prosecution, especially since the government often must depend on whistleblower information to make cases.

Even those relatively few whistleblowers with possible exposure such as Birkenfeld (who admitted to engaging in a tax fraud scheme) can often negotiate protection from prosecution, but only if they tell the whole truth from the start, and follow the rules for obtaining protection. This was a topic in the “IRS Whistleblower Boot Camp” panel discussion that I led this past March, with panelists including IRS Whistleblower Office Director Steve Whitlock–how to protect the whistleblower who has potential exposure.

Why Birkenfeld apparently thought he could get away with withholding information from the government about his own wrongdoing–a foolish move to us–remains a mystery, even after we reviewed his sentencing transcript. That horrendous judgment call distinguishes Birkenfeld’s case from all other whistleblower cases we have seen.

At Birkenfeld’s sentencing, prosecutor Kevin Downing explained that Birkenfeld’s information was extremely valuable to the IRS, and that Birkenfeld probably would not have been prosecuted had he simply been forthcoming by disclosing his own misconduct in assisting tax evasion:

“BUT FOR MR. BIRKENFELD FAILING TO DISCLOSE HIS INVOLVEMENT WITH THE FRAUD AND THE U.S. CLIENTS THAT HE AIDED AND ASSISTED IN TAX EVASION, I BELIEVE WE WELL WOULD HAVE NONPROSECUTED MR. BIRKENFELD. BUT GIVEN THE FACT THAT HE REFUSED TO PROVIDE THAT INFORMATION AND LED US DOWN A COURSE WHERE WE HAD TO START [TO] INVESTIGATE MR. BIRKENFELD AND HIS ACTIVITIES, THAT IS WHY WE ARE HERE TODAY, THAT IS WHY HE WAS INDICTED, AND THAT’S WHY HE PLED.” (Birkenfeld Sentencing Tr. 12-13)(emphasis supplied).
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IRS “Voluntary Disclosure” Program Inundated by More Than 14,000 Taxpayers

We have followed with great interest the IRS Voluntary Disclosure Program, especially after the UBS settlement created fear of discovery in many U.S. taxpayers with offshore accounts.

IRS Commissioner Doug Shulman announced that the IRS Voluntary Disclosure Program was flooded with submissions by more than 14,000 taxpayers, according to the Wall Street Journal.

IRS Whistleblower cases have been impacted–and in some cases probably pre-empted–by the submissions of recalcitrant taxpayers to the IRS Voluntary Disclosure Program. The IRS Criminal Investigative Division in certain areas
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New SEC Whistleblower Rewards and Whistleblower Protections Approved by House Committee–But Improvements Are Needed

Since the Madoff and Stanford schemes proved ruinous to so many investors, many have asked why the SEC has no meaningful “whistleblower” program to expose wrongdoing, a topic we have written about previously.

Perhaps Harry Markopolis’ voice is finally being heard, albeit faintly. Last week, the House Financial Services Committee approved legislation that would expand both whistleblower rewards and whistleblower protections, among other things.

Still, past experience with the False Claims Act and the IRS Whistleblower statute shows that the proposed rewards need to be beefed up to be effective.

The “Investor Protection Act of 2009” (excerpted below) also would increase the SEC’s budget and make other changes designed to strengthen enforcement.

The new rewards to whistleblowers would be up to 30% of monetary sanctions of more than $1 million:

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New ‘‘Health Care Fraud Enforcement Act of 2009’’ Includes Health Care Whistleblower Provisions Aimed at Kickbacks

The battle against those who steal taxpayer dollars through Medicare fraud and other health care fraud took a step forward this week. The Senate is now considering the “Health Care Fraud Enforcement Act,” which will enhance the government’s tools used to investigate and remedy Medicare and Medicaid fraud.

After a Senate Judiciary Committee hearing Wednesday on “Effective Strategies for Preventing Health Care Fraud,” Senators Leahy, Kaufman, Specter, Kohl, Schumer, and Klobuchar sponsored the new anti-fraud measure.

Excerpts of the Senate announcement follow:

The bill makes straightforward but critical improvements to the federal sentencing guidelines, to health care fraud statutes, and to forfeiture, money laundering, and obstruction statutes, all of which would strengthen prosecutors’ ability to combat this particularly destructive form of fraud. These improvements include:

o Sentencing increases: The bill directs the Sentencing Commission to increase the guidelines range for health care fraud offenses and clarifies that the full potential scope of the fraud should be considered at sentencing.

o Redefining “health care fraud offense”: The bill includes all health care crimes within the definition of “health care fraud offense,” regardless of where they are codified. (ERISA, drug marketing, and kickback crimes are currently not included) This change will make available to law enforcement the full range of antifraud tools, including criminal forfeiture and obstruction penalties, to combat these offenses.

o Improving whistleblower claims: Kickbacks lead to unnecessary and risky medical care and pervert the doctor-patient relationship. This bill clarifies that all payments made pursuant to illegal kickbacks are false for purposes of the False Claims Act.

o Creating a common-sense mental state requirement for health care fraud offenses: Some courts have held that defendants must be aware that their conduct violates a specific provision of criminal law in order to be held accountable. This bill restores the original intent of Congress that a person is guilty of a health care offense if he knowingly does what the law forbids.

o Increasing funding: Money spent on health care fraud prevention and enforcement is returned manifold through costs savings and civil and criminal recoveries. This bill authorizes a modest, yet significant, increase in federal antifraud spending of $20,000,000 per year through 2016.

The new bill would add to legislation earlier this year to strengthen law enforcement statutes aimed at fraud, the Fraud Enforcement and Recovery Act.

Of particular importance to qui tam whistleblower cases under the False Claims Act, the nation’s major whistleblower law, the new bill removes any ambiguity that “kickbacks” violate the False Claims Act. The official summary discusses kickbacks in section 2(c):

Section 2(c). Kickbacks
All too often, health care providers secure business by paying illegal kickbacks, which needlessly increase health care risks and costs. When a doctor’s independent judgment is compromised by a kickback, the patient faces the risk that the doctor is making decisions that are not in the patient’s best interest. In addition, excessive payments to doctors increase health care costs, may result in unfair competition, and may compromise medical research independence and the standards of scientific integrity.

The Department of Justice has had success both prosecuting illegal kickbacks and pursuing False Claims Act (FCA) matters predicated on underlying violations of the Anti-Kickback Statute (AKS). Nevertheless, defendants in such FCA cases continue to mount legal challenges. A court recently held that, even though a device company may have paid a kickback to a doctor to use a particular medical device, the bill for the procedure to implant the device was not false because the claim was submitted by the innocent hospital, and not by the doctor. United States ex rel. Thomas v. Bailey, 2008 WL 4853630 (E.D. Ark.) (Nov. 6, 2008). In other words, a claim that results from a kickback and that is false when submitted by a wrongdoer is laundered into a “clean” claim when an innocent third party finally submits the claim to the government for payment. This has the effect of insulating both the payor and the recipient of the kickback from FCA liability. This obstacle to a successful FCA action particularly limits Department’s ability to recover from pharmaceutical and device manufacturers, because in such instances the claims arising from the illegal kickbacks typically are not submitted by the physicians that received the kickbacks, but by pharmacies and hospitals that had no knowledge of the underlying unlawful conduct.

This section remedies the problem by amending the AKS to ensure that all claims resulting from illegal kickbacks are false, even when the claims are not submitted directly by the wrongdoers themselves. (Notably, in such circumstances, neither AKS nor FCA liability will lie against an innocent third party that submitted the claim but lacked the requisite intent required under those statutes.)

The full text of the bill is below:
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Health Care Fraud Strike Force Targets Medicare and Medicaid Fraud

With the nation’s health care costs growing, a DOJ and HHS initiative to combat health care fraud continues to show progress.

Building on past enforcement efforts, in May 2009 the government announced its Health Care Fraud Prevention and Enforcement Action Team (HEAT), as part of what is now a Cabinet-level battle against Medicare fraud. To date in FY 2009, the Department of Justice has recovered close to one billion dollars in health care fraud cases, and has obtained 300 convictions.

Last week, the government announced
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New False Claims Act Amendments Strengthen Enforcement of Health Care Fraud and Procurement Fraud Laws

Defrauding the government of taxpayer dollars has gotten tougher over the past five months.

Important changes to the nation’s primary anti-fraud statute, the False Claims Act, took effect on May 20, 2009, when the Fraud Enforcement and Recovery Act of 2009 became law.

Among the most significant changes, Congress clarified and corrected the False Claims Act by legislatively overruling certain court decisions that sought to limit the scope of the Act, including Allison Engine Co. v. United States ex rel. Sanders, 128 S. Ct. 2123 (2008); United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004), cert. denied, 544 U.S. 1032 (2005); and United States ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. 2005), rev’d, 562 F.3d 295 (4th Cir. 2009).

These important 2009 changes to the False Claims Act include the following:

1. The amendments expand the definition of “claim,” and fraud directed against government contractors, grantees and other recipients is now plainly covered by the law.

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Part 2: IRS Whistleblower Program Report by Treasury Inspector General for Tax Administration (TIGTA)

We wrote yesterday about the just-released report on the new IRS Whistleblower Program by the Treasury Inspector General for Tax Administration (TIGTA). The “rest of the story” should be told.

Some history is essential to evaluate how far the handling of whistleblower (or “informant”) claims has progressed since the newly created IRS Whistleblower Office was formed in early 2007, and what is still needed.

Although information provided by whistleblowers is extremely effective in exposing fraud, before 2006 Congress had not authorized an effective IRS whistleblower rewards program–and some in Congress affirmatively opposed one.

Some of this history is described in a 2006 report by TIGTA, which helped prompt Congress to create the new IRS Whistleblower Rewards Program. That 2006 report described the value of informant claims–and also the absence of any centralized process within the IRS for coordinating those claims. It described what the new IRS Whistleblower Office Director and still-to-be-hired staff would inherit in February 2007.

First, the 2006 IG Report leaves no doubt about how valuable “informant” information has been to the IRS–even when there was no coordination of informant claims:

The Informants’ Rewards Program has significantly contributed to the IRS’ efforts to enforce tax laws, but additional management focus could enhance the effectiveness of the Program as an enforcement tool and make the process more accommodating to informants. Our analysis of IRS data indicated that examinations initiated based on informant information were often more effective and efficient than returns initiated using the IRS’ primary method for selecting returns for examination.

Nonetheless, perhaps based in part on the past hostility toward the IRS’s making effective use of whistleblowers before 2006, the old “informant” program was no program at all. This was the “mess” that the new Whistleblower Office Director and tiny staff of four inherited and had to start revamping in 2007, as described by TIGTA’s 2006 report:
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IRS Whistleblower Program: Inspector General Urges Whistleblower Protection from Retaliation and Administrative Changes

Today the Treasury Inspector General for Tax Administration (“TIGTA”) released a Report on the IRS Whistleblower Program that urges Congress to protect IRS whistleblowers from retaliation by employers, and recommends various administrative changes to the Program.

The Report’s title, “Deficiencies Exist in the Control and Timely Resolution of Whistleblower Claims,” is misleading to this writer, who has followed the progress of the new Program since its inception. Before Congress created the new IRS Whistleblower program in December 2006, the Inspector General had observed
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IRS Whistleblower Office Issues Latest Annual Report to Congress

The IRS Whistleblower Office has released its Annual Report to Congress, for the fiscal year ended September 30, 2008. Some highlights are below:

First, the IRS Whistleblower Program has experienced explosive growth since Congress authorized these new IRS Whistleblower rewards in December 2006.

According to this Report, “the initial results suggest that whistleblowers with significant knowledge are coming forward as a result of the changes to the award program. We received claims that appear to meet the section 7623(b) criteria on 46
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Health Care Fraud Lawyers to Analyze Recent Amendments to False Claims Act

At the “Advanced Health Law” seminar on October 9, attorneys prosecuting and defending cases of alleged health care fraud will discuss the important new amendments to the False Claims Act. I am honored to be the panelist who will discuss these important new provisions from the perspective of representing whistleblowers (known as “relators”) who bring qui tam whistleblower cases under the False Claims Act.

These significant changes to the False Claims Act took effect on May 20, 2009, when the Fraud Enforcement and
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In Largest False Claims Act Case Over Mortgage Fraud, Bank of America to Pay $1 Billion

Since the 2008 financial collapse, many have called for imposing liability on those whose fraud fueled the crisis.

In this early phase of what we predict will be a wave of financial fraud cases, the Justice Department announced today the largest False Claims Act settlement to date over mortgage fraud. Bank of America has agreed to pay $1 billion to resolve allegations that the Bank, through Countrywide Financial Corporation and some of its subsidiaries and affiliates, engaged in underwriting and origination mortgage fraud.

DOJ
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IRS Whistleblower Claims Explored at Heckerling Institute, the Leading Conference for Estate & Trust Lawyers and Estate Planners

The University of Miami’s Heckerling Institute last week brought together the nation’s leading estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals. For the first time, these estate planning professionals delved into how estate and gift tax issues are the subjects of many IRS Whistleblower claims.

This program was organized by Marty Basson, who recently retired from the IRS Whistleblower Office and hung out his shingle (now providing a wealth of knowledge to the private bar), after a distinguished career as the IRS authority on estate and gift tax issues.

Marty has long served on the Heckerling Institute faculty at the University of Miami. Marty is also a charter member of the IRS Estate and Gift Tax National Advisory Panel, a select group of IRS attorneys who assist in forming nationwide policy decisions in the estate and gift tax area.

Marty asked me to join him and Dawn Applebaum of the IRS Whistleblower Office for a Heckerling panel discussion last week on the IRS Whistleblower Program in the estate and gift tax arena. While a few professionals in attendance had already filed IRS Whistleblower claims, the vast majority had not.

Heckerling provided a first class forum to address many of the “hot” issues in the tax whistleblower program. I was honored to join Marty and Dawn as the private whistleblower attorney who provided the perspective of whistleblowers in the IRS Whistleblower Program.

Once Congress created the new IRS Whistleblower Program in December 2006, the IRS Whistleblower Office was unsure whether it would receive many estate tax and gift tax claims. It received far more estate and gift tax claims than anticipated.

Consider a typical case of a divorced couple who both know that a parent has hidden accounts offshore. When that parent dies, the estranged spouse knows that the offshore accounts will not likely appear on the estate tax return. Such information about tax evasion is very useful to the Service, so that honest taxpayers do not bear more than our fair share of the burden.

Our Heckerling discussion covered many, many aspects of the IRS Whistleblower Program in a spirited discussion that ran out of time. Marty was suddenly free to express his own observations, not simply the official position of the IRS.

Among the topics were recent Tax Court opinions on protecting the confidentiality of whistleblowers and of taxpayer information in appeals, and the protections of taxpayer information in proposed new Tax Court Rule 345.

I was asked to discuss steps to protect whistleblowers from criminal and civil liability, which has been an important issue in past presentations after UBS whistleblower Bradley Birkenfeld found himself prosecuted for a federal offense. Marty also asked me to discuss the view of numerous tax whistleblowers as their claims progress through the process.
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How Whistleblowers in Qui Tam, IRS, and SEC Whistleblower Cases Must Protect Email Communications

At the Healthcare Fraud Institute this past week, I was asked to address what steps whistleblowers should take to ensure confidentiality of emails with their lawyers. Although qui tam cases under the False Claims Act were the focus of our discussion, the same principles apply to tax whistleblowers and SEC whistleblowers.

Potential whistleblowers should never use their company’s email system, or any email account shared with or accessible to another person, for communicating with their attorney or for gathering information or evidence to report to the government.

Although the law encourages whistleblowers to report fraud, whistleblowers can create unnecessary problems for themselves by not following this rule.

First, emails between whistleblowers and their attorneys are privileged and confidential, but the privilege can disappear and be waived if the communication is disclosed to others.

Second, qui tam whistleblower cases under the False Claims Act are filed with a court order “sealing” the case from public view, while the government investigates. If an email accidentally exposes the case, the whistleblower may have violated the court’s “seal” order.

Third, alerting a defendant company that the whistleblower has reported the company’s fraud to the government is almost certain to provoke retaliation against an employee who is a whistleblower. Immediate suspension or firing often follows. Although the False Claims Act and the SEC and CFTC whistleblower laws create remedies for retaliation, those remedies take time to achieve. They will not pay the whistleblower’s mortgage next month–or this year.

We advise all of our clients that they must protect the confidentiality of their emails. Many people do not realize that emails sent from a company’s computer system usually leave some record, even if the employee is accessing a personal Gmail account.
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Qui Tam Whistleblower Cases Under False Claims Act Explained

I have been asked to publicize a seminar at which I am speaking on handling qui tam whistleblower cases under the False Claims Act, the nation’s primary whistleblower law addressing fraud that steals government funds. Here is the announcement:

AAJ will hold a “Qui Tam” Teleseminar on December 6, 2011 at 2:00 pm EST. With recently amended whistleblower laws and several high profile settlements, lawyers need to understand the procedural complexities and pitfalls in qui tam whistleblower cases. Cosponsored by the Qui Tam Litigation
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2011 IRS Whistleblower Boot Camp Hears of Deputy Commissioner Steve Miller’s “Desire for the Whistleblower Program to Grow”

At this past week’s third annual “IRS Whistleblower Boot Camp,” Deputy IRS Commissioner for Service and Enforcement Steven T. Miller spoke of his “desire for the whistleblower program to grow.” A major announcement was that he would “push for” the IRS to begin using the expertise of whistleblowers who can help the IRS interpret information obtained in its audits..

In his remarks, Deputy Commissioner Miller described “offshore” tax abuses as a key area. He commented that whistleblower submissions have a “unique place” in “breaking bank secrecy.”

With budget reductions, the IRS is looking for ways to “leverage” its efforts. According to Miller, whistleblower submissions in at least three areas can help:

1. Promotion of abusive tax shelters known to potential whistleblowers
2. Tax violations in which sophisticated information technology systems pose a barrier to the IRS, unless a whistleblower can explain them
3. Inadequate information reporting that is required of third parties, and that whistleblowers can address
When it “makes sense” for the IRS to use the whistleblower’s expertise, Miller said he would encourage use of disclosure agreements with whistleblowers authorized under section 6103(n) of the Internal Revenue Code, which governs disclosure of taxpayer information. Examples he gave include review of information received in response to the Service’s information document requests, or explanation of information technology issues known to the whistleblower.

Sen. Chuck Grassley recently urged the IRS to make better use of expertise and resources that whistleblowers and their lawyers can provide, as the Justice Department does in False Claims Act cases.

This year’s IRS Whistleblower Boot Camp also included many other senior IRS officials. Whistleblower Office Director Steve Whitlock and his office’s Special Counsel Debra Bowe were major participants.

Once again, the Office of Chief Counsel’s Senior Counsel Tom Kane participated and was again very generous with his time, both during and after the program. He addressed various litigation issues that arise in whistleblower matters. Senior Program Analysts Dawn Applebaum and Kathy Onken also provided a great deal of knowledge and insight into how the program is operating.

The most fascinating issues to me were those involving the international and offshore efforts of the IRS, the subject of the session I moderated. On this panel, joining IRS Whistleblower Office director Steve Whitlock and Senior Analyst Dawn Applebaum were Toni Weirauch, Deputy Director of International Crimes in the IRS Criminal Investigation Division; and Donna Prestia of the new Global High Wealth Division. The attendees gained an appreciation of the considerations of representing whistleblowers who may be foreign nationals gathering evidence in ways that comport with U.S. law, but that may be contrary to other countries’ bank secrecy laws.

My colleagues Erika Kelton, Paul Scott, Linda Stengle, and Margaret (Peggy) Finnerty deserve thanks for their excellent presentations as well.
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Next IRS Whistleblower Boot Camp: Offshore and International Tax Whistleblower Issues and Latest Developments

Each year’s “IRS Whistleblower Boot Camp” brings together senior officials of the IRS Whistleblower Office and tax whistleblower attorneys to explore the latest developments in the IRS Whistleblower Program. This year’s Boot Camp is November 15, 2011 in Washington.

Of special interest this year is that Deputy IRS Commissioner for Services and Enforcement Steven T. Miller will participate for the first time. Other IRS officials participating include (in order of appearance):

—Stephen Whitlock, Director of the IRS Whistleblower Office
–Debra Bowe, Special
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Qui Tam Whistleblower Cases, and the New Financial Whistleblower Programs by the SEC, CFTC, and IRS To Be Discussed at Whistleblower law Symposium

Every two years, attorneys prosecuting or defending qui tam whistleblower cases under the False Claims Act and other whistleblower laws gather for the Whistleblower Law Symposium.

We have written much about “qui tam” whistleblower cases under the False Claims Act. Since last year’s passage of the Dodd-Frank law, whistleblowers who help expose (1) violations of the securities laws or (2) commercial bribery of foreign government officials, now can receive rewards of 10-30% of money sanctions imposed under the new SEC Whistleblower Program. The new IRS Whistleblower program pays whistleblowers 15-30% of amounts recovered. These cases also help stop fraud against taxpayers and investors.

On October 21, an unusual group of national experts on these claims will gather for the Whistleblower Law Symposium, which our firm organizes every two years. Not only do we have senior attorneys from the Department of Justice and experienced whistleblower lawyers discussing qui tam cases, but the Director of the IRS Whistleblower Office Steve Whitlock will participate and explain the tax whistleblower program. Senior SEC attorneys also have stated that they wish to be part of our seminar to discuss the new SEC Whistleblower Program, and are seeking approval to participate.

This conference is broader in scope than any whistleblower law conference in the country of which I am aware, as we have a national faculty of lawyers on both sides of these cases, as well as some of the top government officials involved.

Registration is still open for those who want to register online here:

Please feel free to call or email me with any questions. The Agenda is below.
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GAO Report Released on IRS Whistleblower Program: Raising–But Not Answering–the Fundamental Questions of What the Tax Whistleblower Program Needs to Be Most Effective

The promising new IRS Whistleblower Program that Congress authorized in December 2006 is the subject of a long-anticipated GAO Report released this morning.

Disappointingly, the report raised, but did not attempt to answer, fundamental questions that will determine whether the IRS realizes the full potential of the new program in helping close the “tax gap”–or settles for a fraction of what it can accomplish.

Inspired by the dramatic successes of the False Claims Act in combating fraud against the government through rewarding whistleblowers,
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Whistleblower Lawyer and IRS Whistleblower Office Staff to Speak at 2012 Heckerling Institute on Estate Planning

The new IRS Whistleblower Program for tax whistleblowers will be featured for the first time at the nation’s leading conference for estate planners, the Heckerling Institute on Estate Planning.

The Heckerling Institute is known as the country’s “leading conference for estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals.” This is the 46th Annual Institute, named after late Professor Philip E. Heckerling, founder of the University of Miami Law School’s Estate Planning Institute. The conference will take place from
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How the New CFTC Whistleblower Rules Will Operate

When the CFTC announced its final whistleblower rules yesterday, it answered many questions about how the new CFTC whistleblower program will work.

David Meister, the CFTC’s Director of the Division of Enforcement, provided this summary according to the unofficial transcript our firm prepared of yesterday’s CFTC public meeting:

The Commission will pay awards to eligible whistleblowers who provide original information to the Commission leading to a successful Commission enforcement action and the imposition of monetary sanctions in excess of $1 million.

Congress provided that the amount of the whistleblower award must be between 10% and 30% of sanctions collected in either the Commission action or related action as defined in the rules. The Commission has discretion in determining the amount of the award within that 10 – 30 percent range.

The rules set forth a number of factors that the Commission will consider in determining the amount of the award. These factors include the significance of the information; the degree of the whistleblower’s assistance; the Commission’s programmatic interest; whether the award enhances the Commission’s ability to enforce the Commodity Exchange Act, protect customers and encourage people to come forward with high quality information; and potential adverse incentives from oversized awards.

To be award eligible, a whistleblower is not required, under our recommendation– a whistleblower is not required to report his information internally to his employer. Staff believes that such a requirement would deter some whistleblowers from coming forward, which would undermine congressional intent.
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