A study released last week by the Social Science Research Network proves what False Claims Act attorneys have known all along: whistleblowers matter.
Four researchers evaluated penalties for misrepresentation from the Department of Justice and the Securities & Exchange Commission from 1978 to 2012. The researchers controlled several factors and then compared cases that involved whistleblowers and those that did not.
The study found that not only did the presence of a whistleblower make a difference, but it made a large difference: companies were hit with penalties that were 63% higher, on average, when a whistleblower was involved than when there was no whistleblower. Also, individuals convicted in connection with the cases received prison terms 2.5 times longer when a whistleblower was involved.
Cases involving whistleblowers did tend to take longer – by approximately 10 months. However, that additional time is expected given the much larger penalties that must be negotiated if the case is resolved through settlement rather than by a trial.
Unfortunately, cases with whistleblower involvement made up only about 13% of all enforcement actions. This study plainly shows that the unique public-private partnership that exists between whistleblowers and the government can have significant financial returns if the government is willing to work with the whistleblowers to pursue cases. Therefore, we are hopeful that this study is an eye-opener for organizations like the SEC and the IRS to encourage and put more resources into whistleblower cases going forward.
To download the full text of the study by Andrew Call, Gerald Martin, Nathan Sharp and Jaron Wilde, click here.