Are Whistleblowers Underpaid?

Well, here’s a really interesting number from the New York Times today and I think it proves a point about whistleblowers. It’s a point I’ve been trying to make about whistleblowers for years. That is, whistleblowers are fundamentally underpaid for the information that they provide the government.

What you say? A whistleblower can collect millions under the Federal False Claims Act the SEC and CFTC whistleblower programs or as this article brings to mind, the IRS whistleblower program. All true.

I’m not arguing for the moment that the share of the whistleblower should be increased. All I’m saying is by objective measure, whistleblowers do not obtain that high a share of any government recovery and nobody should get away with claiming they are greedy. It is the fraudsters who are greedy.

The Times reports the IRS paid $20 million to private debt collectors to collect $6.7 million in taxes that were owed to the IRS.

You read that right.

I mean if it were the other way around, If the debt collectors obtained the $20 million and were paid $6.7million, it would still exceed the maximum percentage a whistleblower can get under the IRS program. It is not the other way around though. They got $20 million and collected $6.7? Seriously? Three times what they collected is what they got to collect it?

If you want to argue that private companies are generally more efficient at collecting debts or less efficient than the government or you want to argue that this is or is not an appropriate function to privatize or that we would all be better off if it were all privatized, go right ahead. Maybe this particular event is an extreme case, but that is not my point.

My point is the maximum award available to an IRS whistleblower is 30 percent and of course, most receive far less. Likewise, under the Federal False Claims Act the maximum amount available to the whistleblower is 30 percent, but only if a case is not intervened (taken over by the government) and the whistleblower litigates the case anyway.  Again, most whistleblowers receive far less.

I think it is fair to say that the risks and difficulties of being a whistleblower are at least as burdensome as being a debt collector. The debt collector does not have to establish the existence of the claim, does not have to convince the government the case is meritorious and does not potentially risk their job to expose wrongdoing.  They don’t have to wait years for justice. They go out and attempt to collect a debt. It’s a useful service and it brought in $6.7 million to the federal treasury last year.

What is a fair percentage to be a debt collector? You tell me. Then tell me why a whistleblower should not get at least as much, if not much more. What is a fair percentage to award somebody who not only creates a large collection for the government, but also exposes important wrongdoing while making that effort?

The debt collector gets a pile of debt to attempt to collect and can go out and do business, if one debt does not get collected, they move on to the next. The whistleblower has a case, a case they usually have to remain silent about even as the government investigates, even as it is the most important thing in that whistleblower’s life. The whistleblower has to work and hope the system will work for them.

Most importantly, the IRS is well aware of the debt owed to it when the debt collector goes to work, but the government may never learn of wrongdoing and harm done to it absent the efforts of whistleblowers.

I think we all hope this particular program highlighted by the Times is an outlier. If debt collectors are used by the government one would like to think it would work better than this.

The government obtained some $3.4 billion dollars from cases filed by individuals under the qui tam provisions of the False Claims Act last year.  They paid total Relator share to those whistleblowers of just under $393 million or around 11.6 percent. The government claims some of the collections are not directly attributable to the relator’s claims, which is why this number is below the minimum 15 percent in the statute.

Given all that though, whistleblowers seem like a bargain to me.