With the introduction of Commonwealth Whistleblower legislation squarely on the Rudd Government’s agenda, elements of the concept should be considered.

One of the most contentious issues in whistleblowing legislation is whether to reward whistleblowers. The only legislation which includes such a provision is the US False Claims Act.

The US False Claims Act was originally enabled by Abraham Lincoln in 1863 to prevent fraud during the Civil War. Coincidently, Barack Obama’s only corporate brief was written for a False Claims lawsuit. In a False Claims action, a whistleblower can initiate a lawsuit against a fraudulent claimant on the government. A claim is any demand for money or property where the government provides any portion of the money or property demanded.  A false claim is any fraud associated with the claim including knowingly making a false record or knowingly violating a contractual obligation. Examples of false claims include billing for goods or services not delivered, billing for work tests not performed, defective testing and double billing. The False Claims Act permits fraud recovery with penalties of treble damages.

There are two important provisions for whistleblowers in the False Claims Act. First, it includes specific protection for whistleblowers. Any employee who is discharged, demoted, suspended, threatened, harassed or in any other manner discriminated against in the terms and conditions of employment by their employer because of a False Claims action shall be entitled to all relief necessary, which includes reinstatement with the same seniority status such employee would have had without the discrimination, twice the amount of back pay and ccompensation for any special damages sustained including litigation costs and attorneys’ fees. Second, whistleblowers are entitled to 15-25% of the fraud recovered.

Since 1986, the   average whistleblower compensation has been 16.84% of the fraud recovered. In the same period over $20 Billion of fraudulent activity has been recovered.

The False Claims Act is recognized as the most effective legislation for combating fraud on the US government as the deterrent effect of the False Claims Act has been estimated to be 10 times the fraud recovered. False Claims Act provisions have been included in the Tax Relief and Health Care Act of 2006, to combat tax fraud. There have also been calls for False Claims Act rewards to extend to the US private sector where employees are compensated for their risks in blowing the whistle. (Editors Note: If that were the case, Wall Street should sound like an AFL umpire’s training camp) …..nevertheless, Australia should consider its own False Claims Act.

STOPline Sentinel would like to acknowledge the contribution of  Dr Kim Sawyer, Senior Fellow, The University of Melbourne