iStock_000002064784XSmallThe Department of Labor recently announced a large settlement involving alleged Disadvantaged Business Enterprise fraud.  While the settlement amount, $2.88 million, is significant, I found the whistleblower’s share, $562,370.00, is even more significant.

The False Claims Act generally applies to the submission of false or fraudulent claims for payment to the federal government.  It also contains a whistleblower provision that allows private parties to file a complaint against the contractor on behalf of the federal government.  The private individual’s complaint is filed under seal and if the complaint results in a financial award or settlement, the complaining individual is entitled to a bounty – a percentage of the recovery, usually between 15% and 25%, but can be up to 30% in some circumstances.  This obviously creates a tremendous incentive for disgruntled or ex-employees to make a claim.

Once a claim is filed, the Justice Department often times notifies the contractor that it is under investigation and the contractor may have an opportunity to respond.  The goal at this stage may be to quietly settle the claim or convince the Justice Department that it should not join the claim.  If the Justice Department does not join the claim, the whistleblower must then pursue the claim on his own.

The False Claims Act is a significant tool in the government’s arsenal to fight fraud.  The whistleblower provisions, and the award that a whistleblower could potentially recover, can certainly incentivize a disgruntled or ex-employee to make a whistleblower claim.