How Much Do Whistleblowers Make From False Claims Act Cases?

By Molly Knobler, TJ Budetti, & Talia Mermin of Phillips & Cohen, LLP

Here are the facts. Companies who contract with the government, or organizations that support those contractors, would have you believe whistleblowers are reaping huge windfalls when they expose fraud on the government. The data simply does not bear that out.

From fiscal years 1987 through 2005, the median relator share was $123,885. By 2009, this number increased incrementally to $144,000 (Note, while FCA settlements can be, at least in part, tax deductible for the defendant,[1] the relator must pay federal and state taxes on their recoveries.).

The 2009 median relator share of $144,000 is before the payment of attorneys’ fees[2] and federal and state taxes. Once those are subtracted, a median relator’s take home is likely closer to about $56,000—slightly less than the median salary for a worker in the United States in 2009.

In addition, qui tam cases generally take years to resolve. From fiscal years 1987 through 2005, qui tam cases in which DOJ intervened took a median of over three years to conclude and ranged from 4 months to 15.5 years. During this time, many relators experience retaliation, which can threaten their financial survival.[3]

During the same period, compensation for corporate executives increased exponentially. Average pay of CEOs at the top 350 firms in 1987 was $2.5 million. By 2009 it climbed to $11.26 million—an increase of 350%. Assuming a 40-hour work week, that’s the median relator share in 2009 every 3.3 days.[4]

When you look at the actual numbers, whistleblowers recover far less for doing the right thing than executives get from their boards for overseeing the wrong thing.

Keep this in mind the next time you hear government contractors and their mouthpieces excoriating whistleblowers and their “exorbitant” bounties.

[1] Historically, FCA defendants “deduct[ed] sizable amounts of FCA settlements because the Department of Justice (DOJ) did not take a position on deductibility in settlement agreements.” As of December 22, 2017, with the enactment of the Tax Cuts and Jobs Act, defendants are limited to deducting the amount specified as “restitution” in the settlement agreement with the government.

[2] David Freeman Engstrom, Harnessing the Private Attorney General: Evidence from Qui Tam Litigation, 112 Colum. L. Rev. 1244, 1281–82 (2012) (“Most relator-side practice proceeds on a contingent fee basis, with the lawyer's cut often set at 40%.”)

[3] Reporting that 79% of employees in the U.S. who reported wrongdoing experienced retaliation, including being given poor performance reviews, unfavorable work assignments, or being excluded from decisions or work activities). See also the National Bureau of Economic Research, which found “in 82% of cases [of a sample of alleged corporate frauds] with named employees, the individual alleges they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light.”)

[4] (($11,260,000 ÷ 52 weeks/year) ÷ (40 hours/week)) x 8 hrs/day = $43,307.69/work day. $144,000 ÷ $43,307.69/day = 3.325 days.