Whistle While You Work—For a Cartelist: Whistleblower Protection and Antitrust

by Jay L. Himes, Matthew Perez

October 01, 2015

We discuss the history of whistleblower statutes and provide an overview of whistleblower programs utilized by the IRS and SEC, as well as varying views on whether a whistleblower statute is necessary to protect those who report antitrust law violations.

1. Introduction
In early 2013, Senators Patrick Leahy, D-Vermont, and Chuck Grassley, R-Iowa, introduced a piece of legislation in the Senate called the Criminal Antitrust Anti-Retaliation Act (CAARA), which sought to provide anti-retaliatory protection for antitrust whistleblowers who reported violations of criminal cartel activityCAARA would, for the first time, allow an employee who is the subject of retaliation to file a complaint in federal court for reinstatement, back pay, and damages to cover litigation costs and attorney fees.2 However, the bill would not provide antitrust whistleblowers with a reward or bounty.3 While the Senate unanimously passed the bill in late 2013, it lingered in the House of Representatives and died with the close of the 113th Congress.4 Yet, whistleblower rights have expanded in other areas of law, and federal law enforcers have made recent public remarks touting the benefits of whistleblower rewards. As a result, there has been renewed debate over whether a whistleblower program is needed in the antitrust context, and what that program should look like.

We discuss here the history of whistleblower statutes, and provide an overview of whistleblower programs utilized by the Internal Revenue Service (“IRS”) and Securities and Exchange Commission (“SEC”). Additionally, we will discuss varying views on whether a whistleblower statute is necessary to protect those who report antitrust law violations.

2. The Historical Underpinnings of Whistleblower Statutes
Whistleblower statutes generally have two main components: (1) a qui tam provision, which allows a private citizen to bring suit on behalf of the government and claim a portion of any penalty imposed;5 and (2) an anti-retaliatory provision, which provides a civil remedy for those who experience retaliation after blowing the whistle on illegal activity.6 While today these provisions often work hand-in-hand to encourage private citizens to report illegal behavior, their historical origins are different.

a. History of Qui Tam Actions
Qui tam provisions date to fourteenth-century England.7 At the time, the nation lacked any organized inspector or police force.8 Thus, the government chose to rely on private citizens to assist in protecting safety and public order, as monarchs like King Edward III enacted statutes allowing those who reported violations to collect a steep bounty.9 Qui tam provisions became so well entrenched in English law that by the 1500s courts began to award qui tam damages even where statutes did not expressly mandate them. Although use of such provisions ebbed and flowed, by the nineteenth century William Blackstone deemed qui tam actions “a consistent part of British legislative policy.”10

In the United States, qui tam actions existed as early as the First Continental Congress in the late 1700s. “Of the fourteen statutes imposing penalties enacted by the First Congress, between ten and twelve authorized qui tam suits.”11 Even McCulloch v. Maryland,12 the Supreme Court decision that helped define congressional power in the first decades of the new nation, was a qui tam action, brought by an individual suing for himself and the state of Maryland.

i. The False Claims Act
The best known and most developed of the early qui tam statutes was the False Claims Act (“FCA”), enacted at the height of the Civil War.13 The FCA’s history not only highlights the policy concerns at play in the use of qui tam actions, but also paves the way for the whistleblower statutes of the last 20 years.

By 1863, the Union Army was not doing well, despite significantly outnumbering the Confederate Army.14 One significant obstacle was the pervasive fraud and profiteering practiced by government contractors.15 Purported weapons shipments were found to contain nothing but sawdust once the boxes were opened.16 Soldiers’ boots fell apart in less than a week, and their tents were not properly waterproofed.17 The same horses and mules were sold to the cavalry multiple times.18 Not only did the Union lack any agency to investigate these crimes, these crimes were often perpetrated by prominent citizens, who could rely on their political connections to escape punishment.19

Thus, in January, 1863, Senator Henry Wilson of Massachusetts (later Vice President to Ulysses S. Grant) introduced Senate Bill No. 467, which was designed to prevent and punish fraud on the U.S. government.20 The bill provided that any person who knowingly submitted false claims to the government would be liable for double the government’s damages plus a penalty of $2,000 for each false claim.21 The bill also included a significant reward for those who came forward to report fraud-50 percent of the recovery.22 As Senator Jacob Howard noted, the provision was based “upon the old-fashioned idea of holding out a temptation, and ‘setting a rogue to catch a rogue,’ which is the safest and most expeditious way I have ever discovered of bringing rogues to justice.”23 While the FCA’s supporters recognized that those bringing qui tam suits might not be the most savory of characters, they were willing to set aside those concerns in favor of the larger goal of preventing fraud.24

In March 1863, the FCA was enacted into law and was noteworthy, in part, because of the limited role it provided to the government in qui tam actions.25 As originally conceived, the individual bringing the action, called the relator, prosecuted the case from beginning to end.26 The United States had no right to intervene, or to otherwise preempt the action, though it could block the withdrawal or discontinuance of the case.27 As one commentator has written, lilt was a terrific plan that started well.”28

ii. Amendments to the False Claims Act
In 1943, the FCA was substantially amended to give the government significantly more power to pursue and direct qui tam suits.29 The amendments further provided that if the government possessed any knowledge of the fraud when the action was filed, the qui tam action could not survive.30 In addition, at the time of filing, the relator had to present all evidence to the government, which had the first option to prosecute.31 The amendments also eliminated any guaranteed reward, leaving that to the court’s discretion.32

The 1943 amendments were spurred by the U.S. Attorney General at the time, Francis Biddle. Biddle denounced the use of the FCA to file so-called “parasitic lawsuits,” where individuals would lift facts from existing criminal cases to file civil qui tam actions of their own.33 The amendments were effective at eliminating such suits, but they also significantly discouraged meritorious qui tam actions.34 While Biddle claimed that the U.S. Department of Justice (“DOJ”) had the necessary resources and drive to pursue FCA cases effectively, this proved to be incorrect.35 For example, with the massive military buildup of the 1980s, newspapers were awash with stories of government contractors who cheated the government by charging $660 for a single ashtray installation, or $7,600 for a coffee pot.36 Yet, the DOJ lagged in bringing qui tam suits.37

The FCA was amended again in 1986. Among other changes, the 1986 amendments eliminated the “prior government knowledge” bar to qui tam suits, providing instead that a relator who is an “original source” with “direct and independent” relevant knowledge had standing to bring suit.38 The 1986 amendments also gave relators a larger role in litigation that was taken over by the government, and established minimum percentages for rewards.39 Finally, the 1986 amendments provided the first private right of action for those retaliated against because of their participation in an FCA case.40

The FCA has been amended several times since 1986, and each set of amendments seeks to revive the competing concerns about the role of qui tam actions.41 Some remain suspicious of whistleblower motives for coming forward, and believe that the DOJ is best positioned to prosecute fraud against the government.42 Others recognize that the DOJ may lack the resources or motivation to pursue fraudulent actions that nonetheless are in the public interest.43 Which side wins out in a given decade appears to depend largely on what the public perceives to be at stake.

b. History of Anti-Retaliatory Provisions
Anti-retaliatory provisions have their roots in the labor relations statutes of the early 20th century. Before that time, employees were almost entirely “at-will”—dischargeable at any time and for any reason. Workers found relief not in the courts, but in the legislature, which passed statutes making it easier for workers to form unions. Moreover, the Clayton Antitrust Act of 1914 exempted labor unions from federal antitrust laws,44 and prohibited federal courts from issuing injunctions that restrained labor unions.45 The Railway Labor Act of 1926 and Wagner Act of 1935 further strengthened workers’ ability to engage in union activities and to bargain collectively.46 By 1940, the Supreme Court recognized that Congress could use national policy concerns to restrict the right of employers to discharge at-will employees.

The passage of the labor relations statutes highlighted not only the possibility of anti-retaliatory provisions, but also their necessity. For instance, the Wagner Act created the National Labor Relations Board (“NLRB”) to implement the Act’s provisions,47 and the NLRB quickly discovered that, to succeed in enforcement proceedings, employee help was vital. In turn, employees would participate only if they knew their jobs would be protected. This trend continued into the 1960s and 1970s, as federal regulation expanded. The newly enacted Civil Rights Act of 1964,48 Occupational Safety and Health Act,49 and Consumer Protection Act,50 among others, all required employee participation to ensure their effective enforcement. Thus, Congress included provisions prohibiting businesses from retaliating against participating employees.51 For the first time, a significant portion of the American private sector workforce had protection against employer retaliation (albeit limited to acts in furtherance of enforcement proceedings).52

Thereafter, Congress began to include not only administrative remedies for retaliation, but also a right for employees to bring private actions to recover for retaliation. For instance, the 1986 amendments to the FCA include a private cause of action, allowing the relator to be awarded “all relief necessary to make the employee whole,” including reinstatement, back pay, two times the amount of back pay, litigation costs, and attorney fees.53

In more recent times, regulatory authorities, including the IRS and SEC, have successfully used whistleblower provisions to enforce various federal and state laws.54

3. Whistleblower Programs in Other Federal Agencies
Because federal agencies have limited resources, public tips have greatly enhanced their ability to detect and prosecute statutory violations. Indeed, the heads of both the IRS and SEC have highlighted how important whistleblower programs have been in detecting fraud and other violations of law. For example, Sean McKessy, the Chief of the SEC’s Office of the Whistleblower, has stated that because the SEC “cannot be everywhere,” the whistleblower program will “help [the SEC] to more quickly identify and pursue frauds that [it] might not have otherwise found on [its] own.”55 Similarly, IRS Commissioner John Koskinen has said that the “information received from whistleblowers has the potential to assist the IRS in detecting tax compliance issues, which in turn helps ensure the integrity and fairness of our tax system.”56

We summarize the whistleblower programs administered by the IRS and the SEC.

a. IRS Whistleblower Program
For the past 140 years, the IRS Commissioner has had the authority to “pay such sums as he deems necessary for detecting and bringing to trial and punishment persons guilty of violating the internal revenue laws or conniving at the same.”57 The Taxpayer Bill of Rights of 1996 expanded the IRS’s ability to pay awards, permitting it to award informants who help “detect[] underpayments of tax.”58 The IRS also “has separate authority to pay informant expenses from appropriated funds available for confidential criminal investigation[s].”59

Awards under this program were discretionary and governed by IRS policy statements. For example, IRS policy allowed for awards of 1, 10, or 15 percent, based on the nature of information provided.60 The IRS could deny claims if (1) the whistleblower was a participant in the scheme; (2) the information was of no value; (3) the IRS already had the information or the information was publicly available; or (4) there was no collection of taxes or penalties from which the IRS could pay an award.61

With the enactment of the Tax Relief and Health Care Act of 2006, the IRS’s whistleblower program ex-panded.62 The legislation created an IRS Whistleblower Office, which was charged with analyzing information submitted and assigning it to another IRS division for further investigation.63 The 2006 Act also created a new subsection (b) to Section 7623 of the Internal Revenue Code, enumerating the conditions under which the IRS may make an award to a whistleblower.64 Specifically, Section 7623(b) provides that the IRS may award “at least 15 percent but not more than 30 percent of the collected proceeds...resulting from the action...or from any settlement in response to such action.”65 The section further sets forth specific requirements to quality for an award, but if a whistleblower cannot satisfy them, the IRS retains its pre-2006 authority to issue a discretionary award.66

Recently, the IRS published a Notice of Proposed Rulemaking in the Federal Register, setting forth guidelines for submitting whistleblower information, and for determining awards. Under the proposed procedure, whistleblowers “must submit to the IRS specific and credible information that the individual believes will lead to collected proceeds from persons whom the individual believes have failed to comply with the internal revenue laws.”67 This “information” must identify the individual or entity that violated the law and include any documents available to substantiate the claim.68

To collect an award, whistleblowers are required to submit, under penalty of perjury, Form 211, “Application for Award for Original Information,” which requests information such as the date of the claim; the name of the claimant; and “[a]n explanation of how the information on which the claim is based came to the attention and into the possession of the claimant[.]”69 If a claimant fails to do so, the Whistleblower Office, at its sole discretion, may provide a non-complying claimant an opportunity to perfect the claim for an award.70

The success of the IRS whistleblower program cannot be overstated. In Fiscal Year 2013 alone, the IRS whistleblower program led to the recovery of over $367 million in underpayments.71 During that same period, the IRS paid 122 awards to whistleblowers totaling over $53 million.72 Indeed, in 2012, Bradley Birkenfeld received $104 million for helping expose a $20 billion offshore tax evasion scheme.73 This award—the largest in the history of the IRS whistleblower program—was given even though Mr. Birkenfeld was himself convicted and imprisoned for more than two years in connection with his participation in the very scheme he revealed to the DOJ and IRS.74

However, a significant drawback to the IRS whistle-blower program is the lack of specific protection for whistleblowers against job-related retaliation.75 The IRS Fiscal Year 2010 and Fiscal Year 2013 reports on its whistleblower program both describe the lack of an express anti-retaliation provision as “an issue[] of interest,” and recommend a legislative remedy.76

Recognizing the retaliation risk, the IRS will generally not confirm or deny the existence of a whistleblower.77 However, the IRS may reveal the identity of a whistle-blower who is “an essential witness in a judicial proceeding[,]” or if ordered to do so by a court.78 Moreover, because targets of IRS enforcement actions are permitted to challenge IRS findings, civil discovery can be used to identify potential sources underlying the IRS’s determinations, including informants.79

To protect their anonymity, whistleblowers have sought protective orders. The Tax Court has held that issuing a protective order to preserve a whistleblower’s identity requires balancing “not only petitioner’s legitimate privacy interests as a confidential informant, but also the nature and severity of the specific harm asserted to arise from disclosing petitioner’s identity” with the “potential harm against the relevant social interests.”80 The Tax Court typically grants requests to proceed anonymously when the whistleblower has shown that he or she will suffer specific, significant job-related retaliation or be subject to physical harm.81 However, Tax Court judges have emphasized that anonymity will not be automatically granted upon a claim of employment discrimination.82 As a result, absent an explicit anti-retaliation statute, tax whistleblowers remain at risk of a potentially adverse decision on a Tax Court petition seeking to preserve their anonymity. This, in turn, exposes Whistleblowers to retaliation for which they have little recourse under federal law.

b. SEC Whistleblower Program
In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) to address systemic weaknesses within the financial services industry that led to the collapse of several long-standing firms, like Lehman Brothers and Bear Stearns.83 Dodd-Frank added Section 21F to the Securities Exchange Act of 1934, thus requiring the SEC to develop its own whistle-blower program.84 Under this whistleblower program, if an informant voluntarily provides original information that results in a SEC enforcement action, the SEC may award the informant between 10 and 30 percent of the amount the SEC collects (provided the total amount collected exceeds $1 million).85

Dodd-Frank also created anti-retaliation protections for whistleblowers. Under Section 21F(h), an employer may not “discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate” against an employee who provides information to the SEC, testifies or otherwise assists with the SEC’s investigation or administrative action, or makes required disclosures under Sarbanes-Oxley.86 Additionally, Section 21F(h) provides a private right of action to all employees who are subjected to retaliatory acts.87 This right of action is not limited to employees of publicly traded companies and their subsidiaries, but also protects employees of “foreign subsidiaries and affiliates of U.S. public companies.”88 Under Section 21F(h), substantial remedies are available to a whistleblower including (1) reinstatement of seniority; (2) double back pay; and (3) litigation costs and attorney and expert witness fees.89

To qualify for these whistleblower protections, Dodd-Frank and SEC rulemaking require that whistleblowers “possess a reasonable belief that the information” provided relates to a possible securities violation, and that they submit information in compliance with all applicable rules.90 “Reasonable belief” looks to whether the whistleblower held “a subjectively genuine belief that the information demonstrates a possible violation, and that this belief is one that a similarly situated employee might reasonably possess.”91 This standard is meant to avoid granting whistleblower protection to individuals who make frivolous submissions.92

To qualify for an award under the SEC program, an individual must voluntarily provide the SEC “original information” about a possible violation of the federal securities laws that leads to a successful enforcement action resulting in monetary sanctions exceeding $1 million.93 Original information must be based on independent knowledge or analysis.94 This means that the informant’s information cannot already be known to the SEC or have been “exclusively derived” from publicly available sources.95

Importantly, the SEC has made clear through its rule-making that submissions need not qualify for an award in order to trigger the anti-retaliation protections.96 At least two federal courts have held that Section 21F(h)’s private right of action applies to an employee who makes disclosures required or protected by law even if that employee did not provide the disclosed information to the SEC.97

Since Dodd-Frank’s enactment, the SEC has issued substantial awards to individual whistleblowers, including an award of over $30 million to one whistleblower in September 2014.98 That award remains the largest in the SEC’s history.99

In contrast to the IRS’s program, the SEC’s whistleblower program appears more robust because of its statutory prohibitions against retaliation. Dodd-Frank’s anti-retaliation provisions have generated dozens of lawsuits by private plaintiffs seeking redress for alleged job-related retaliation.100 Those advocating for whistleblower protections in antitrust law cite the SEC’s success stories.

4. Whistleblowers in Antitrust
The antitrust laws do not provide protection for whistleblowers who report cartel activity. Historically, the DOJ has relied, instead, on its leniency program, applicable to both companies and individuals, to detect criminal antitrust violations.101 Designed to destabilize cartels, the Antitrust Division’s leniency program publicly announces to price-fixers (and other criminal antitrust violators) the self-reporting path that, if followed, will immunize them against all criminal consequences, despite having committed a federal felony. The program, unique among federal law enforcement agencies, is widely recognized to have exposed many of the cartels that the DOJ has prosecuted in recent years.

Nevertheless, as many antitrust pundits have pointed out, while the leniency program may help corporate executives escape criminal punishment, it does nothing to shield whistleblowers from their employers. Furthermore, many believe that in addition to anti-retaliatory provisions, antitrust laws should also provide bounty awards.

a. The Cautionary Tale of Martin McNulty
Once upon a time, Martin McNulty was an executive in the packaged-ice industry.102 In late 2004, McNulty learned that his employer, Arctic Glacier International Inc., had an agreement with other ice producers to allocate the southeastern Michigan ice market.103 According to McNulty, when he refused to participate in the scheme, the company fired him.104 McNulty went on to aid the FBI in its criminal investigation.105 In 2010, Arctic Glacier and three of its executives pled guilty to violating the Sherman Act, and Arctic Glacier agreed to pay a $9 million fine.106 But, after 14 years as a packaged-ice executive, McNulty claims he was “blackballed” from the industry, and after years of not being able to find work, his house went into foreclosure.107

When all was said and done, McNulty calculated that whistleblowing cost him $6.2 million.108 At Arctic Glacier’s sentencing, McNulty argued that the court should award him that amount as restitution under the Crime Victims’ Rights Act (“CVRA”).109 However, the district court, and later the Sixth Circuit, disagreed.110 Simply, McNulty was not a crime victim under the CVRA. The court noted that McNulty’s alleged difficulties arose from his refusal to take part in the conspiracy.111 “If proven, these would indeed be harms to McNulty, but they are not criminal in nature, nor is there any evidence that they are normally associated with the crime of antitrust conspiracy.”112 Thus, McNulty was left with little recourse. His predicament highlights what some believe is an obvious gap in the DOJ’s leniency program.

b. ACPERA and the GAO Study
The DOJ has called its leniency program its “most effective” investigative tool in detecting criminal cartels.113 Under the program, a successful leniency applicant can avoid criminal prosecution, criminal fines, and prison sentences for its executives if it is the first to report an antitrust violation.114 Additionally, in 2004, Congress enacted the Antitrust Criminal Penalty Enhancement and Reform Act (“ACPERA”), to further incentivize self-reporting by eliminating treble damages and joint and several liability for the leniency applicant if it provides “satisfactory cooperation” to civil plaintiffs.115

On June 9, 2010, President Obama signed legislation extending ACPERA for another ten years.116 While this new legislation modified some provisions of the original Act, Congress delayed acting on two proposed additions to ACPERA—a whistleblower reward provision and a whistleblower protection provision.117 Instead, Congress commissioned the Government Accountability Office (“GAO”) to study and report back on the appropriateness of adding these two provisions.118

In July of 2011, the GAO issued its report recommending that Congress consider amending ACPERA to add anti-retaliatory protection for those reporting criminal antitrust violations.119 The GAO noted that potential whistleblowers may be reluctant to report criminal wrongdoing because, under the current law, whistle-blowers who report criminal antitrust violations lack a civil remedy if they experience retaliation.120 The DOJ’s leniency program affords protection from federal criminal prosecution for a company (and its officers, directors, and employees) and for an individual if the company or individual is the first to report a criminal antitrust violation and provide cooperation to the DOJ.121 But that dispensation from prosecution does not protect a reporting individual from retaliation by his or her employer, or by other cartel participants.122 Outside of overt discrimination, at-will employees have little recourse when they suffer retaliation—i.e., the Martin McNultys of the world.123 Thus, the GAO proffered that by adding a civil remedy for those who are subjected to retaliation, employees may be encouraged to report criminal antitrust violations.124 However, the report was split on whether including bounty provisions would aid in greater cartel detection and deterrence.125

Proponents of a bounty provision argue that such incentives would “motivate more whistleblowers to report criminal cartel activity to DOJ which, in turn, could result in greater cartel detection” and destabilization.126 Proponents further believe that a reward is necessary to compensate potential informants for the substantial risk that they run.127 However, not everyone is on board with a bounty program.

c. DOJ’s Unreceptive Response
While the DOJ has not taken an official position on CAARA, it has stated that it does not support a bounty program. Indeed, the DOJ has expressed concern that whistleblower rewards could hinder its current enforcement program by jeopardizing witness credibility, and generating false claims that do not result in prosecutions but require tremendous DOJ resources to vet.128 Ultimately, the DOJ maintains a strong predisposition toward its leniency program, and generally disfavors anything that might upset the status quo.

The DOJ has expressed that its biggest concern with a bounty program is that it weakens a whistleblower as a trial witness because a paid whistleblower may not be regarded as a credible witness by the jury.129 Jurors may not believe a witness who stands to benefit financially from a successful enforcement action against those he implicated.130 Further, the fact that the DOJ may be less likely to prove its case because of whistleblower credibility issues could affect the DOJ’s leverage in obtaining plea agreements and deter companies from settling with the DOJ.131

Additionally, the DOJ expressed concern that a whistleblower reward could result in many false claims that do not lead to criminal prosecution.132 A bounty program creates an incentive for increased false reporting. When someone comes in and alleges a global conspiracy involving many companies around the world, it takes tremendous DOJ resources to vet those claims.133 Accordingly, whistleblower tips pertaining to criminal cartel activity would require substantial investigation to substantiate (or refute) the claims.134 Thus, false claims could drain DOJ resources.

Moreover, because cartel activity is secretive, typically only conspiracy insiders “have sufficient knowledge to be of assistance in a criminal investigation[,]” and the DOJ has maintained that the “existing leniency program already provides incentives for wrongdoers to self-report” by offering them “get-out-of-jail” cards.135 Accordingly, the leniency program is successful because it is those who potentially face punishment who are most likely to know about cartel activity.136

Remarkably, the Antitrust Division’s response to whistleblower bounties is in stark contrast to the remarks of U.S. Attorney General Eric Holder, who recently advocated for increased whistleblower awards in financial fraud cases.137 Specifically, Holder encouraged Congress to consider modifications to the Financial Institutions Reform, Recovery, and Enforcement Act, which would increase incentives for individual cooperation, including raising the $1.6 million cap on awards for individuals who come forward to report criminal activity.138 Holder stated, “[t]his could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress—making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.”139 Manhattan U.S. Attorney Preet Bharara echoed Holder’s remarks following a recent speech calling for reform in the New York State Legislature.140 Bharara called whistleblower bounties “useful tools for rooting out public corruption[.]”141

While many believe that Holder’s and Bharara’s comments should also apply in the antitrust context, the Antitrust Division seems inclined to disagree. According to the Antitrust Division, the nature of antitrust cases makes the leniency program an already unique and highly effective detection tool.142 Indeed, the program is particularly successful in the antitrust context because there are many players involved in a conspiracy and any one of them can turn in the others.143 In other criminal areas, such as tax or securities fraud, where often only a single company is involved, a whistleblower is necessary to report a violation. Thus, the success enjoyed by the IRS and SEC, aided by bounty provisions, may not transfer as smoothly to the antitrust context.

5. Conclusion
Today, the prevalence of anti-retaliatory provisions testifies to a growing appreciation of whistleblowers by the public at large. In addition to serving as an effective participant in the government’s enforcement of public order, whistleblowers appeal to those skeptical of government efficacy or distrustful of its motives. Whistleblowers can root out abuses of rights and bring them to light. With more and more private citizens demonstrating their ability to find creative solutions to solving social ills come renewed efforts to protect them?”144

It remains to be seen whether such provisions would find success in antitrust cases. Certainly, the tale of Martin McNulty supports the argument for anti-retaliatory protection for antitrust whistleblowers. However, the Antitrust Division’s cool response to bounty provisions makes it unlikely that we will see such measures in antitrust law in the near future unless the Division’s position changes. While such provisions have found success with the IRS and SEC, the nature of antitrust conspiracies, and the well-recognized success of the DOJ’s existing leniency program, give reason to question whether the additional benefits that bounty provisions might bring in the antitrust context are worth the risk.

New York Bar Association
Commercial and Federal Litigation
Antitrust Committee

Jayme J. Herschkopf
Jay L. Himes
Meegan Hollywood
Matthew Perez
Aidan Synnott


  1. Criminal Antitrust Anti-Retaliation Act, S.42, 113th Cong. § 216 (2013), available at s42/text.
  2. See id. at § 216(b), (c).
  3. See generally id. at § 216.
  4. See generally
  5. The term “qui tam” is a shortened version of the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte sequitur,” meaning “who brings the action for the king as well as for himself.” See United States ex rel. Stillwell v. Hughes Helicopters, Inc., 714 F. Supp. 1084, 1086 n.1 (1989) (citing 3 WILLIAM BLACKSTONE, COMMENTARIES ON THE LAWS OF ENGLAND 160 (1768)).
  6. See, e.g., Criminal Antitrust Anti-Retaliation Act, S.42, 113th Cong. § 216 (2013), available at bills/113/s42/text (last visited Aug. 15, 2015).
  7. Dan D. Pitzer, Note, The Qui Tam Doctrine: A Comparative Analysis of Its Application in the United States and the British Commonwealth, 7 Tex. Intl L.J. 415, 417 (1972); see also Note, The History and Development of Qui Tam, 1972 Wash. U. L.Q. 81 (1972), available at cgi?article=2715&context=law_lawreview (last visited Aug. 15, 2015).
  8. Pitzer, supra note 7, at 417-18; The History and Development of Qui Tam, supra note 7, at 86.
  9. Pitzer, supra note 7, at 417-418; The History and Development of Qui Tam, supra note 7 at 87.
  10. See James B. Helmer, Jr., False Claims Act: Whistleblower Litigation 48-50 (6th ed. 2012 & Supp. 2014).
  11. United States ex rel. Stillwell v. Hughes Helicopters, Inc., 714 F. Supp. 1084, 1086 (C.D. Cal. 1989).
  12. 17 U.S. 316 (1819).
  13. False Claims Act, 31 U.S.C. §§ 3729 et seq.
  14. James B. Helmer, Jr. & Robert Clark Neff, Jr., War Stories: A History of the Qui Tam Provisions of the False Claims Act, the 1986 Amendments to the False Claims Act, and Their Application in the United States ex rel. Gravitt v. General Electric Co. Litigation, 18 OHIO N.U. L. Rev. 38, 35 (1991).
  15. Id.
  16. Id.; see also Kent D. Strader, Counterclaims Against Whistleblowers: Should Counterclaims Against Qui Tam Plaintiffs Be Allowed in False Claims Act Cases?, 62 U. Cin. L. Rev. 713, 729 n.90 (1993) (citing 132 CONG. REC. H6482 (daily ed. Sept. 9, 1986) (statement of Rep. Berman)).
  17. Helmer & Neff, supra note 14, at 36 n.8; Strader, supra note 16, at 729, n.90.
  18. Strader, supra note 16, at 729 n.90 (citing 132 Cong. Rec. H6482 (daily ed. Sept. 9, 1986) (statement of Rep. Berman)).
  19. Helmer & Neff, supra note 14, at 35.
  20. A Bill To Prevent and Punish Frauds Upon the Government of the United States, S. 467, 37th Cong. (1863), available at http://memory. db&recNum=1532 (last visited Aug. 1, 2015).
  21. Id.
  22. Id.
  23. CONG. GLOBE, 37th Cong., 3d Sess. 955-56 (1863), available at ampage?collId=llcg&fileName=063/11cg063.db&recNum=45 (last visited Aug. 1, 2015).
  24. Helmer, supra note 10, at 55-56.
  25. Act of Mar. 2, 1863, ch. 67, 12 Stat. 696 (1863) (codified as amended at 31 U.S.C. §§ 3729-3733 (1982)).
  26. Helmer, supra note 10, at 58.
  27. Id.
  28. Joel D. Hesch, Breaking the Siege: Restoring Equity and Statutory Intent to the Process of Determining Qui Tam Relator Awards Under the False Claims Act, 29 T.M. COOLEY L. REV. 217, 230 (2012).
  29. See Act of Dec. 23, 1943, ch. 377, 57 Stat. 608 (1943) (codified as amended at 31 U.S.C. §§ 3729-3733 (1982)).
  30. Id. at (C); see also Helmer & Neff, supra note 14, at 38-40.
  31. Id.
  32. Act of Dec. 23, 1943, ch. 377, 57 Stat. 608, at (E) (1943) (codified as amended at 31 U.S.C. §§ 3729-3733 (1982)); Helmer & Neff, supra note 14, at 38-40.
  33. Helmer, supra note 10, at 64-65.
  34. Id.
  35. Id.
  36. Id.
  37. Qui tam provisions also fell out of favor in the United Kingdom in the middle of the twentieth century. In response to public criticism, the Common Informers Act 1951 effectively abolished the right of private citizens to file qui tam actions. Pitzer, supra note 7, at 419 (citing Common Informers Act, 14 & 15 Geo. 6, c. 39, § 1 (1951)).
  38. False Claims Amendments Act of 1986, 100 Stat. 3153, § 3 (1986) (amending 31 U.S.C. § 3730(e)(4)); HELMER, supra note 10, at 68-71.
  39. Id. (amending 31 U.S.C. § 3730(d)).
  40. Id. at § 4; HELMER, supra note 10, at 68-71.
  41. See, e.g., Major Fraud Act of 1988, 102 Stat. 4631, § 9 (1988) (amending 31 U.S.C. § 3730(d)); Fraud Enforcement and Recovery Act of 2009, 123 Stat. 1617, § 4 (2009) (amending 31 U.S.C. §§ 3729, 3730(h), 3731(b), 3732, 3733); Act of March 23, 2010, 124 Stat. 901 (2010) (amending 31 U.S.C. § 3730(e)(4)).
  42. Some have questioned whether legislation allowing private citizens, instead of the DOJ, to pursue such suits violates the separation of powers doctrine. See ROBIN PAGE WEST, ADVISING THE QUI TAM WHISTLEBLOWER 67-68 (2d ed. 2009) (discussing constitutional challenges to the FCA).
  43. See HELMER, supra note 10, at 64-65.
  44. Act of Oct. 15, 1914, ch. 323, 38 Stat. 732, § 6 (1914) (codified at 15 U.S.C. § 17).
  45. Id. at § 20 (codified at 29 U.S.C. § 52).
  46. Railway Labor Act, ch. 347, 44 Stat. 577 (1926) (codified at 45 U.S.C. § 151 et seq.); Wagner Act of 1935, ch. 372, 49 Stat. 449 (1935) (codified at 29 U.S.C. §§ 151 et seq.).
  47. Wagner Act of 1935, 49 Stat. 449, § 3.
  48. Civil Rights Act of 1964, 78 Stat. 241 (1964).
  49. Occupational Safety and Health Act, 29 U.S.C. §§ 651-678 (1970).
  50. Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. §§ 5301 et seq. (2010).
  51. See, e.g., Civil Rights Act of 1964, 78 Stat. 241, § 704; Occupational Safety and Health Act, 29 U.S.C. § 660(c)(1); Dodd-Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. § 5567(a).
  53. False Claims Act, 31 U.S.C. § 3730(h).
  54. Internal Revenue Code, 26 U.S.C. § 7623(b); Securities and Exchange Act of 1934, 15 U.S.C. § 78u-6 (2010).
  55. Sean McKessy, Speech by SEC Staff: Remarks at Georgetown University (Aug. 11, 2011), available at speech/2011/spch081111sxm.htm (last visited Aug. 1, 2015).
  56. John Koskinen, Statement on IRS Whistleblower Program (Aug. 2014), available at Koskinen%20whistleblower%20statement%20-%20version%20 082014%20(2).pdf (last visited Aug. 1, 2015).
  57. INTERNAL REVENUE SERVICE, FISCAL YEAR 2013 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 2 (2014), available at http://www. FY_13_3_7_14_52549.pdf (last visited Aug. 1, 2015).
  58. Id. (citing Taxpayer Bill of Rights 2, 110 Stat. 1473, § 1209 (July 30, 1996) (codified at 26 U.S.C. § 7623(a)).
  60. Id. at 2.
  61. Id.
  62. Id. at 3 (citing Tax Relief and Health Care Act of 2006, 120 Stat. 2958, § 406 (2006) (codified at 26 U.S.C. § 7623(b)).
  63. Tax Relief and Health Care Act of 2006, 120 Stat. 2958, § 406(b) (2006).
  64. Id. at § 406(a).
  65. I.R.C. § 7623(b)(1) (2006).
  66. See id. at § 7623(b)(2). To qualify for an award under Section 7623(b), the information must relate to: (1) “a taxpayer, and individual taxpayers only, one whose gross income exceeds $200,000 for least one of the tax years in question” and (2) “a tax noncompliance matter in which the tax, penalties, interest, additions to tax, and additional amounts in dispute exceed $2,000,000.” INTERNAL REVENUE SERVICE, FISCAL YEAR 2013 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 3 (citing I.R.C. § 7623(b)(5)). I.R.C. § 7623(a) preserves the IRS’s pre-statute discretionary authority.
  67. I.R.S. Bulletin 2013-3, REG-141066-09, § 301.7623-1(c)(1) Gan. 14, 2013), available at html (last visited Aug. 1, 2015). This rulemaking was made final in I.R.S. Bulletin 2014-36 (Sept. 2, 2014).
  68. I.R.S. Bulletin 2013-3, REG-141066-09, § 301.7623-1(c)(1).
  69. Id. at § 301.7623-1(c)(2), (3).
  70. Id. at § 301.7623-1(c)(4).
  71. Id. at Table 6.
  72. Id.
  73. Laura Saunders & Robin Sidel, Whistleblower Gets $104 Million: Now a Felon, Former Banker Told U.S. About Tax-Evasion Tactics by UBS and Its Wealthy Clients, WALL ST. J., Sept. 11, 2012, available at 5412614237708 (last visited Aug. 1, 2015).
  74. See United States v. Birkenfeld, No. 08-cr-60099 (S.D. Fla.); Eamon Javers, Why this Swiss bank whistleblower can’t leave US, CNBC (Dec. 14, 2014), available at (last visited Aug. 1, 2015).
  75. Whistleblower 14106-10W v. Comm’r, 137 T.C. 183, 202 (2011).
  76. INTERNAL REVENUE SERVICE, FISCAL YEAR 2010 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 7-8; INTERNAL REVENUE SERVICE, FISCAL YEAR 2013 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 12 (2011), available at annual_report_to_congress_fy_2010.pdf (last visited Aug. 1, 2015). Specifically, the IRS has expressed concern that “an adverse ruling on a discovery request could open the door to fishing expeditions to identify whistleblower involvement and targeted requests to determine whether particular individuals made whistleblower submissions.” INTERNAL REVENUE SERVICE, FISCAL YEAR 2013 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 8; INTERNAL REVENUE SERVICE, FISCAL YEAR 2013 REPORT TO CONGRESS ON THE USE OF SECTION 7623, at 12.
  77. See 6 Administration, I.R.M. § (Aug. 7, 2015) (“To the extent that the IRS Whistleblower Office determines that an individual is a ‘whistleblower’ under IRC section 7623, such individual shall be deemed to be a confidential whistleblower whose identity shall be protected in accordance with IRC 6103(h) (4).”); I.R.S. Bulletin 2008-4, § 3.06 (Jan. 14, 2008), available at (last visited Aug. 10, 2015) (IRS “will protect the identity of the claimant to the fullest extent permitted by law.”).
  79. Id.
  80. Whistleblower 14106-10W,137 T.C. at 203 (citing Sealing Plaintiff v. Sealed Defendant, 537 F.3d 185, 190-91 (2d Cir. 2008)).
  81. See, e.g., Whistleblower 10949-13W v. Comm’r., T.C. Memo. 2014 94, at *5 (May 20, 2014) (potential for physical harm justifies proceeding anonymously when whistleblower’s targets were allegedly tied to terrorist organizations, and they had already used armed men to raid whistleblower’s offices and had threatened his life).
  82. Whistleblower 14106-10W, 137 T.C. at 208-09 (Halpern, J., concurring) (emphasis added): I have concurred in the result in this case because I think that we should give whistleblowers contemplating a section 7623(b)(4) action fair notice that we will not automatically grant anonymity upon a claim of possible employment discrimination. Were we to decide this case as I would, dissatisfied whistleblowers with a fear of employment discrimination would, before filing a petition with the Court, weigh the expected dollar return from commencing a section 7623(b)(4) action against the expected cost (measured in dollars) of the disadvantages associated with the public disclosure of information that ordinarily becomes part of the case file and the public record in a Tax Court case.... Until (and unless) Congress acts, I believe that is the best we can offer.
  83. See Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1739 (2010).
  84. Id. at § 922 (codified at 15 U.S.C. § 78u-6 (2010)). Dodd-Frank also created a whistleblower program for the Commodity Futures Trading Commission (“CFTC”). See Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1739, § 748 (2010) (codified at 7 U.S.C. § 1 et seq.). In May 2014, the CFTC issued its first whistleblower award of approximately $240,000 to an individual “for providing valuable information about violations of the Commodity Exchange Act.” Press Release, U.S. Commodity Futures Trading Comm’n, CFTC Issues First Whistleblower Award, May 20, 2014, available at PressRoom/PressReleases/pr6933-14 (last visited Aug. 15, 2015).
  85. Securities Exchange Act of 1934, 15 U.S.C. § 78u-6(b)(1).
  86. Id. at (h)(1)(A)(i)-(iii).
  87. Id. at (h)(2)(B)(i).
  88. JORDAN A. THOMAS, SEC WHISTLEBLOWER PROGRAM HANDBOOK at 3-4 available at file:// /C:/Users/tmb/Downloads/SEC+Whistl eblower+Program+Handbook+(for+web).pdf (last visited Aug. 15, 2015) (citing Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1739, § 929A (codified as amended at 18 U.S.C. § 1514A).
  89. Securities Exchange Act of 1934, 15 U.S.C. § 78u-6(h)(1)(C)(i)-(iii).
  90. Securities and Exchange Commission, Securities Exchange Act of 1934, 17 C.R.R. § 240.21F-2 (2011).
  91. Implementation of Whistleblower Provisions of Section 21F of the Securities Exchange Act of 1934, Securities Exchange Act Release No. 34-34545, at 16 (Aug. 12, 2011), available at http://www.sec. gov/rules/final/2011/34-64545.pdf (last visited Aug. 15, 2015).
  92. Id.
  93. See 17 C.F.R. § 240.21F-3(a).
  94. Id. at § 240.21F-4(b)(1)(0.
  95. Id. at § 240.21F-4(b).
  96. See 17 C.F.R. § 240.21F-2(b)(iii) (“The anti-retaliation protections apply whether or not you satisfy the requirements, procedures and conditions to qualify for an award.”).
  97. Egan v. TradingScreen, Inc., No. 10 Civ. 8202 (LBS), 2011 U.S. Dist. LEXIS 47713, at *9-19 (S.D.N.Y. May 4, 2011); Peters v. LifeLock, Inc., No. 14-cv-00576, slip op. at 6-13 (D. Ariz. Sept. 19, 2014).
  98. Press Release, Securities Exchange Commission, SEC Announces Largest-Ever Whistleblower Award (Sept. 22, 2014), available at PressRelease/1370543011290#.VQHxDvx4py0 (last visited Aug. 15, 2015).
  99. See id.
  100. See, e.g., Ellington v. Giacoumakis, 977 F. Supp. 2d 42 (D. Mass. 2013); Murray v. UBS Secs., LLC, No. 12 Civ. 5914 (JMF), 2013 U.S. Dist. LEXIS 71945 (S.D.N.Y. May 21, 2013); ,Genberg v. Porter, 935 F. Supp. 2d 1094 (D. Colo. 2013); Nollner v. S. Baptist Convention, Inc., 852 F. Supp. 2d 986 (M.D. Term. 2012); Kramer v. Trans-Lux Corp., No. 3:11cv1424 (SRU), 2012 U.S. Dist. LEXIS 136939 (D. Conn. Sept. 25, 2012).
  101. See generally U.S. Dep’t of Justice, Antitrust Division, Leniency Program (1993), available at criminal/leniency.html (last visited Aug. 15, 2015).
  102. McNulty v. Reddy Ice Inc., et al., 2:08-cv-13178 (PDB) (RSW), 2009 U.S. Dist. LEXIS 45298, at *5 (E.D. Mich. May 29, 2009).
  103. Id. at *6-8.
  104. Id. at *8-9.
  105. Id. at *9.
  106. See Plea Agreement, United States v. Arctic Glacier Int’l Inc., No. 1:09-cr-00149-HJW, at 8 (S.D. Ohio Oct. 13, 2009), available at (last visited Aug. 15, 2015).
  107. Transcript of Sentencing Hearing Proceedings at 32-34, United States v. Arctic Glacier Int’l Inc., No. 1:09-cr-00149-HJW (S.D. Ohio Feb. 18, 2010).
  108. Id.
  109. Id.; see also 18 U.S.C. § 3771 (2015).
  110. See In re McNulty v. Reddy Ice Holdings, Inc., No. 08-13178, 2010 U.S. Dist. LEXIS 5310 (E.D. Mich. Jan. 25, 2010), aff’d, 597 F.3d 344 (6th Cir.’2010).
  111. In re McNulty, 597 F.3d at 347.
  112. In re McNulty, 597 F.3d at 352.
  113. See Scott D. Hammond et al., Frequently Asked Questions Regarding the Antitrust Division’s Leniency Program and Model Leniency Letters, U.S. DEP’T OF JUSTICE, Nov. 9, 2008, at 27, available at http://www. (last visited Aug. 15, 2015).
  114. See Scott D. Hammond, Detecting and Deterring Cartel Activity through an Effective Leniency Program, U.S. DEP’T OF JUSTICE, INT’L WORKSHOP ON CARTELS, Nov. 21-22, 2000, at 2, 3, available at http:// (last visited Aug. 15, 2015).
  115. 118 Stat. 661, § 213 (2004) (codified at 15 U.S.C. § 1 note), as amended by Act of June 9, 2010, 124 Stat. 1275 (2010).
  116. Act of June 9, 2010, 124 Stat. 1275, § 1 (2010).
  117. Id. at § 5.
  118. Id.
  119. Criminal Cartel Enforcement: Stakeholder Views on Impact of 2004 Antitrust Reform Are Mixed, but Support Whistleblower Protection, U.S. Gov’t Accountability Office GAO-11-619, at 50 (July 2011), available at pdf (last visited Aug. 15, 2015) [hereinafter GAO Report].
  120. Id.
  121. See U.S. Dep’t of Justice, Antitrust Division, Corporate Leniency Policy (1993), available at guidelines/0091.pdf (last visited Aug. 15, 2015).
  122. Id.
  123. According to a recent report published by the compliance software firm, NAVEX Global, the volume of employee retaliation reports has risen over the past five years. See NAVEX Global, Ethics & Compliance Hotline Benchmark Report, at 6 (2015), available at (last visited Aug. 15, 2015). The report indicates that instances of retaliation increased from 4,594 in 2013 to 5,189 in 2014. Id at 22. Moreover, case closure times have also continued to climb, indicating that companies may be devoting enough resources to compliance issues. Id. at 6.
  124. GAO Report, supra note 119, at 45-50.
  125. Id. at 36-45. Although not mentioned by the GAO, a whistleblower bill introduced in 1912 was never enacted. This measure proposed an antitrust amendment that would have authorized the DOJ “to offer and pay rewards to the person or persons who shall first furnish to the Government information which shall lead to the detection of violations of the [Sherman Act],” and would have made the intimidation or assault of such “informers” and their families a punishable offense. H.R. 20194, 62d Cong., 2d Sess. (1912). The history of the bill, drafted at least in part by a group known as the “Antitrust League,” is recounted in Hearings on H.R. 20194 Before the House Comm. on the Judiciary, 62d Cong., 2d Sess. (April 16, 1912).
  126. GAO Report, supra note 119, at 36.
  127. Id. at 50.
  128. Id. at 36.
  129. Id. at 38-39.
  130. Id.
  131. Id. at 39.
  132. Id. at 40-41.
  133. See id. at 44-45.
  134. Id.
  135. Id. at 41.
  136. Id.
  137. Attorney General Eric Holder, Remarks on Financial Fraud Prosecutions at NYU School of Law (Sept. 17, 2014), available at (last visited Aug. 15, 2015).
  138. Id.
  139. Id. (“Realistically, staying ahead of these developments requires incentivizing individuals from within the industry to come forward and cooperate with ongoing investigations.”).
  140. Ed Beeson, Bharara Says Whistleblower Awards May Aid Corruption Fight, Law360, March 6, 2015, articles/628617/bharara-says-whistleblower-awards-may-aid-corruption-fight (last visited Aug. 15, 2015).
  141. Id.
  142. Audio recording: Anti-Retaliation: Coming to an Investigation Near You, held by the Am. Bar Ass’n (Apr. 16, 2014).
  143. Id.
  144. Daniel P. Westman & Nancy M. Modesitt, Whistleblowing: The Law of Retaliatory Discharge 10-11 (2d ed. 2014).

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