Whistleblower Law Firm Headquartered in New York City

Whistleblower complaints may be submitted confidentially to several federal or state agencies, under a myriad of federal and state laws. Examples follow:

• Antitrust violations may be reported confidentially to the U.S. Department of Justice, Antitrust Division, the U.S. Federal Trade Commission, State Attorneys General, or regulators abroad;
• Securities fraud violations may be reported to the U.S. Securities and Exchange Commission (“SEC”);
• Manipulative practices may be reported confidentially to the U.S. Commodity Futures Trading Commission;
• Fraud may be reported to the federal government under the federal False Claims Act of 1863 (31 U.S.C. § 3729, et seq.);
• Tax fraud may be reported confidentially to the U.S. Internal Revenue Service (“IRS”);
• Motor vehicle safety issues may be reported to the U.S. Department of Transportation; and
• Bank fraud may be reported confidentially under the U.S. Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

 

Whistleblowers, qui tam parties, relators, or confidential informants need not be current or former employees or other “insiders”; they can be a broader spectrum of parties—agents, vendors, competitors, customers, accountants, lawyers, or healthcare professionals—or even general observers of suspected unlawful activity. Even a corporate competitor can blow the whistle. You do not need to have witnessed the misconduct yourself nor have documentary evidence. And you do not need to be an American citizen, resident, or company. Even if you may have been involved to some extent in the misconduct, there are avenues for you to blow the whistle effectively, especially if the whistleblower participated in the wrongdoing unknowingly or at a superior’s direction. In fact, such individuals often have access to exactly the sort of information necessary, and the law recognizes that to prevent ongoing fraud, we need such brave individuals to come forward.

Awards given to brave whistleblowers, qui tam parties, relators, or confidential informants under various federal or state laws can be very large, often between 15 and 30 percent of what is collected by the government regulator. We often handle these matters on behalf of informants on a contingency basis: you will not have to advance any litigation costs, expenses, or fees, which would be recouped only for a part of the incentive payment awarded to you. Indeed, some laws permit for shifting of the attorneys’ fees and litigation costs and expenses from the defendant, so the funds recovered could be in addition to any incentive payments made to the whistleblower.

Nematzadeh PLLC can align and partner long term with our clients by being able to formulate hybrid legal fees, including, without limitation, contingency fees, hourly fees, fixed fees, phased fees, success fees, and a combination thereof. 

Government regulators provide robust programs that incentivize confidential whistleblowers and informants to reveal antitrust schemes. These confidential whistleblowers and informants can be entitled to meaningful incentive payments for helping government regulators seek justice and have the benefit of protection from retaliation. Whistleblowers or government investigations often expose antitrust conspiracies. In the U.S., the main government regulators who enforce antitrust and unfair competition laws (federal and state) are the Department of Justice (“DOJ”), Antitrust Division, Federal Trade Commission, and State Attorneys General. If businesses or individuals believe that they have violated the antitrust laws, government regulators provide incentives for self-reporting.

Financial fraud claims are typically brought under the U.S. Securities and Exchange Commission (“SEC”) Whistleblower Reward Program. The integrity of the securities and financial markets is critical to the growth of U.S. business and the welfare of the U.S. economy. Whistleblowers play an important role in reporting fraud to the SEC to assist in their important mission of protecting investors and regulating the U.S. financial markets. The SEC enforces the federal securities laws, primarily contained in the Securities Act of 1933 (15 U.S.C. § 77a), the Securities Exchange Act of 1934 (15 U.S.C. § 78a), the Investment Company Act of 1940 (15 U.S.C. § 80a–3), the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 through 15 U.S.C. § 80b-21), the Sarbanes-Oxley Act of 2002 (15 U.S.C. § 7241), and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (12 U.S.C. Ch. 53). The SEC has broad jurisdiction over the U.S. financial markets and regularly brings enforcement actions against public and private companies, banks, investment advisers, asset managers, and individuals.

Common examples of securities fraud include:

• False or misleading disclosures regarding a company’s financial results or condition, its products, or its business risks;
• Improper securities trading practices, including, without limitation, insider trading;
• Market manipulation;
• Charging hidden fees to investors;
• Ponzi schemes;
• Bribery of foreign officials; and
• Failing to register securities, including digital tokens and other crypto assets.

The confidentiality of the whistleblower could be protected. Incentive payments made to confidential whistleblowers can be very meaningful: whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million. Since issuing its first award in 2014, the CFTC has awarded approximately $330 million to whistleblowers. These figures have been increasing regularly. Lead whistleblower attorney Justin Nematzadeh has experience in protecting whistleblowers who confidentially alert the SEC about potential violations; let us guide you through the entire process.

Victims of fraud, manipulative trading, or other types of unlawful transacting affecting commodities, derivatives, futures, options, or commodities exchanges have rights to sue under the Commodities Exchange Act of 1936 (“Commodities Exchange Act”) (7 U.S.C. ch. 1 § 1). These victims often include individual traders, entrepreneurs, asset managers, energy firms, financial institutions, government entities, public or private institutional investors, and precious-metals traders.

Whistleblowers play an important role in reporting fraud to the Commodity Futures Trading Commission (“CFTC”) under the CFTC Whistleblower Reward Program to assist in their important mission of protecting investors and regulating the commodities markets. The CFTC enforces the Commodity Exchange Act, and the CFTC also has jurisdiction over financial derivatives, such as commodity futures and certain types of option or swap agreements.

The CFTC frequently brings enforcement actions against commodity market participants for fraudulent disclosure, market manipulation, and trading violations. Whistleblowers are protected in reporting violations to the CFTC, and they can receive meaningful incentive awards. Since issuing its first award in 2014, the CFTC has awarded approximately $330 million to whistleblowers.

Qui tam claims can be brought under the federal False Claims Act of 1863 (“False Claims Act”) and various state laws (at least dozens of states have their own false claims statutes that parallel the False Claims Act). Private individuals or entities can report suspected wrongdoing, and their reporting and cases remain “under seal,” which is confidential even to the potential defendant. The regulator can investigate the charges and potentially bring a case, and the informant could be entitled to a meaningful incentive payment if the investigation or litigation yields results. If you have information that an individual or company is committing fraud against the government, you may be entitled to a significant reward for reporting it.

Companies that obtain federal or state funds through false representations or fraud can be sued in what are known as Qui Tam cases to recover these funds, which imposes triple damages and penalties against violators. The False Claims Act is a federal law under which the federal government can reclaim funds lost (taxpayers’ money) to fraud: the government loses hundreds of billions of dollars to fraud each year—about 30 states, including New York, also have their own False Claims Acts to recover funds lost to fraud. Individuals who “blow the whistle” on illegal conduct are incentivized to become whistleblowers and act as a relator because, in part, they typically receive a material portion of the recovery, often 15 to 30 percent of the recovery. The False Claims Act covers fraudulent claims made against any federal agency, program, contract, or grant.

The False Claims Act authorizes the government or whistleblowers to sue individuals and companies accused of defrauding the government. These lawsuits are initially filed under seal in federal court, which initially keeps whistleblowers and their allegations confidential. This allows the DOJ to investigate the defendant for an extended period of time without the alleged perpetrator knowing about the investigation.

The seal is not lifted by the court until after the DOJ investigates the charges and decides whether to intervene. After the investigation is complete, the government may either take over the case or decline to do so, allowing the whistleblower to proceed with the litigation on his or her own.

The qui tam relator is the whistleblower who brings the False Claims Act claims against the company or individual who committed the fraud. Usually, the qui tam relator has access to confidential information about the alleged scheme.

If the government pursues litigation, the whistleblower may be rewarded with a significant portion of any recovered funds. In a successful qui tam claim, a whistleblower can be rewarded between 15 and 30 percent of the government’s recovery plus reasonable attorneys’ fees and costs. Justin Nematzadeh has a proven track record of helping clients throughout New York bring claims against parties who have defrauded the government.

Whistleblower cases brought under the False Claims Act often revolve around several types of alleged fraudulent activity, including the following, without limitation:

• Making false statements in grant applications for research funding, such as from the National Institutes of Health;
• Selling defective or improper goods to the government;
• Billing for goods or services never provided;
• Billing for unnecessary services; and
• Billing schemes that increase payment without adding value.

Construction Fraud

The federal and state governments enter into contracts in nearly every area in which public funds are expended. These areas include, without limitation, defense contracting, infrastructure, information technology, building construction and maintenance, and purchases of all manner of tangible goods. Fraud is common in civil engineering and construction contracts awarded by the federal government, such as the following, without limitation:

• Bid-rigging, bribery, or other misconduct to obtain a government contract;
• Providing non-compliant or substandard goods or services (or failing to provide the required goods or services at all);
• Unauthorized substitution of parts or equipment—for example, using cheaper, inferior items when a contract requires specific, high-quality parts;
• Failing to properly test for defects or safety flaws (lack of quality control);
• Making false certifications as to the quality or attributes of the goods or services provided (or the manner in which they were provided); or
• Fraud in connection with government set-aside programs for minorities, women, and the disabled.

Defense Contractor Fraud

Defense contracts with the federal government amount to billions of dollars each year. For example, fraudulent activity in the aerospace and defense industries typically involves the following, without limitation:

• Intentionally inflating prices on government contracts;
• Unlawful billing schemes (for example, charging the Department of Defense for high-quality parts or equipment while providing cheaper replacements);
• Supplying defective parts; or
• Failure to meet the specifications of a contract.

 

Motor Vehicle Safety

In 2015, in the wake of serious motor vehicle safety scandals, Congress passed the “Fixing America’s Surface Transportation Act” (49 U.S.C § 5310), which established a Motor Vehicle Safety Whistleblower Act and Motor Vehicle Safety Whistleblower Reward Program at the Department of Transportation. Under the Motor Vehicle Safety Whistleblower Act, any employee or contractor of a motor vehicle manufacturer, part supplier, or dealership may submit information to the government regarding serious violations of federal safety laws. Serious safety violations include the following, without limitation:

• Defects that cause the driver to lose control of the vehicle;
• Failure of safety measures such as airbags or brakes;
• Ineffective crash safety mechanisms; or
• Spontaneous fires or explosions.

In addition, as the motor vehicle industry continues its trend toward self-driving cars and other automated control features, the range of potential safety violations will only increase.

Whistleblowers whose information results in the government’s collection of over $1 million in monetary sanctions may be eligible for a financial reward equal to 10 to 30 percent of the amount recovered. The Department of Transportation takes all reasonable measures to protect the anonymity of whistleblowers.

Healthcare (Medicare/Medicaid) Fraud

Healthcare fraud is one of the most common types of fraud perpetrated on the federal government. This type of fraud arises when a medical professional or healthcare entity—for example, a hospital, lab, or pharmacy—submits fraudulent claims to Medicare or Medicaid, including the following, without limitation:

• Billing for services not provided;
• Administering unnecessary services;
• Billing for a more costly service than what was provided (upcoding);
• Billing each stage of a procedure as separate procedures (unbundling);
•  Payments (kickbacks) to physicians, physician practices, or hospitals by pharmaceutical companies or others in return for drug promotion or purchases (a violation of the Anti-Kickback Statute);
• Pharmacies improperly billing Medicare or Medicaid for drugs not prescribed;
• Medical device companies not securing proper approvals by the U.S. Food and Drug Administration for selling medical devices or using them for off-label purposes;
• A physician referring certain services to an entity in which they have a financial stake (a violation of the Physician Self-Referral Law, also known as the Stark Act); or
• The use of invalid drug patents to block generic entry.

This category also includes fraud related to the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES) (15 U.S.C. Ch. 116).

Pharmacy Benefit Manager Fraud

Pharmacy benefit managers (“PBMs”) are companies that manage prescription drug benefits on behalf of government-funded programs. In exercising this role, PBMs routinely negotiate with drug manufacturers and pharmacies. Although the contractual relationships between PBMs and the numerous parties with whom they conduct business are generally not made public, a PBM is as a general matter obligated to pass along the cost savings that it negotiates on behalf of the program it represents. To the extent that it conceals this benefit and pockets it for itself, the PBM is opening itself up to liability under the False Claims Act for causing false claims to be submitted to the government.

Additionally, PBMs sometimes wear several hats while operating within the complicated matrix of the pharmaceutical distribution chain. This means that there may well be situations in which the PBM has financial interests that conflict, and it thus may be incentivized to negotiate for something less than the best deal possible for the government program. Should this happen, the False Claims Act has potentially been violated.

Durable Medical Equipment Fraud

Durable medical equipment is medical equipment that can be used again and again, such as beds, wheelchairs, and back braces. This realm of health care is subject to less regulation and has fallen victim to some of the most egregious examples of billing the government for items that were induced by kickbacks, were unnecessary, were never provided, or (as has occurred with items such as back braces, hearing aids, and glucose monitors) were never prescribed by a provider.

Electronic Health Records Fraud

Electronic health records (“EHR”) are electronic versions of the information contained in paper charts in your doctor’s or other healthcare provider’s office. EHRs may include your medical history, notes, and other information about your health, including your symptoms, diagnoses, medications, lab results, vital signs, immunizations, and reports from diagnostic tests, such as x-rays. The federal government has long recognized that EHRs have great potential to improve health care but can also cause harm to the provision of safe and effective health care if they do not function properly.

To encourage hospitals to invest the millions of dollars needed to purchase and use a foundationally sound EHR system, in 2010, the government established programs under Medicare and Medicaid to pay significant incentive payments to hospitals and physicians for owning and using EHRs certified against a federal standard. This goal created the potential for fraud in at least two respects.

First, to qualify for incentive payments, the EHR software must be “certified,” meaning that it was tested by a government-approved body and found to be capable of performing a set of specific criteria. If the software manufacturer cheats during the testing, the software will falsely receive certification and cause hospitals and other providers to unwittingly apply for incentive payments using unqualified software. Second, to receive incentive payments, providers must demonstrate that they are using the software in a “meaningful manner” by satisfying certain objectives. If the provider falsely represents that these objectives have been satisfied, when they have not, False Claims Act liability will attach.

Telemedicine Fraud

Prior to the COVID pandemic, the Medicare and Medicaid programs had been repeated targets of telefraud, as had unsuspecting patients in their homes. But during the COVID pandemic, Congress acted quickly to ease restrictions on telemedicine through the CARES Act of 2020. This greatly expanded the circumstances under which healthcare providers could bill Medicare and Medicaid for seeing patients and providing services remotely. The law also allowed providers to charge for seeing patients in other states for the first time. This has led to an explosion of telemedicine fraud.

For instance, in September 2021, the Office of the Inspector General (“OIG”) for the U.S. Department of Health and Human Services issued a report on telemedicine in the context of Medicaid and behavioral health. The OIG concluded that increased monitoring by states to detect Medicaid telemedicine fraud is urgently needed. More generally, the DOJ has responded to the uptick in telemedicine fraud by making it a primary target.

Tax Fraud

Tax fraud and illegal tax avoidance cost the federal and state governments billions of dollars each year. In 2020 alone, the IRS’ criminal enforcement arm identified over $2 billion in federal tax fraud. There are countless ways in which a business can improperly avoid its tax obligations. Some of the most common include the following, without limitation:

• Failure to report all sources of taxable income;
• Claiming improper deductions or credits;
• Engaging in illegal tax shelters;
• Failure to forward withheld employee taxes to the IRS;
• Failure to pay appropriate taxes on investment activity or cryptocurrency transactions;
• Failure to properly account for intercompany transfers; or
• Failure to identify income that is attributable to U.S. business activity.

The primary manner through which whistleblowers can report tax fraud in New York is through the IRS Whistleblower Reward Program, which covers underpayments of federal taxes and related penalties and proceeds. Certain states, like New York, allow whistleblowers to pursue state tax-related claims through their false claims act statutes or other statutory or administrative mechanisms.

In 2006, the IRS Whistleblower Program was established to administer a system that encourages individuals to come forward with information regarding the underpayment of federal taxes by offering financial awards when that information leads to successful government recovery. Since its creation, the IRS Whistleblower Program has led to the collection of over $6 billion in underpaid taxes and has made over $1 billion in awards to whistleblowers.

Individuals who follow the procedures of the IRS Whistleblower Program and whose information leads to the recovery of over $2 million in proceeds may be eligible for financial awards equal to 15 to 30 percent of the proceeds collected. The IRS will take all appropriate measures to protect the anonymity of whistleblowers and does not personally identify whistleblowers even when making and announcing its whistleblower awards.

The process of preparing your claim is kept confidential and culminates in a complaint being filed with the court “under seal,” which in essence means that the existence of the complaint must be kept confidential and thus only the whistleblower, his or her counsel, the court, and the government will know it has been filed. This “under seal” requirement provides the government an opportunity to investigate the claims on its own, without alerting the defendant to the investigation, while also providing anonymity to the whistleblower until the government reaches a decision as to whether it will pursue or “intervene” in the case. Indeed, it is common for a whistleblower to simply continue working at his or her employer after he or she has filed a whistleblower complaint under seal against it.

Whistleblowers in New York cannot be fired for whistleblowing. The False Claims Act includes a provision that protects whistleblowers (whether employees or independent contractors) from retaliation by their employers. Prohibited retaliation includes the following, without limitation: termination, suspension, demotion, harassment, or any other discrimination in the terms and conditions of employment.

Nematzadeh PLLC can help you understand the risks and rewards of pursuing a claim, determine the strength of your case, and assess your chances of winning.

Ultimately, whistleblowing can be personally satisfying, as well as financially rewarding, knowing that your efforts have stopped the wrongdoing and protected others like you. Our firm is experienced in protecting the rights of whistleblowers. If you believe that you have evidence of securities, financial, or tax fraud or other wrongdoing, contact Nematzadeh PLLC by calling (646) 799-6729 or emailing lawyer@nematlawyers.com for a confidential, free consultation. We can—and often do—take matters on contingency.