When most people think of whistleblowers they probably picture “insiders” at companies that cheat the government. Indeed, the federal False Claims Act, a key whistleblower law, requires that information or evidence of fraud, waste or abuse come from an “original source.” But there’s no requirement that the original source be someone inside the company. Outsiders with the right information can blow the whistle, too.
Indeed, in some situations, the best whistleblowers may be a law breaker’s competitors.
Companies that break the law and get away with it make fair competition difficult or impossible for the majority of businesses that go to great lengths to fulfill their legal obligations. The fact that complying with a law is difficult or expensive is no excuse for breaking it—every company deals with its own unique pile of red tape. So government contractors and other companies that violate their legal obligations are just rigging the game in their favor at the expense of everyone who plays by the rules—and for government contractors, at the expense of the American taxpayer.
Here are three reasons why competitors and other outsiders can make excellent whistleblowers:
- Outsiders don’t have to worry about retaliation.
Non-insider whistleblowers are largely immune from retaliation. The False Claims Act prohibits companies from retaliating against workers who bring whistleblower suits (as do many other federal and state whistleblower laws). But workplace retaliation isn’t really an issue for competitors, is it? They’re already adversaries in the marketplace. It’s a fair fight.
- Competitors can smell a rat.
Under the False Claims Act’s qui tam provisions, any private person who has information or evidence of fraud, waste or abuse by a government contractor can bring a lawsuit against that contractor on behalf of the United States. The person, called a “relator,” is entitled to receive a share of the money recovered in a verdict or settlement. Relators can be individuals or they can be legal “persons,” like a corporation.
Companies forced to compete for government contracts against a cheater make good relators because they know their industries inside and out—well enough to know, or at least have an idea, that something fishy is going on. For instance: Federal agencies set aside a certain number of contracts for small businesses that meet specified eligibility criteria. But some large companies misrepresent their sizes in order to qualify for the contracts. They may make improper payment deals with a smaller entity or even create the small business entity specifically for the purpose of qualifying for the contracts. Last July, when a California-based IT contractor and a number of affiliates settled a False Claims Act suit accusing them of misrepresenting their size, the whistleblower wasn’t an employee—it was another IT contractor, a legitimate small business in Virginia, and its owner. He apparently knew his market well enough to know something was afoot.
- They know they’re doing the right thing.
Using a whistleblower complaint as a vehicle to take down a dishonest competitor may seem like a low blow. But think about it: The companies that break the law are really the one hitting below the belt, aren’t they? And they don’t care who they hurt in the process.
Doctors should refer their patients to outside providers like therapists and rehab facilities based on what’s best for the patient, not what’s best for the doctor’s bottom line. But it’s clear that many physicians and other healthcare providers aren’t above breaking the law in order to milk Medicare, Medicaid and TRICARE. They’re more concerned with lining their own pockets than their patients’ wellbeing.
Take for example a False Claims Act case that settled last April, in which a doctor was accused of sending referring patients exclusively to one therapy provider—which happened to be wholly owned by his brother. This is a violation of the Physician Self-Referral Act (also known as the “Stark Law”), which generally prohibits doctors from referring Medicare and Medicaid patients to entities in which the doctor has a financial interest, including entities owned by the physician’s immediate family members.
In that case, the relator was an employee of a competing therapy provider who discovered the illicit arrangement while in the doctor’s office, trying to convince him to refer patients to his employer’s facility. This is a perfect example of how a company can use a False Claims Act lawsuit to remove a source of unfair competition from the market and at the same time while recover taxpayer dollars lost to fraud and help ensure patients get the care they need, not whatever helps the “family business.” It’s a win-win-win—certainly not a low blow.