09/09/2013 // Whistleblower Law Firm // Keller Grover, LLP // (press release)
Fraud may take many forms, but when it comes to tackling it, one weapon has proven particularly effective: inside information. Individuals who have witnessed improper behavior often provide the most powerful means for rooting it out. Known as whistleblowers, they are becoming more and more important in the ongoing effort by government — and society — to right troubling, often costly, wrongs.
In the financial sector, for example, recent cases have highlighted the value of inside information. In fraud cases, prosecutors will typically rely on documents to show improper behavior. While such evidence can be powerful, it can also be open to interpretation. Each side will invariably contend that the documents say something different. A whistleblower, however, puts a face and voice to the evidence — supplementing a prosecutor’s interpretation with context, through on-the-scene testimony.
Not surprisingly, fraud prosecutors are increasingly relying on such insiders to build their cases. Consider, for example, the current ‘London Whale’ case involving two JPMorgan Chase employees and their alleged role in understating the bank’s $6 billion loss in credit default swaps in 2012. In building its prosecution against the two bankers, the Justice Department isn’t just relying on documents alone to prove its charges (which include conspiracy, wire fraud, falsifying corporate records, and making false filings with the Securities and Exchange Commission), but is turning to an insider — another trader at the bank.
“Essentially the government is saying, here is someone who was there, who saw what was going on, and can spell it all out in the courtroom,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer. “The government may have emails and phone call transcripts that they will say show improper efforts to understate losses, but these are complex cases with skillful lawyers. Each side will develop an argument for what the evidence shows. When you have an insider, you have a flesh-and-bones narrator to add details, and credibility, to your interpretation.”
This, says Keller, is what makes whistleblowers essential for beating back fraud. “They are the eyes and ears that can show exactly what happened, whether it is Medicaid fraud, or financial fraud, or improper behavior in the pharmaceutical, defense, or healthcare sectors,” says the whistleblower lawyer. “If we are going to uncover fraud and recover ill-gotten funds, it is essential for insiders to step forward and tell the story of what went on.”
The gold standard of whistleblower statutes — the federal False Claim Act — gives insiders a significant incentive for stepping forward: a share in any ultimate recovery the government receives from those who defraud it. Those recoveries have not been trivial. Since the FCA was significantly modified in the 1980s, it has spurred the recovery of more than $34 billion.
“The False Claims Act has been so successful that many states have emulated it with their own whistleblower laws, and several key government agencies — such as the SEC and the Internal Revenue Service — have launched their own whistleblower programs,” says Keller, whose firm has offices in Los Angeles and San Francisco. “Even though the London Whale case is not about a fraud on the government, it shows how important insiders are in any complex matter. The documents may tell the story, but an insider can literally point the finger at the defendants. The result isn’t just a powerful case — but a compelling one.”
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