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Should an employee use a California Corporation Whistle Blower Hot Line?

Whistle blowers are often faced with the dilemma of to whom the should report suspected fraud and abuse of government funding. Many large corporations, in an effort to comply with legal requirements or simply in order to have employees believe a meaningful internal channel is available, will offer a “hot line” to their employees.  Before you report any suspected criminal or civilly wrong conduct to the hot line, ask yourself the following questions:

1.  What detriment is there to me in not using the hotline?  See if the company requires a report to the hot line (see your employee handbook, policies and procedures). Does it use the word “may” or “shall”? The latter may not be legal if it is designed to discourage the reporting of fraud or other illegalities such as discrimination to a governmental agency.

2. What advantage is there to report internally vs relying on the reporting provisions of federal or state false claims laws?  The federal false claims act (31 USC 3729) protects the identity of the whistle blower and requires a full scale governmental investigation. Additionally, anti-retaliation provisions protect the whistle blower from adverse job actions as a result of the reporting. Further, what assurance do you have the hotline will actually fix the problem if your “in line” and “direct” supervisors were made aware of it and did not fix it? Will your hot line report simply be sent back to them, and will you be retaliated against for going over their head?

3. What about financial incentives? It would be highly unusual if not unheard-of for a corporation to offer financial rewards for reporting fraud internally. However, the false claims act provides for a financial recovery of up to 30% of the amount the government receives as a result of a qui tam lawsuit. Recent pay offs to qui tam plaintiffs in the pharmaceutical industry have exceeded ten million dollars to just one qui tam plaintiff.

4. Has the in house hot line program been used by the company to punish those who, in the past, reported wrongdoing? One method of finding this out is to research the company on line (don’t use your company e mail/Internet to do that!).  Read employee (even anonymous) reviews. Ask co workers. Call those who may no longer work for your California-based employer. An attorney can be of help here, as they can review corporate-published materials and reports to governmental agencies under “self reporting” rules.

5. Do not trust anyone who answers the hotline phone! Remember that hot lines and HR departments are not your advocate. They are there to save the company tons of money.  Any advise they give you will not be as your attorney, with your best interests in mind. Even contacting a government inspector will not necessarily get you complete or correct legal advise. I am not aware of any government inspector or certainly any corporate hot line employee, who told our clients of their right to a financial recovery for reporting the fraud. A private whistle blower attorney is the best place to get this information. Your financial interests and your attorneys’ are aligned–100%.

6.  Are you promised confidentiality? This is a closely-related issue to punishment (bullet 4). While many companies promise to keep your complaint confidential, as said in a recent publication, your call may be the “fingerprint” the company relies on to find out the source of the report. A highly technical legal violation may only be known by a few people.

7. Who “runs” the hot line or compliance program? A program which originates in the corporate attorney’s office (called the general counsel or “in house” attorney) is highly suspect. You are basically giving the goodies to the wrong attorney! Always find yourself an attorney with whom you have an attorney client relationship and aligned interests. A corporate attorney has the same high degree of loyalty and fiduciary to his client–the corporation–not to you! Feel slightly more comfortable if your compliance hotline goes to the audit committee. Sarbanes-Oxley Act requires that audit committees including a confidential employee concern program (15 U.S.C. Section 78(f)(4).