LEGAL MATTERS: Lance Armstrong, Lawsuits + MA’s Whistleblowing Law

Wednesday, January 23, 2013

John T. Longo, GoLocalWorcester Legal Contributor

Cheating-bicyclist-turned-whistleblower Floyd Landis is pressing a lawsuit against Lance Armstrong that could make him the biggest winner in Armstrong’s doping scandal--what does this headline-grabbing event remind us about the law, and about Massachusetts' own whistleblowing laws?

False Claims Act

Landis, who was stripped of his 2006 Tour de France win because of doping, filed the lawsuit in 2010 under the federal False Claims Act. The Act is a Civil War-era law Congress passed to fight fraud by government contractors. The Act requires anyone caught collecting money from the government based on a false claim to repay up to three times the amount they fraudulently obtained.

To help uncover fraud, the Act contains qui tam provisions that allow individual whistleblowers to bring false claims lawsuits and then keep15% - 25% of the money they recover for the government. In FY 2012, whistleblowers got to keep $439 million of the $3.3 billion they recovered for the federal government.

Enter Landis. His theory is Armstrong cheated the Postal Service out of millions of dollars in sponsorship money by falsely assuring it he was drug free. The Service spent more than $32 million sponsoring Armstrong’s racing teams so Landis could walk away from the lawsuit with over $10 million for himself. As in all False Claims Act lawsuits, the government has the right to take over the case from Landis but, even if it does, it will still have share whatever money it recovers with him.

If the lawsuit succeeds, Landis won’t be the first person to win by turning in a fellow cheater. The biggest cheater-turned-whistleblower case so far was in September when the IRS awarded $104 million to Bradley Birkenfeld for turning over evidence of a huge tax evasion scam involving Swiss bank accounts. He will receive the money despite having served 2 ½ years in prison for taking part in similar schemes.

IRS & SEC Whistleblowers

Whistleblowers in False Claims Act cases must actually file a lawsuit to earn their cut but the IRS and the Securities and Exchange Commission makes it even easier for tipsters to earn money for their information. The IRS rewards people who simply turn in big tax cheats with 15% – 30% of whatever it collects and it lets them do it anonymously; in October it gave a whistleblower $38 million. (But think twice before turning in your neighbor because the IRS only pays if your tip results in it collecting at least $2 million.) Similarly, the SEC now gives whistleblowers 10% – 30% of any fine over $1 million it collects based on their tips.

State Whistleblowers

Rhode Island and Massachusetts have false claims laws that are very similar to the federal Act and both require the whistleblower to actually file a lawsuit before they can earn a commission. The Rhode Island law rewards whistleblowers with 15% - 30% of whatever the state recovers; the Massachusetts law gives them 10% - 30%.

Get a Lawyer Before You Blow the Whistle

Given the amount of money involved, and the complexity of the different whistleblower laws, a cottage industry of lawyers specializing in qui tam cases has emerged. If you want to get paid for being a whistleblower, be sure to talk to one of them first.