Canadian Whistleblowers Can Use These US Reward Laws

Canadian law includes some protection for whistleblowers at the federal and provincial level, but less than provided under some U.S. laws.

For example, in Canada whistleblower protection laws are almost non-existent in the private sector and the public sector whistleblower law in Canada does not provide rewards for successful whistleblowers. These legislative gaps discourage whistleblowers from reporting fraud, which in turn paves the way for more sophisticated fraud schemes and international corruption.

In Canada, The Office of the Public Sector Integrity Commissioner of Canada is one of the Independent Oversight Offices created as part of the Canadian Federal Accountability Act. The Office investigates wrongdoing in the federal public sector and helps protect whistleblowers, and those who participate in investigations, from reprisal. In recent years, only a handful of whistleblowers in Canada have gained the attention of the Integrity Commissioner. And the Public Servants Disclosure Protection Tribunal is the only entity (controlled by the Integrity Commissioner) that can provide remedy. The Commissioner has referred only seven whistleblowers to the Tribunal, and no case has yet reached the point where the Tribunal could order a remedy for the whistleblower.

In contrast, strong United States whistleblower laws can protect and reward Canadians who file claims and submit substantial evidence of fraud against the U.S. Government or various other regulatory commissions, such as the IRS, SEC, and CFTC. If you’re a Canadian with knowledge of a fraud involving U.S. government contracts, or taxes, securities, or commodities, you may be eligible for protection and rewards under various U.S. whistleblower laws.

Below is a guide to help Canadian whistleblowers understand U.S. whistleblower laws, as well as an overview of their rights, and reporting (“whistleblowing”) procedures.

• Whistleblower laws for federal and provincial level employees in Canada are weak. Those reporting fraud should not expect to be protected by any law whatsoever.
• For public sector wrongdoing, the Public Servants Disclosure Protection Act (PSDPA) does not allow private sector participants to be sanctioned or investigated. And there is no coverage for the private sector altogether.
• Residents of Canada who know of violations resulting in a successful prosecution, where the U.S. government obtains monetary sanctions, may be eligible for an award and enhanced U.S. whistleblower protections under various U.S. laws.

There are two agencies who deal with whistleblower complaints: The Office of the Public Sector Integrity Commissioner (“PSIC”) and the Public Servants Disclosure Tribunal (“PSDT”). Both of these agencies stand behind the Public Servants Disclosure Protection Act (“PSDPA”) which was enacted on April 15, 2007.

The Treasury Board must establish a code of conduct applicable to the public sector. As well, every Chief Executive must establish a code of conduct applicable to the portion of the public sector for which he or she is responsible.

If this code of conduct is violated, “good faith” disclosures can be made by public servants at the federal or provincial level, or by those in the private sector.

Types of violations resulting in a disclosure or reprisal complaint include:

• Misuse of public funding or public asset
• Gross mismanagement and misconduct in the public sector
• Acts of omission that endanger the health and safety of others, or the environment
• Serious breaches of “code of conduct”
• Coaching or directing another to commit a wrongdoing

1. The disclosure process – under the PSDPA, good faith disclosures made by public servants or members of the public can be done in full confidence, and are protected against reprisals – so long as the whistleblower cooperates in the investigations.
2. Reprisal complaint process – whistleblowers filing a complaint against the organization in which they work for (or with) and are experiencing reprisal. Reprisal means any measure taken against a “public servant” as a result of making protective disclosures to The Commissioner.

The first step – write a disclosure statement and provide supporting evidence to support your allegations of misconduct. Your statement will be sent to the Office of the Public Sector Integrity Commissioner (PSIC) of Canada, who is the sole authority to conduct investigations into allegations of reprisal throughout the government. You will then have your disclosure reviewed by the Commissioner to see an investigation is warranted.

Factors in making a decision whether to pursue an investigation include:

• Whether it’s appropriate for the PSIC to investigate based on the information provided or if there is another agency that the complaint is better suited for;
• The length of time elapsing after the fraud occurred. If an extended period of time has elapsed since the conduct that is the subject complaint occurred, the PSIC may deem the complaint to not be worth the time and effort of pursuing a full investigation; and
• The jurisdiction in which the fraud complaint was filed.

The PSIC will respond to complaints within 15 days of submission and a decision to investigate will be made within 90 days. The Commissioner will notify (a) the disclosure complainant, or (b) reprisal complainant in writing with a decision of whether or not they’ve decided to pursue an investigation.

The second step – if your disclosure or complaint is approved, the PSIC will investigate the claim. This happens when allegations concerning misconduct are supported with strong evidence, as defined by the Act.

The process may vary depending on:

• The availability of key documentation, evidence and witnesses;
• The complexity of the claim and underlying fraud; and
• Whether additional research is or will be required.

All investigations into disclosures or reprisals conclude within 1 year of their commencement date.

The last step – wait for the PSIC to make a decision whether wrongdoing was found based on the results of the investigation. The results will be communicated to the whistleblower and others involved.

There is no appeal process, but the disclosure or reprisal complainants may apply for judicial review of the PSIC findings and bring them to the Federal Court of Canada.

As efficacious as the process sounds, Canadian whistleblower laws still must be improved to provide maximum protection for whistleblowers. The current laws primarily focus on the steps one can take for managing complaints of misconduct and wrongdoing, when they should focus more on protecting and rewarding whistleblowers.

The first step in reporting misconduct or reprisal is to contact the PSIC who can help explain your options. Alternatively, you can hire a whistleblower attorney who can help you anonymously file a formal complaint with the PSIC.

If the misconduct or violation includes US government money or contracts, securities, commodities, or tax evasion, you must retain a US-based attorney to file a claim, and also, to file for rewards. The partners at Kohn, Kohn & Colapinto have fought and won numerous landmark international fraud cases.

Canadians who know of violations and report them in a timely fashion to the proper authorities may be eligible to submit a claim to receive a whistleblower informant award if their information led to a successful prosecution.

However, these filing procedures are extremely technical and failure to file a timely claim following the specific procedures outlined in each law can result in an otherwise qualified whistleblower losing his or her claim to a reward.

False Claims Act — the False Claims Act’s qui tam provision empowers whistleblowers who have firsthand knowledge of frauds/violations against the U.S. Government to file a whistleblower lawsuit on behalf of the government. In return, if the whistleblower’s case is successful they may be awarded between 15% and 30% of what the government collects from the fraud.

Once a qui tam case is filed under seal, the U.S. government will investigate the claim and decide whether it will elect to “intervene” in the case. If the government “intervenes” it effectively takes over the case. However, even after intervening the government may want to work with the whistleblower and their attorney to successfully litigate the case.

The False Claims Act incentivizes whistleblowers to work with the government, with a right to a reward, which may be enforceable in court. The mandatory minimum payments, which are often in the millions of dollars, are essential for convincing otherwise skeptical potential whistleblowers to step forward.

Examples of False Claims Act and Qui Tam Violations:

• Overbilling the government for more than was provided;
• Kickbacks in relation to government programs such as Medicare;
• Fraud in obtaining a government contract;
• Providing defective goods to the government;
• False statements on customs forms;
• False statements to get a government lease;
• Failure to pay monies owed to the government;

Our law firm has written several Frequently Asked Questions and guides to help you better understand the False Claims Act:

• What is Qui Tam?
• What is the False Claims Act?
• The False Claims Act for Healthcare Whistleblowers

The IRS Whistleblower Program — The Internal Revenue Code has a favorable tax whistleblower law that permits any IRS or tax fraud whistleblower to obtain between 15% and 30% of any collected proceeds received by the government as a result of the original information filed by the whistleblower.

An analyst in the IRS Whistleblower Office will consider the information provided by the whistleblower and has to decide if the case is worth pursuing. The entire process may take upward of a year or more depending on the complexity of the filing.

If the whistleblower disagrees with the outcome of the award claim, he or she can appeal to the Tax Court under 7623(b) within 30 days of determination. However, decisions under 7623(a) may not be appealed in Tax Court.

Examples of IRS Fraud:

• Offshore Tax Havens – knowingly moving money to a bank in another country to avoid reporting taxable income;
• Money Laundering – masking or concealing the source of illegally-obtained money by transferring it through bank accounts or legitimate businesses, for example;
• False Reporting – reporting incorrect information on tax returns, such as underreporting revenues or taxable income;
• Falsely Operating Under Tax-Exempt Status – claiming a tax-exempt status to receive tax credits or deductions;
• Pyramiding – withholding employee taxes and intentionally not remitting taxes to the IRS, then filing bankruptcy and starting another company;
• False Payroll Tax Returns – preparing false payroll tax returns understating the number of wages on taxes owed;
• Failure to Pay Payroll Taxes – failing to file employment tax returns to evade employment taxes, for example.

We’ve created a Frequently Asked Questions guide What Is Covered Under The IRS Tax Whistleblower Reward Program?, to help you better understand the types of misconduct and frauds are covered under the IRS Whistleblower Reward program.

The Securities & Exchange Commission Whistleblower Program — The Securities & Exchange Commission (“SEC”) is authorized by the U.S. Congress to provide monetary rewards to eligible individuals who voluntarily come forward with original information on securities violations that leads to a successful SEC enforcement action in which over $1 million dollars in sanctions is ordered. The award amount can range between 10% and 30% of the monies collected. Multiple whistleblowers can qualify for an award, but the total amount of the award can never total an amount higher than 30% of the sanctions.

The Office of the Whistleblower was established to administer the SEC’s whistleblower program. Tips, complaints and referrals should be submitted via the SEC’s Form TCR directly to the SEC in order for a whistleblower to be eligible for the program.

Securities Fraud Includes:

• Manipulation of a security’s price or volume;
• Insider trading;
• Fraudulent or unregistered securities offering;
• False or misleading statements about a company (including false or misleading SEC reports or financial statements);
• Bribery of, or improper payments to, foreign officials;
• Ponzi Schemes, Pyramid Schemes, or High-Yield Investment Programs;
• Theft or misappropriation of funds or securities;
• Fraudulent conduct associated with municipal securities transactions or public pension plans;
• Other fraudulent conduct involving securities.

Below is a short list of Frequently Asked Questions related to this program:

• Dodd-Frank Whistleblower Protections and Awards
• Qualifying for SEC Whistleblower Rewards

Commodity Futures Trading Commission Whistleblower Program — Like the SEC, the Commodity Futures Trading Commission (“CFTC”) is authorized to provide monetary rewards to eligible individuals who voluntarily come forward with original information on violations of the Commodities Exchange Act (“CEA”) that leads to a successful CFTC enforcement action in which over $1M in sanctions is ordered. The award amount can range between 10% and 30% of the money collected. Multiple whistleblowers can qualify for an award, but the total amount of the award can never total an amount higher than 30% of the sanctions.

Examples of CFTC Fraud Includes:

• Spoofing and other manipulation of commodities and derivatives markets;
• Insider trading;
• Foreign currency (Forex) fraud;
• Virtual currency fraud;
• Engaging in retail commodity transactions without registering with the CFTC
  Internal controls violations, such as a bank’s failure to supervise traders;
• Precious metals fraud such as misrepresentations as to source, value, or quantity;
• Phony futures and options websites.

Learn more about the CFTC whistleblower program by reading our Frequently Asked Questions:

• CFTC Whistleblower Awards Under The Commodity Exchange Act
• Reporting Anonymously as a CFTC Whistleblower

Foreign Corrupt Practices Act — whistleblower claims under the Foreign Corrupt Practice Act (“FCPA”) are initially filed with either the SEC or the CFTC and whistleblowers are eligible for awards for reporting FCPA violations through these offices’ whistleblower programs.

The FCPA prohibits U.S. persons (including publicly traded companies abroad) from paying anything of value to a foreign government official in order to obtain a business advantage. The FCPA also requires publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation.

The FCPA has widespread transnational application. Billions of dollars in fines have been collected by the United States as sanctions for bribes paid outside the United States by publicly traded companies. Indeed, since 2012 numerous whistleblowers represented by the attorneys at Kohn, Kohn and Colapinto, LLP have been paid over $350 million for cases that concern violations of law that occurred in Europe or other international jurisdictions.

U.S. citizens and non-U.S. citizens are equally eligible for whistleblower rewards for reporting violations of the FCPA.

Learn more about the Foreign Corrupt Practices Act by reading Frequently Asked Questions.

The most effective strategy to protect yourself from retaliation is to prevent the organization on which you are blowing the whistle from knowing who you are. If persons at this organization don’t know who you are, it’s difficult for them to retaliate against you. Put simply: it is always safer to be a confidential and anonymous whistleblower.

In Canada, government employees may receive far greater protection against reprisal for whistleblowing compared to those in the private sector.

Whistleblowers in Canada can file a complaint anonymously if they hire a whistleblower attorney to do it on their behalf. The information and disclosures submitted, as well as the information collected related to investigations, is kept confidential under the PSDPA.

In the U.S., the whistleblower retaliation or “adverse action” against individuals who speak out in the appropriate manner to protect the public interest is prohibited by a variety of laws such traditional tort and contracts law, from which they may receive damages resulting from reprisal for blowing the whistle.

The FCA permits whistleblowers to file complaints without revealing their identity to anyone (FCA cases are filed under seal and not even the defendant is initially notified of a case’s existence). However, after the government concludes its initial investigation, the whistleblower complaint is made public. Additionally, the FCA allows whistleblowers to sue for retaliation in certain circumstances.

The IRS, SEC, and CFTC whistleblower programs must maintain the confidentiality of whistleblowers who request such protection. The SEC and CFTC programs also permit individuals to file tips anonymously as long as they are filed through an attorney.

Canadian citizens who know of violations of U.S. law should contact a whistleblower law firm to learn how and whether to file a claim or tip.

Such violations implicating Canadian whistleblowers could include Bank Secrecy Act violations, illegal foreign bank accounts, money laundering, ocean pollution, foreign bribery, and more.

The strongest and most widely applicable U.S. federal whistleblower laws allow for non-U.S. citizens to report fraud confidentially. In fact, in recent years, thousands of whistleblowers around the world from over 120 countries have actively used U.S. laws to report instances of fraud, waste, and abuse. Under one law alone, the False Claims Act, the U.S. government has recovered over $46.5 billion in sanctions and awarded $7.8 billion to whistleblowers since 1986.

The attorneys at Kohn, Kohn & Colapinto have been critical in developing the IRS and SEC whistleblower laws and have supported some of the world’s largest whistleblower reward cases in history. If you’re a Canadian resident and would like to report major fraud against the U.S. government or major violations of U.S. laws, complete an intake form at the bottom of this page for a confidential case evaluation with one of our whistleblower attorneys.

University of Toronto Lecture
Partner Stephen Kohn of KKC giving a talk at the University of Toronto with other leading experts in Canadian Whistleblower Protection laws.