Risk Management and Crisis Response Blog

Corporate whistleblower rewarded pursuant to the False Claims Act

Aug 31, 2017 2 MIN READ
Shawn Irving

Partner, Disputes, Toronto

Sanofi-Aventis has been rewarded $38.7 million for its role as a whistleblower in a settlement between another major pharmaceutical company and the US Department of Justice – the first instance of a corporate whistleblower rewarded pursuant to the qui tam provisions of the Federal False Claims Act (“FCA”).
The FCA imposes civil and criminal liability on any entity that falsely bills or otherwise defrauds the US government.
The FCA allows whistleblowers (individuals or corporations) to file qui tam actions alleging that a person or entity has defrauded the U.S. federal government. When a qui tam suit is commenced on the government’s behalf, the U.S. federal government has the right to intervene and join the action. If the government declines, the whistleblower may proceed on his or her own. 
As compensation, the whistleblower is entitled to 15-30% of any government recovery including the damages and civil fines. In certain cases, the whistleblower may receive immunity, though it is not guaranteed.
There is currently no legislation akin to the FCA in Canada. The government certainly has the power to defend itself from fraud or institute actions alleging fraud, but there is no legislation that allows a private party to commence a qui tam suit on the Government of Canada’s behalf. Commentators note that without this possibility, fraudulent activity will not only be difficult to identify, but also costly to prosecute. 
Indeed, the American experience shows that the introduction of the qui tam provisions has increased government recoveries exponentially, from $50 million in 1986 (the year when the provisions were introduced) to $4.7 billion in 2016.
The introduction of legislation akin to the FCA would be in line with the trend towards introduction of whistleblower programs by Canadian regulatory bodies. The most recent example being the establishment of the Ontario Securities Commission’s Whistleblower Program  in July 2016.
As we have previously written, the increased reliance on whistleblower programs is one of the most significant developments in the realm of regulatory enforcement in recent years.