Empowering Whistleblowers: Combatting Cyber Fraud through the False Claims Act

The article outlines how the False Claims Act empowers whistleblowers to report cyber fraud, ensuring accountability and protection against retaliation in digital activities.

In the United States, the False Claims Act (FCA) serves as a pivotal legal shield for whistleblowers, protecting those who come forward with vital information.

Notably updated in October 2021, this important legislation now encompasses cyber fraud and false claims concerning digital operations.

Acting as a civil enforcement tool, the FCA allows whistleblowers to share in financial settlements while ensuring their anonymity.

Additionally, it guards against employer retaliation, preventing harassment, discrimination, or termination as a consequence of their disclosures.

Whistleblowers may even have the opportunity to recover damages, making the FCA a crucial ally for those revealing cyber misconduct.

THE CIVIL CYBER-FRAUD INITIATIVE: A CLOSER LOOK

Data breaches often lead companies to make urgent decisions aimed at fixing security weaknesses.

These can range from assessing vulnerabilities and sharing key information to setting up data backups or even negotiating ransom payments with cybercriminals.

Unfortunately, when a breach occurs, it can seriously damage public trust in cybersecurity, impacting consumer confidence and investor decisions alike.

Many organizations, fearing repercussions, may choose to hide a data breach instead of reporting it.

This approach is not only misguided but also detrimental, especially for businesses that partner with the government or receive federal funding.

The Civil Cyber-Fraud Initiative, unveiled on October 6, 2021, empowers whistleblowers to reveal attempts by corporate leaders to conceal data breaches.

By taking action, whistleblowers can protect taxpayer interests and ensure that companies honor their responsibilities to safeguard governmental information and sustain reliable systems.

Under this initiative, whistleblowers who expose cyber-related fraud, waste, or misconduct may earn between 10% and 30% of the resulting settlement, provided their information is original and immediate.

This financial reward comes from penalties and fees tied to the FCA and does not tap into taxpayer money.

Reporting instances of unreported breaches or false claims of cybersecurity compliance is also eligible for reward.

In addition, the FCA’s provisions offer strong protections against retaliatory actions from employers.

If an employer retaliates against a whistleblower—through harassment, demotion, denial of promotion, termination, or pay cuts—they can be taken to federal court and held liable for damages that may include double back pay, extra compensatory damages, and coverage of legal fees.

This framework not only provides a pathway for justice for whistleblowers but also encourages companies to address their internal problems responsibly and proactively.

IDENTIFYING REPORTABLE CYBER FRAUD

The Civil Cyber-Fraud Initiative expands the FCA’s reach, offering protection to whistleblowers who identify a range of cybersecurity violations related to government contractors, grantees, and organizations funded with public money.

Here are common types of infractions:

  • FAILURE TO COMPLY WITH CYBERSECURITY STANDARDS: Federal contracts often require adherence to specific cybersecurity requirements to help secure sensitive data, including personal health information and military locations.

    Standards may include the Federal Acquisition Regulation (FAR), the Defense Federal Acquisition Regulation Supplement (DFARS), and the Cybersecurity Maturity Model Certification (CMMC).

  • CONCEALING DATA BREACHES OR SECURITY WEAKNESSES: Contractors may attempt to hide the fact that their systems are inadequately secure to safeguard their contracts.

    However, failing to disclose security vulnerabilities or unreported breaches involving sensitive government data violates their contractual or regulatory duties.

  • FALSE CLAIMS ABOUT TECHNOLOGICAL SECURITY: It is unlawful to report contractors knowingly providing substandard or counterfeit technology services to the government.

    Any technology deployed must meet essential safety benchmarks and pass federal compliance evaluation.

  • MISUSE OF FEDERAL CYBERSECURITY FUNDS: Fraud can occur when contractors improperly allocate funds intended for cybersecurity efforts.

    This might involve charging the government for cybersecurity measures that were never put in place.

  • INACCURATE REPORTING OF SECURITY INCIDENTS: Companies engaged in government contracts are often required to maintain comprehensive incident response plans.

    Some may manipulate incident reports to secure contracts, thereby disadvantaging more qualified contenders.

    Misreporting or neglecting to report security incidents can now be actionable under the FCA.

The fear of retaliation looms large for many potential whistleblowers.

However, the protections and incentives provided by the FCA are designed to encourage individuals to report data breaches and certification inaccuracies.

Here’s how you can embark on the whistleblowing journey:

ACTING AS A CYBER WHISTLEBLOWER: A STEP-BY-STEP APPROACH

  • SEEK ADVISORY SUPPORT: Although you can blow the whistle independently, collaborating with an experienced qui tam attorney enhances your chances for success.

    Legal experts can facilitate your interactions with the Department of Justice (DOJ) while ensuring compliance with all legal protocols.

  • GATHER EVIDENCE: Building a strong case requires solid documentation.

    You may already possess relevant materials—like emails, comments, screenshots, or company manuals.

    Be prepared to provide sworn statements or any additional information requested by federal investigators.

  • FORMALLY FILE YOUR COMPLAINT: To activate FCA protections, your complaint must be officially submitted.

    Casual discussions with coworkers or supervisors don’t offer FCA safeguards.

  • PREPARE TO COOPERATE: Engaging with federal authorities is crucial if you wish to qualify for any rewards under the FCA.

    This may involve supplying detailed information, answering follow-up inquiries, or participating in sworn interviews.

The first claim filed under the Civil Cyber-Fraud Initiative involved Comprehensive Health Services LLC, a case that focused on protecting sensitive health data and the locations of U.S. service members overseas.

Other significant judgments have yielded millions in recoveries from:

  • Defense contractors that misrepresented their system security,
  • Medicaid providers linked to data breaches involving children in Florida, and
  • Telecom companies that did not meet basic security standards for public internet services.

The government relies heavily on contractors to deliver essential services, particularly those equipped with robust digital frameworks and secure data management.

The Civil Cyber-Fraud Initiative plays a critical role in enforcing accountability among contractors and promoting transparency in reporting by organizations receiving taxpayer funding.

By raising your voice, you contribute to the integrity of these systems and ensure that taxpayers receive the full benefits of their investments.

With the FCA, digital service providers now face compliance standards comparable to those imposed on contractors in sectors such as construction, healthcare, and education, all of which already operate under strict regulatory oversight.

Source: Natlawreview