For individuals who are against over regulation as a market mechanism, whistleblower cases can be justified because this is almost a private sector solution to the problem. There is anti-fraud law and there are private individuals and private attorneys who are responsible for vetting and making sure the case is substantial prior to bringing it to court. Instead of creating an extra layer of agencies to investigate and hire extra investigators who work for the government, there is this private sector cottage industry of attorneys who work with whistleblowers. The whistleblowers are private individuals who come forward and if they have really strong evidence and can convince a lawyer that the evidence is strong enough that the lawyer should take their case on a contingency basis and thereby risk not getting anything for a lot of work just to bring the case forward. This is as close to a private sector solution to fraud as imaginable.
This is as close to a private-public partnership as one can come up with. It is a private-public partnership to work on the problem of fraud in the government and therefore people who believe in that kind of a way of dealing with the government have positive industry reactions and view this as valuable.
The government pays for all these services and the government does not have the resources to continually monitor all contracts, all healthcare providers, or all grants that it provides, at least not with the level of detail involved. At some level, the government has to trust that the people they are doing business with are living up to the contracts, the grants, and the agreements that they make with the government or they would need such resources that are almost unimaginable to monitor these activities on a daily basis. The False Claims Act that allows the government to be able to act on the basis of strong information from whistleblowers in a position to know about the fraud. That helps the government to determine when a company is really at fault and of course the Act has been responsible for collecting billions of dollars back to the government as a result of successful cases.
One cannot bid rig or cheat and legitimately win a contract. If they get caught under the False Claims Act, they can lose a lot of money, be exposed, and furthermore, be debarred from government contracting for a period of time. There is an impact on those bad companies and a positive impact for the good companies in that way.
If there were not whistleblower laws, the government’s money would become an almost corporate welfare situation. There are of course many companies that would do the right thing anyway, but those companies who would be willing to rip off the government will thrive and in time, thrive at the expense of all other companies.
Developments to Influence Industry Standards
There has been a success in some circuits with respect to certification theory. This is the idea that when a company bills the government there is a certification implied by billing the government that that company is going to do what it contracted to do. This could force companies to think about their contracts and what they are promising the government more seriously. There have been major collections in certain industries that are going to alert those industries. There have been a couple of recent cases showing that competitors who may have inside information about their competition and may be in a position to blow the whistle on the competition may want to use the False Claims Act, which could definitely have an impact on industry standards.