I applaud President Biden’s Build Back Better plan with its three-pronged focus: COVID-19 relief, rebuilding our aging infrastructure, and restoring our middle class. The American Rescue Plan was signed into law on March 11, 2021, providing $1.9 trillion in funds to assist Americans suffering from economic hardships from the pandemic. The American Rescue Plan is well known for providing $1,400 per-person direct payments and extending unemployment insurance benefits. However some of the plan’s largest dollar impacts actually flow through existing federal programs for combating child hunger and poverty, like the Supplemental Nutrition Assistance Program (SNAP) and the Child Tax Credit and Earned Income Tax Credit initiatives. It is important to note that Covid stimulus legislation passed in 2020, and the new stimulus bill makes use of existing programs like each state’s unemployment system to deliver federal relief dollars to those in need. The Paycheck Protection Program (PPP) was the largest new distribution of federal monies with no prior system in place for distribution.
We saw fraud and abuse in both the established unemployment systems across the country and certainly in the newly created PPP loans. To date, the fraud has grown into the billions. According to the House Select Committee on the Corona Virus Crisis, nearly $84 billion has been misappropriated by potentially fraudulent loans. In its press release about COVID-19 fraud enforcement actions, the Department of Justice put a spotlight on the value of whistleblowers to its ability to hold wrongdoers accountable. Commenting on its first Covid-19 False Claims Act settlement, the DOJ stated: “as unscrupulous actors take advantage of vulnerabilities created by the COVID-19 pandemic and the new government programs disbursing federal relief . . . whistleblower cases will continue to be an essential source of new leads to help root out the misuse and abuse of taxpayer funds.”
The American Jobs Plan proposed by President Biden will authorize over $2 trillion to rebuild infrastructure from highways, bridges, ports, electricity grids, and drinking water systems to expansions of high-speed broadband networks and modernizations of schools, federal buildings, and more. The job creation potential will be obvious to all, as well the potential for a fraud bonanza. Only a portion of the funds in the $2 trillion package will be funneled through existing programs.
I urge the elected officials contemplating this massive infrastructure bill to include whistleblower provisions, similar to those in the Dodd-Frank Act and the False Claims Act in the American Jobs Plan. Whistleblowers are a check and balance on abuses of power and outright fraud. However, the history of retaliation against whistleblowers has shown speaking up is too risky without legal protections. Legal protections that include a bounty reward system, like those in Dodd-Frank and the False Claims Act, have proven to be the most effective at encouraging whistleblowing and protecting whistleblowers. Bounty programs attract legal advocacy support for the whistleblower, which is critical. The Build Back Better plans of this Administration must include protections and safeguards to ensure waste, theft and fraud are prevented. We’ve already witnessed the brazen creativity of bad actors taking advantage of the relief and stimulus bills passed this last year. According to the White House website, “[t]he American Jobs Plan will invest in America in a way we have not invested since we built the interstate highways and won the Space Race.” Congress must not allow this investment to be squandered by fraud by failing to protect the whistleblowers that would report it.
My experience as a whistleblower and with whistleblowers has shown me that perpetrators of fraud have little fear of detection because silencing whistleblowers with job loss and attacks on their credibility has been very effective. I’ve met far too many whistleblowers with destroyed careers, health and families. When asked for advice, I often wrestled with providing whistleblowers and would-be whistleblowers with hope until the passage of the Dodd-Frank Act put bounty provisions in place that in many cases allowed anonymity, and most importantly, provided the whistleblower with much needed legal support. The White House statement about the American Jobs Act identifies the government’s commitment to “[i]nvest resources wisely to deliver infrastructure projects that produce real results.” Enron’s fraud cost investors over $60 billion, and that does not consider losses to customers, employees, vendors and creditors, or the distrust it caused in the capitalist system. Efficient systems exist where trust exists. Whistleblowers are the best first line of defense to ensure that well laid plans garner real results and bad actors are identified and held to account.
In 2020, Whistleblower Network News conducted a Marist poll that found that 82% of Americans think Congress should make strengthening whistleblower laws a priority. Notably, likely voters shared this viewpoint across demographic and political groups. In the same year, the Securities and Exchange Commission reported the incredible success of its Dodd-Frank Act whistleblower program and has continued to issue record-breaking sanctions and awards into 2021. During the 2020 issuance of some generally positive whistleblower amendments, Commissioner – and former Acting Chair – Allison Lee stated that whistleblowers “display extraordinary bravery to expose fraud and wrongdoing, and to shine light in some very dark places.” adding that “in doing so, they reinforce our fundamental values – that the rule of law matters, and no one is, or should be, above the law.”
The Securities and Exchange Commission’s (SEC) 2020 annual report stated that in its ten-year history, the program had issued $2.7 billion in total monetary sanctions, including “more than $1.5 billion in disgorgement of ill-gotten gains and interest, of which more than $850 million has been, or is scheduled to be, returned to harmed investors.” Since issuing its first award in 2012, the SEC has awarded over $800 million to whistleblowers. Reflecting on the success of the SEC whistleblower program, the SEC’s then Chief of the Office of the Whistleblower, Jane Norberg, stated that “FY 2020 truly was a historic year that demonstrated the Commission’s dedication to the whistleblower program, which continues to have a significant impact on the Commission’s enforcement efforts and protection of retail investors. We hope the awards made in FY 2020 continue to incentivize whistleblowers to come forward and report specific, timely, and credible information to the Commission, which in turn enhances the agency’s ability to detect wrongdoing and protect investors and the marketplace.” in her introduction to the report. The SEC program continues to set records into 2021. I participated in the comment process, meeting with Commissioners at the SEC to help them understand why these pro-whistleblower provisions needed to be adopted and how dangerous it can get for whistleblowers without proper protections. I am calling on Congress to ensure whistleblowers who seek to report frauds spawned by the rush of infrastructure funding included in this infrastructure bill will have robust whistleblower protections in place, so they do not pay for their truth telling with their careers, health or family.
In 2020, the Commodities Futures Trading Commission’s whistleblower program also reported success. This report showed that the program far exceeded expectations for its Dodd-Frank Act whistleblower program, growing from an agency that received a mere 15 tips in its first year of operation to receiving over 1,000 tips and issuing 16 whistleblower awards totaling $20 million in 2020. The CFTC program has resulted in billions of dollars in sanctions exposing otherwise undetectable – yet highly significant – frauds. And the program only promises to increase its success as whistleblowers continue to submit tips.
The Commodities whistleblower program is particularly important to infrastructure because much of infrastructure billing will be touched directly by the commodities market. The plan outlines expansions in massive construction projects, all of which will draw on resources classically considered commodities – like fuel. The Commodities market is a multi-trillion-dollar market that spans all natural resources that touch our lives and every single infrastructure project. According to the agency, the Commodities whistleblower program “receives tips and complaints regarding activities such as failures to supervise; record keeping or registration violations; swap dealer business conduct; wash trading; solicitation, misappropriation, and other types of fraud; use of deceptive or manipulative devices in trading; as well as spoofing and other forms of disruptive trading or market manipulation.”
The Commodities swap market is a major component of how prices for these essential elements of daily life are set. Therefore, market manipulation of commodities would have a huge impact on the cost of infrastructure projects and the effective negotiation of contracts. Manipulation and other prohibited conduct on the commodities market have a radically pervasive impact on how infrastructure dollars are spent and will be a likely sight for frauds that might initially seem outside of the scope of these government contracts. Whistleblowers are best positioned to know about such frauds. However, due to a disastrously low cap on the fund out of which whistleblowers are paid – the CFTC may not be able to effectively award these whistleblowers. This is why the bi-partisan CFTC Fund Management Act, a bill that would raise the cap on this fund and allow the CFTC to continue to effectively operate its whistleblower program, must be passed as part of the infrastructure bill.
Further, the Consumer Financial Protection Bureau needs a Dodd-Frank Act style program. According to the White House, “[t]he President’s plan includes $20 billion for a new program that will reconnect neighborhoods cut off by historic investments and ensure new projects increase opportunity, advance racial equity and environmental justice, and promote affordable access.” And “give consumers point of sale rebates and tax incentives to buy American-made [Electric Vehicles], while ensuring that these vehicles are affordable for all families.” The Consumer Financial Protection Bureau is currently the touchstone agency for addressing these issues. The Financial Compensation for Whistleblowers Act must be included in the infrastructure bill to incentivize whistleblowers to come forward about discriminatory practices in lending and credit related to the programs created by the infrastructure initiative. The CFPB oversees fairness in credit in housing, auto, and small business loans. Achieving the government’s goals around equity and the expansion of electric vehicles will involve all of these financial tools. However, without the help of whistleblowers, the government will be defrauded by bad actors who intentionally or inadvertently engage in discriminatory and otherwise prohibited consumer level conduct without fear of detection. This failure would result in an outcome in direct opposition to the stated intent of this bill.
Individuals must be empowered to act whenever they see the public being defrauded by bad actors – particularly when taxpayers have made such a huge investment in our future. For these instances, Congress must think more broadly and center the value of False Claims Act whistleblowers. The False Claims Act has been hugely successful at helping the Department of Justice uncover crimes ranging from Medicare and Medicaid fraud to stopping school lunches from including sub-par meat. Sen. Grassley said it best in his address to the 2021 Federal Bar Association: “[t]he key to the False Claims Act’s success is that it allows whistleblowers to sue fraudsters on behalf of the federal government by standing in the shoes of the U.S. government.” “Since the 1986 amendments to False Claims Act, cases have recovered more than $64 billion for taxpayers[.]”
An individual’s ability to seek restitution on behalf of the government goes to the heart of the American infrastructure initiative, which is to boost our collective well-being and empowerment to create a stronger nation. But there is a huge gap in the ability for whistleblowers to independently pursue these cases when the amount in controversy is more than $150,000 yet still too small for the Department of Justice to pursue. This loophole motivates smaller projects to be conducted in a fraudulent manner because of the extremely low risk of punishment regardless of the risk of detection. The Programs Fraud and Civil Remedies Act would cover these frauds if it were revisited, and new thresholds were adopted to allow individuals to bring administrative actions for frauds of up to $1 million. Congress must incorporate this revision into the infrastructure bill to ensure that whistleblowers may help the government prevent and punish frauds both large, mid-sized, and small. No fraud should go unremedied because it is “too small” to concern the American public. Finally, there is still room for improvement to the False Claims Act, including issues around what types of fraud are considered material. These issues impede the whistleblower’s and the government’s ability to stop fraud and should be fixed in the manner proposed by Sen. Grassley with this bill.
The importance of whistleblower protections in the infrastructure bill impacts counterintuitive areas as well. For example, there is widespread fraud in the timber industry, and this fraud may not be known to the government without whistleblower assistance. Corruption can be found at every stage of the supply chain, including access and permitting, hiring, transport, processing, export and trade, governance, and the process of hiding the proceeds. This corruption often includes potential illegal activities happening in the industry, including bribery, money laundering, and misleading investors about deforestation risks. This illicit conduct touches infrastructure development directly, as nearly every project is likely to use timber products or incorporate timber costs in some form. The costs of failing to protect whistleblowers who are best positioned to help the government intervene in such fraud will undermine the government’s infrastructure investment. False Claims Act style amendments to the Lacey Act, which covers the timber industry, would protect timber whistleblowers and save U.S. taxpayers millions while also protecting the environment. These amendments are included in the Wildlife Conservation and Anti-Trafficking Act and should be included in the infrastructure bill.
The Biden administration also states that in order to make the U.S. infrastructure more resilient, it must “[m]aximize the resilience of land and water resources to protect communities and the environment.” This resilience is only possible with the support of whistleblowers who would report misleading public statements or fraudulent practices in relation to climate, environmental, social, and governance issues – to whom there is currently no protection. By including Dodd-Frank Act and False Claims Act protections for climate, environmental and wildlife whistleblowers, the government would be able to ensure that infrastructure resilience is fortified – not undermined by fraud. The Securities and Exchange Commission is currently seeking comment on whether it should require Environmental, Social, and Governance disclosures from publicly traded companies. Congress should consider including such reporting requirements for government contracts and ensure that those requirements can be policed by those best positioned to identify fraud – whistleblowers.
We cannot make the same mistake twice. Whistleblower advocates noted in a March 2021 letter to President Joe Biden, House Speaker Rep. Nancy Pelosi, Sen. Majority Leader Sen. Charles Schumer, House Minority Leader Rep. Kevin McCarthy, and Senate Minority Leader Sen. Mitch McConnell that the COVID relief stimulus package of nearly $3 trillion “did not add whistleblowing protections to the law, either to challenge misspending or misconduct threatening public health.” This failure has opened the U.S. taxpayer up to unknown numbers of frauds. Many of these were immediately reported by whistleblowers who have already assisted the government in successfully recovering what may only be a fraction of these funds. That mistake cannot be repeated with the infrastructure bill. The American Jobs Plan is extremely ambitious, and without the support of whistleblowers, it is destined to fail.
Congress must include whistleblower protections to challenge misspending and misconduct, ensure that infrastructure funds are directed toward the appropriate projects and that infrastructure projects are executed safely and in a manner that benefits the public. This legislation is an unprecedented taxpayer investment. To prevent it from becoming an unprecedented fraud, Congress must protect whistleblowers.