Corporations must cope with more whistleblowers.

• Author: Rose, Robert

The rewards are alluring. It has never been so enticing to become a whistleblower.

Casinos attract customers by hyping slot machine winners. State governments do the same with lottery jackpots.

In September, the Internal Revenue Service touted the largest whistleblower award ever--$104 million--to a former UBS banker who exposed the largest tax evasion scheme in history. The award comes as he finished his prison sentence for involvement in that crime.

Earlier this year, the Department of Justice settled with five of the largest mortgage servicing companies and sent a $46 million share to a group of whistleblowers. The 2010 Dodd-Frank Act authorizes awards of up to 30 percent of collections for high-quality original information. The Securities and Exchange Commission made its first whistleblower award of $50,000 in August for information against an unidentified public company. With $150,000 collected thus far, the identity-protected whistleblower may be receiving more checks in the future.

The actions of informants do not have to become public. Lawyers representing whistleblowers contend that most of their clients had tried repeatedly to report their concerns internally and were punished for their efforts. A study in 2010 by a nonprofit, public interest organization found that nearly 90 percent of employees who filed qui tam--False Claim Act--suits initially reported their concerns internally, either to supervisors or compliance departments. Nearly 5 percent of whistleblowing plaintiffs actually worked in compliance departments.

Whistleblowers in the defense industry have specific protection in 10 U.S.C. 2409. "Contractor" is a broadly defined term. It is a person "awarded a contract with an agency," such as the Defense Department, Army, Air Force, Coast Guard or NASA.

To qualify for protection from retaliation, the employee must reasonably believe that he has evidence of gross mismanagement of a Defense Department contractor grant, a gross waste of government funds, a contract or grant violation, or "a substantial and specific danger to public health or safety." If such information is disclosed to a member of Congress, the representative of a congressional committee, an inspector general, the Government Accountability Office, a Defense Department contract oversight officer or the Justice Department, then the contractor may not discharge, demote or otherwise discriminate against the whistleblower.

Despite the strength of these protections...