Whistleblower award shows dangers of ignoring fraud complaints

The Securities and Exchange Commission announced a whistleblower award of more than $300,000 to a relator in a compliance and audit role at the investigated company, Inside Counsel reported. The SEC said the whistleblower came forward only after the employer failed to act on an internal complaint within 120 days of receiving it.     

No case of alleged misconduct should stay open for more than 30 days without explanation of why the case is pending, Inside Counsel added. Resolution delays raise the risk of subsequent external reporting and enforcement action.  

"Individuals who perform internal audit, compliance and legal functions for companies are on the front lines in the battle against fraud and corruption," said Sean McKessy, chief of the SEC's office of the whistleblower, in a statement. "They are often privy to the very kinds of specific, timely and credible information that can prevent an imminent fraud or stop an ongoing one."

The lessons of this case echo attorney Kirk Nahra's advice for payers in an exclusive interview with FierceHealthPayer: Anti-Fraud. "Deal well with complaints," Nahra said. "Most fraud cases are generated by whistleblowers. Research and anecdotal evidence show most whistleblowers brought problems to their companies' attention and only became whistleblowers when problems weren't fixed. So solving problems identified by whoever brings them forward is a good way to reduce the likelihood of an investigation."

A former health plan lawyer whose company survived a federal investigation offered similar advice in a FierceHealthPayer eBook, Payer Strategies to Prevent and Detect Fraud. If employee concerns are specific and credible, attorney Nabil Istafanous said, insurers should appropriately review those concerns, "even if that means hiring outside experts at considerable expense."    

Failure to follow-up on reports of potential fraud sends a message to staff that it's pointless to speak up about wrongdoing since nothing will change, the article noted. Contractors should train front-line supervisors to recognize the significance of and handle potential fraud complaints as they arise, Inside Counsel recommended.

For more:
- read the Inside Counsel article

>> Download the free FierceHealthPayer e-book, Payer Strategies to Prevent and Detect Fraud