Cybersecurity Fraud

The United States Department of Justice announced the new Civil Cyber-Fraud Initiative, a cybersecurity enforcement program that relies on the federal False Claims Act (FCA) to hold entities accountable for failing to follow cybersecurity regulations. This new provision makes it easier for whistleblowers, who are often government contractors or federal employees in cybersecurity cases, to initiate qui tam cases against violators. The new program sends a message to whistleblowers that they can expect the government’s support for reporting companies who defraud government programs.

Below is what you need to know about the FCA, how it relates to cybersecurity matters, and how these new regulations impact whistleblowers. 

What is the FCA?

The FCA is a law that allows the federal government and private citizens to pursue litigation against companies that defraud the government. While the FCA applies to many industries, several principles require companies to abide by cybersecurity standards to receive federal government money through grants or contracts.   

Most FCA cybersecurity regulations require companies to take certain precautions to increase the resiliency of critical networks and systems. Because many government contractors work with sensitive data, maintaining consumer protection and market integrity are essential. The proliferation of cyberattacks has made it necessary for companies to explore ways to deliver critical services safely amid evolving threats. 

What is an example of an FCA violation?

The FCA outlines the actions that can require companies to pay fines to the government. While the regulations are broad, falsifying information or recklessly disregarding accurate data are examples of improper actions. Any entity that violates the law is a potential defendant in an FCA suit. 

Most successful whistleblower cases have evidence that the misconduct caused the government to suffer a loss. The misconduct can take many forms, including: 

• Charging the government too much for products or services
• Delivering a product or service that is substandard
• Evading or underpaying the government on monetary obligations other than taxes
• Failing to return an overpayment received from the government

The FCA allows the government to sue violators on its own, while the qui tam rule enables private citizens to pursue actions on behalf of the government. A large majority of FCA fraud lawsuits come from qui tam claims. 

It should be noted that the FCA protects whistleblowers from retaliation or discrimination.  

What is the Civil Cyber Fraud Initiative?

Despite the FCA, some entities have failed to implement appropriate cybersecurity measures or report harmful cyber incidents. To deter this behavior, the new Civil Cyber-Fraud Initiative uses the FCA to penalize grant recipients and contractors that:

• Intentionally delivering substandard cyber services or products
• Deliberately misrepresenting or concealing cyber practices
• Knowingly failing to monitor and report cyber breaches

The enforcement program is designed to increase the number of qui tam whistleblower cases by making it easier to report incidents. 

WHAT CAN I DO IF I KNOW ABOUT AN FCA VIOLATION INVOLVING CYBERSECURITY VIOLATIONS? 

Several options exist if you want to report a company that has committed fraud against the government. First, you can report the misconduct to the Inspector General on behalf of the agency that has been defrauded. Second, you can notify the Federal Bureau of Investigation. Your last option is to file a qui tam case in federal court. 

Filing a qui tam FCA action based is a complicated endeavor and you must follow many crucial procedural requirements when filing an FCA action suit. For instance, all complaints must be filed under seal. As such, most whistleblowers seek counsel before proceeding with the claim. 

There are many benefits to hiring an experienced attorney to assist with a whistleblower case. First, an attorney can help protect your anonymity, if desired, and safeguard you against any retaliation. Also, gathering evidence with an attorney’s help may increase the likelihood of recovering misused funds. 

What are the Rewards for Whistleblowers?

You may be eligible for financial compensation if your qui tam lawsuit results in a monetary recovery for the government. You may receive a portion of the recovered funds depending on the case. You may get up to 25% of the money if the government intervenes in the case. You can receive up to 30% of the funds recovered if the government does not intervene. 

Keep in mind that the amount the whistleblower receives depends on numerous factors, including the nature of the case, the quality of the evidence gathered, and the amount of assistance provided by the whistleblower. 

Work With a whistleblower lawyer

Contact us at Piacentile, Stefanowski & Associates LLP, known as Whistleblowers International, if you have information about FCA cybersecurity fraud. We evaluate your evidence confidentially and free of charge. We do not charge clients anything unless we secure them a monetary reward, and even then, it is based on a percentage of their recovery.