Whistleblowers As the New Ambulance Chasers, Only Much Worse

Whistleblowers are broadly described as noble individuals beset by scoundrels. The basis for the latter is that these employees are said to shed light on nefarious activities of the illegal, immoral or fraudulent variety inside companies. If they’re exposing what’s wrong, what’s not to like? A lot, actually.

That’s the case firstly because the incentives are all wrong. For evidence, all we need do is consider former Booz Allen Hamilton employee Sarah Feinberg’s “qui tam” suit against her former employer. Feinberg’s contention is that upon arrival at the world-leading consultancy, she became privy to explicit attempts by her employer to overcharge the federal government.

On the face of it, readers should be skeptical. With Booz Allen, we’re talking about one of the most difficult places in the world to secure employment from. Contrast that with the federal government. Yet it’s the federal government deciding that it was overcharged, with Booz Allen as the scoundrel. Not only do those inside the consultancy disagree with Feinberg’s assessment, there’s no reasonable basis for it in the first place. That is so because companies like Booz Allen take in lots of dollars precisely because the work they do rates repeat business.

Assuming explicit attempts to overcharge a client, doing so would logically come at the expense of myriad other pieces of business in the future. To which some will say that the federal government isn’t staffed with people who would notice or understand overcharging (well, yes…), but Booz Allen’s competitors are capable of seeing what government bureaucrats perhaps might not. Precisely because the federal government has deep pockets, the true whistleblowers would be the competition eager to reach into those same deep pockets, and who could do so by exposing improper activity. Yet it wasn’t McKinsey, Bain and others revealing what Feinberg alleges, and their lack of charges further support Booz Allen’s contention that it was operating well within federal billing guidelines.

All of which brings us to the obvious. “Qui tam” lawsuits are suits in which whistleblowers are awarded a portion of any settlement or judgment as a lure for them to come forward with evidence of fraud, theft, you name it. What’s obvious here is that there’s a lot of gold to be mined by coming forward. Immense amounts.

Indeed, while governments are staffed with individuals who much more often than not wouldn’t rate a job at Booz Allen or others like it, they have taxable access to the productive fruits of the world’s most productive people. Rich as Booz Allen is, there’s no fighting a federal government with theoretically unlimited resources to hire as many lawyers as possible. What’s true for Booz Allen is true for every single U.S. corporation, including the richest one, Apple.

Think of the horrid incentives here. And in thinking of them, please don’t forget that a great deal of theory informs accounting. What this means is that in theory, any billing of work done for the federal government could have theoretically fraudulent qualities. Since it could, what’s to keep any employee from making sufficient noise? Worst case, the employee is paid a princely sum to quietly go away. Or, as was the case with Feinberg, a $377 million settlement foisted on Booz resulted in a $70 million payout for Feinberg.

Will Feingberg be the last to blow the whistle? Hopefully the question answers itself. Few will fight a resource-unlimited government, which means all manner of unworthy whistleblowers will place themselves on the easy path toward wealth. And for nothing. In the real world of commerce, market signals and competition are whistleblowers non-pareil. Let’s rely on them over expanding the power of government aided by the disgruntled.


  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

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