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The dispute centers on Insect Shield’s contracts with the Department of Defense (DOD) to manufacture military uniforms treated with permethrin, an insecticide designed to protect soldiers from insects.

The government claimed that from 2015 to 2021, the company and its CEO failed to meet the contract’s quality-testing requirements. Specifically, the government alleged: “Insect Shield and Lane failed to follow the permethrin testing requirements by inappropriately combining results from different rounds of testing, re-labeling test samples to hide the true origin of the samples, performing re-tests of uniforms in excess of what the contract permitted, and concealing failing test results.”

This case was initiated by a whistleblower who filed a qui tam lawsuit on behalf of the United States under the FCA. These provisions allow private citizens and private parties to file lawsuits on behalf of the government to report fraud. Qui tam whistleblowers are eligible to receive between 15 and 30% of the government’s recovery. In return for her contribution, the whistleblower will receive $315,000.

A Department of Justice official stressed the need for contractors to follow the rules in public contracts, saying, “government contractors and subcontractors must comply with contractual commitments and share truthful information with the government.”

“Our Soldiers rely on government contractors to provide equipment that they can depend on while serving their country,” said Special Agent in Charge Keith Kelly of the Department of the Army Criminal Investigation Division, Fraud Field Office.

This settlement sends a strong message to government contractors across the country. Public money is closely watched, and any failure to follow the rules will be addressed. For both federal agencies and taxpayers, the case is a reminder that vigilance and accountability are central to the nation’s procurement system.

This case also shows how important qui tam whistleblowers are in uncovering possible fraud. Without these private citizens coming forward, many cases of misconduct in government contracts might go undetected.

The claims resolved by the settlement are allegations only, and there has been no determination of the defendants’ liability.

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The SEC whistleblower program, established by the Dodd-Frank Act, incentivizes whistleblowers to report original, timely information in return for monetary awards between 10% and 30% of recovered sanctions over $1 million. The program guarantees whistleblowers’ identities remain confidential and anonymous, and can remain so until an award application is processed.

In order to be eligible for an award, federal law requires all whistleblowers to submit a Tip, Complaint, or Referral (TCR) form when providing information to the SEC. The SEC has cited numerous reasons why a TCR is essential to operating a whistleblower program, including increased efficiency and ability to manage high volume of tips, accurate record of what information the whistleblower deems important, and a clear indication the whistleblower seeks heightened confidentiality protections. The federal register states, “the requirement to file a TCR has been a necessary initial step for an individual to obtain treatment as a ‘whistleblower’ under our rules and, in our experience, has proved beneficial to the effective administration of our whistleblower program.”

The SEC’s strong commitment to using the TCR program is demonstrated through its provision that failing to submit a TCR form constitutes grounds for denial of an award. “The Commission has treated the failure to file a properly executed TCR as grounds for denial of a claim for award.” So, in order for any whistleblower to be eligible for a monetary award, they must file a TCR form.

With this in mind, some applicants are denied awards even after they submitted an appropriate TCR under the correct procedures because the SEC failed to review the TCR. For example, in a Final Order issued on February 26, the SEC denied an award to a whistleblower applicant who submitted a TCR, but whose information went unreviewed. The claimant challenged their award denial by stating, “it was a violation of the Commission’s Enforcement Manual not to search the TCR system before the opening of and during the Covered Action investigation.” Not only did the applicant submit a TCR, the information they provided was used in the investigation, “the overlap between the TCRs and the subject matter of the Commission’s enforcement action further reinforce that Claimant 2’s information was used and relied upon to open the investigation or otherwise significantly contributed to the investigation and enforcement action.” The Order demonstrates that whistleblowers are submitting valid TCRs and their information is being used to conduct investigations, but are being denied awards because these forms are not being examined. Here, the SEC did not open a submitted TCR relevant to an ongoing investigation, which is not consistent with their claim that TCRs are essential to operating an effective whistleblower program.

If this trend continues, it could have further consequences on whistleblowers’ ability to provide information and receive awards. If TCRs go unreviewed, cases of fraud could go undetected by federal agencies. If award incentives decrease, whistleblowers will be less likely to provide information, not wanting to risk speaking up without the chance they will be rewarded for doing so.

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These regulations are long overdue; They were codified by the Anti-Money Laundering Act (2020) and the Anti-Money Laundering Whistleblower Improvement Act (2022), but have not yet been fully implemented. This notice follows longstanding bipartisan pressure for FinCEN to use whistleblowers to enforce sanctions, anti-money laundering laws, and protect national security. The proposed regulations will finally fulfill these mandates.

The proposal outlines how whistleblowers can report violations promptly and securely, while detailing the award application process and eligibility criteria for making and adjudicating awards. Like the SEC’s program, whistleblowers may receive 10–30 percent of penalties collected if their tip leads to action by the Treasury or the Department of Justice. FinCEN recently launched a whistleblower portal, a major step after years of accepting tips without a dedicated public website.

While FinCEN’s long-awaited regulations are a small step towards making the program more accessible, advocates expressed heightened caution about the risk to whistleblowers’ safety and questioned whether the program would be effective in combating corruption.

The proposed regulation offers some confidentiality protections for whistleblowers who report to FinCEN, but not enough, according to the National Whistleblower Center. FinCEN will have full discretion to share a whistleblower’s identity with law enforcement, risking serious consequences for the whistleblower’s life and livelihood.

Stephen Kohn, Chairman of the National Whistleblower Center, expressed grave concern. “These are statutory rights identical to those in Dodd-Frank, which have made the SEC a welcoming environment for whistleblowers. These individuals are literally risking their careers and lives to step forward and report some of the most corrupt and dangerous criminal elements. These criminals are violating sanctions and putting illicit funds and drug money into the financial system. FinCEN’s final regulations should not stop at the bare minimum mandated by Congress…”

Whistleblowers and advocates welcome the first steps of change under FinCEN, but further work is needed before the program is safe for whistleblowers to use.

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“The passage of this legislation – with a unanimous, bipartisan vote – is a strong signal to the IRS that Congress fully supports the IRS making greater use of the tax whistleblower program,” said Dean Zerbe, an author of the original IRS whistleblower program law and a leading attorney for tax whistleblowers. “The tax whistleblower program has proven highly successful – bringing in billions of dollars from tax cheats while targeting limited IRS resources on bad actors.”

The IRS Whistleblower Programs requires that whistleblowers who submit original information to the IRS leading to successful enforcement against tax fraud receive an award of between 15% and 30% of the sanctions collected by the government. Since its inception, the program has led to government recoveries of over $7.5 billion in tax fraud cases.

However, the program’s efficacy has recently been stifled by delays. Whistleblowers now wait an average of eleven years between submitting an award application and receiving their award.

H.R. 7959 will address this issue by requiring the IRS to pay interest on unnecessarily delayed awards. Representative Mike Thompson (D-CA), a co-sponsor of the bill, described the change as “basic fairness.”

“When the government drags its feet,” said Thompson, “whistleblowers should not be the ones paying the price.”

Additionally, the bill will establish a de novo standard of review for whistleblower award appeals, allowing the Tax Court to look at the facts of a case when determining whether an award was decided correctly, and will improve confidentiality protections for IRS whistleblowers.

In his opening statement on the bill, Representative Mike Kelly (R-PA), the bill’s sponsor, stated: “Whistleblowers play an essential role in upholding the integrity of our tax laws. When individuals come forward to expose wrongdoing by tax cheats and fraudsters, they help ensure our tax system remains fair for all Americans.”

Stephen M. Kohn, Chairman of the Board of the National Whistleblower Center, called the vote “a major step forward in ending terrible delays facing tax whistleblowers,” but also highlighted that more work remains to be done before the bill can go into effect.

“It is unacceptable that whistleblowers who risk their careers and suffer retaliation have to wait 11 years to obtain the compensation Congress mandated they obtain,” Kohn said. “We must now redouble our efforts to have these critically needed bipartisan reforms passed by Congress and signed into law.”

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“Too often, whistleblowers are treated like skunks at a picnic when they ought to be commended for their bravery. It ought to be easier – not harder – for whistleblowers to report misconduct, especially to Congress,” he stated. “Whistleblowers must be protected from retaliation and fully informed of their rights.”

Grassley emphasized the role of whistleblowers in congressional oversight as a powerful tool to root out waste, fraud, abuse, and misconduct and protect taxpayer dollars. A long-term champion of whistleblowers in Congress, Grassley has introduced new legislation to extend the anti-gag provision to cover federal employees of executive agency government corporations. The new provision would require government nondisclosure policies and similar agreements to inform employees they can blow the whistle to Congress and government watchdogs.

In line with Sunshine Week’s theme of transparency, Grassley highlighted whistleblowers from the IRS, CBP, FBI, ATF, and FEMA who bravely brought forward misconduct and suffered subsequent retaliation, including IRS whistleblowers Gary Shapley and Joseph Ziegler. With the senator’s assistance, 16 of these whistleblowers were able to gain promotions, compensation, and relief from the retaliation they suffered.

“As my examples show, whistleblowers are the key to transparency,” Grassley stated. “Sunshine Week is an opportunity for the country to highlight the righteous fight for transparency. Sunshine is essential to making the government accountable to ‘We the People.’”

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The case concerns two whistleblowers who published reports online alleging misconduct by their company. While the whistleblowers filed a timely tip with the SEC, the SEC found the whistleblowers’ reports online independently and began an investigation based on those publicly available reports rather than the whistleblowers’ filing. In denying the whistleblowers an award, the SEC held that the information they provided had not “led to” a successful enforcement action, even though the enforcement action was based on reports written and published by the whistleblowers, and the whistleblowers included those reports in their Commission filing.

The amici argue that the SEC’s denial overlooks the central issue: under Dodd-Frank, the “original source” exception means whistleblowers remain eligible for awards even if the SEC learns of their allegations through the media, so long as the whistleblower was the original source of that information. The amici emphasize that Congress modeled these provisions on the False Claims Act and the IRS Whistleblower Program, both of which also protect original source whistleblowers even when information first appears in the news media.

The brief also notes that the SEC’s ruling reflects the logic of the “jurisdictional bar,” a rule present in an earlier version of the FCA that denied awards to whistleblowers when the government already possessed the information, for any reason, including if the government had seen it in the media. This rule, however, was repealed in 1986, and Dodd-Frank was explicitly based on the version of the FCA that rejected the jurisdictional bar. Amici argue this history means that the SEC’s decision “contravenes decades of Congressional lawmaking and ignores the plain meaning of ‘original information’ and its modifying term ‘original source’ as used in Dodd-Frank and its implementing regulations.”

Finally, the brief points out that the SEC’s decision directly contradicts the Commission’s own regulations, which also include the original source exception.

Several leading whistleblower advocacy groups also filed amicus briefs in this case, including The Anti-Fraud Coalition, Government Accountability Project, Whistleblower Aid, The Signals Network, and Better Markets. The SEC’s response brief in this case is due April 24^th.

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Specifically, the whistleblower reported unnecessary personnel and overstaffing, as OMHA was continually employing 150 employees who were originally hired in 2019 to meet a temporary surge in appeals cases that occurred between 2012 and 2015.

OMHA expanded its workforce to reduce delays of 3 to 4 years and meet the court-ordered 90-day processing deadline. Once the agency’s case levels were no longer backlogged, the expanded workforce exceeded operational needs, leaving 40 of the agency’s 120 teams without sufficient work. As of August 2025, following the whistleblower’s disclosure, OMHA reduced its workforce by 185 employees.

In a press release, OSC stated the waste has been “addressed and corrected, resulting in meaningful improvement to the agency’s stewardship of taxpayer dollars and in the whistleblower’s expressed satisfaction with the agency’s progress.”

The Whistleblower Protection Act protects federal employees from retaliation for reporting misconduct to OSC, the Merit Systems Protection Board, or Inspectors General. Federal whistleblowers may also make confidential reports without notifying their employer.

OSC Senior Counsel Charles Baldis said, “OSC thanks the whistleblower for bringing forward the information that revealed nearly $30 million in waste of taxpayer funds. This disclosure brought needed attention to OMHA’s serious overstaffing challenges. OSC also appreciates HHS’s decisive and substantive actions to prevent the waste of taxpayer dollars.”

Baldis concluded: “A major part of OSC’s mission is to help prevent waste, fraud, and abuse in the federal government. We’re always pleased when we can contribute to a successful resolution like this one.”

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