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Bentham IMF Looks to Finance Whistleblowers

Oct. 18, 2016, 10:35 PM

Bentham IMF, the U.S. subsidiary of the publicly traded Australian litigation finance firm of the same name, announced on Tuesday it is unrolling a new program to finance whistleblower lawsuits.

The most standard type of whistleblower suit is filed under the False Claims Act, and allows a person to file a civil claim against a business or individual that is defrauding the U.S. Treasury. That person is entitled to a percentage of any money that is recovered for the Treasury as a result of their suit.

Often, whistleblower lawyers work on a contingency basis, and take their fees out of the recovery, so they don’t need outside financing. For this reason, Bentham IMF’s program is not funding the cost of litigation but is primarily aimed at providing whistleblowers with cash while they wait for their claim to wind through court.

“What’s most often the case is the whistleblower needs living money,” said Dave Kerstein, investment manager and legal counsel at Bentham IMF. “Maybe they’ve been terminated from their job.”

Kerstein added, “It’s a difficult period for them and these litigations can last many years, and so they’re in need of and can utilize funding to help them survive during the life of a claim.”

The company has also funded lawyers representing whistleblowers. In all cases, it seeks a percentage of the total recovery and claims to only collect on a non-recourse basis — meaning only if the case is successful.

The investments can be given to the whistleblower as a lump sum cash payment, or more likely, in multiple payments spaced out over a period of time. Bentham IMF structures the deal so that it receives either a percentage of the total recovery, or a multiple of the money it deployed in the case — whichever is greater, according to Kerstein.

He said the multiple is usually two to four times what it invested, but the company tries not to take cases where it’s a cut of the recovery, and the lawyers’ cut of the recovery will leave the whistleblower with less than 50 percent of the total recovery.

The minimum investment that Bentham IMF will make is $1 million, according to Kerstein, who declined to provide specifics of how the contracts are structured, saying each one is different. He said his firm has already funded five whistleblower lawsuits, but declined to disclose the details.

As part of its whistleblower financing program, Bentham IMF can also help select counsel, and connect them with others who have been whistleblowers and can offer guidance on the experience, the firm said.