What type of person is an FCPA whistleblower? Is it someone just out to get rich? Is it a person constantly scheming to uncover wrongdoing where they work, to catch their employer in a bad act? Is it always a disgruntled worker who feels betrayed? Now that the Dodd-Frank whistleblower provisions have been in place for almost a year and a half, the answers to these questions are becoming clearer.
Background. The 2012 Annual Report to Congress by the SEC’s Office of The Whistleblower reports that the office received 3,001 tips, complaints, and referrals in its first full year, 115 of which were related specifically to alleged FCPA violations. The office received several of these from abroad. From Latin America, it received six tips from Venezuela, four from Mexico, three from Brazil, one from Bolivia, and one from the Dominican Republic. It is not clear whether the tips from Latin America related to FCPA or other securities issues.
The SEC’s whistleblower program allows an informant to receive 10 percent to 30 percent of the government’s financial recovery as long as the informant provides original information that leads to a successful resolution resulting in monetary penalties exceeding US $1 million. Though whistleblowers are not required to report first through their company’s internal reporting program, there are incentives to doing so. For example, the SEC gives them credit for the findings of the company’s resulting investigation.
So who are whistleblowers? Kara Brockmeyer, the Chief of the SEC’s FCPA unit, recently stated at the ACI 2012 National Conference on the FCPA that many of them are people who have already tried to go to their company first, who attempted to use their company’s internal reporting programs. They are people who personally know something has gone wrong and want to fix it. She said that they are good people who are angered and disaffected when the company does not respond.
Is this just talk from an enforcer who has her own incentives to bolster the name of whistleblowers? Recent data suggests not.
A recent survey by the Institute of Internal Auditors (IIA) conducted this Fall reveals that Chief Audit Executives are not witnessing significant changes in employee whistleblowing despite the significant potential awards associated with the Dodd-Frank provisions. Less than 5 percent of internal auditors are worried that employees will bypass their own reporting programs. More than three quarters of internal auditors surveyed indicate they have little to no concern (78 percent) with employees circumventing already established internal processes. Only fifteen percent feel that risks that whistleblowers will bypass their internal reporting processes have increased since Dodd-Frank went into effect.
In addition, the vast majority of respondents say that hotline claims have not gone down. If they had, it might have indicated that whistleblowers were choosing instead to go directly to the government. But hotline tips have generally stayed at the same levels.
Richard Chambers, the President and CEO of the IIA, recently explained these findings to FCPAméricas: “The survey indicates that there has not been a mass rush to circumvent the internal processes in companies, something that had been feared. The survey findings are based on the insight of chief audit executives who are on the front lines of these issues in most companies.” Mr. Chambers said that, based on his own extensive experience working on whistleblower matters, he has learned that whistleblowers are often individuals who are genuinely concerned about the operations of their companies. They are employees who want a safe and healthy workplace. The vast majority has sincere motives. They are not always simply disgruntled.
Ms. Brockmeyer also said that the SEC is not naïve. Enforcers realized that whistleblowers have obvious financial incentives to come forward. She added that Dodd-Frank has made the quality of tips better. This suggests that whistleblowers now understand that, unless their information is true and valuable, they will not get their bounty.
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