The whistleblower industry is alive and well in the United States. The United States Securities and Exchange Commission (SEC) recently issued a press release announcing that the agency had surpassed the US$100 million mark for the payment of whistleblower awards. According to the release, the whistleblower programme has led to over US$500 million in financial remediation paid by companies, and more than US$107 million in bounties to 33 whistleblowers. SEC chairperson Mary Jo White said: “The SEC’s whistleblower programme has proven to be a game changer for the agency.” These whistleblower reports have come from far and wide, including from all 50 states as well as 95 foreign countries.
Such awards may be ready for a burgeoning increase, however. The original head of the SEC’s whistleblower programme, Sean McKessy, has resigned from his government position. He will move into private practice, doing – you guessed it – whistleblower cases.
As noted in an article in The Wall Street Journal, it was “an unusual turn of the revolving door that highlights the potential profitability of legal work that didn't exist a few years ago.” In the interview, McKessy said: “There really wasn’t a business space, that I think is now being created by the SEC whistleblower programme, that allows for a law firm to participate in a meaningful way, and a way that makes sense economically.”
While industry groups such as the United States Chamber of Commerce have criticised the SEC whistleblower programme on the grounds that “it undermines companies’ efforts to fix problems internally”, there can be no doubt it has been a success for regulators. For example, whistleblower tips have led to over US$500 million in fines and penalties obtained by the SEC. Moreover, such industry criticism fails to address the fact that over 90 percent of whistleblowers either report internally or try to do so, but to no avail.
Companies need have a robust reporting culture to protect themselves, where tips and reporting are taken seriously internally. It also requires protection against retaliation. Finally, a company should have a robust investigation protocol in order to quickly and efficient identify allegations that require investigations, so that internal whistleblowers do not become SEC whistleblowers.