The Chamber of Commerce has commenced a well-financed and aggressive lobbying campaign to undermine America’s most effective whistleblower law, the False Claims Act. To justify its anti-whistleblower campaign the Chamber published a report entitled, “Fixing the False Claims Act: the Case For Compliance-Focused Reforms.” The purpose of this blog series is to combat the Chamber’s misinformation, and explain why the False Claims Act must be protected.

Fact Number 15:

In its comprehensive rulemaking, the Securities and Exchange Commission also evaluated the cost-benefit analysis of “encouraging” internal reporting programs but not “mandating” these programs. The Commission correctly recognized that the competition between internal corporate programs and a well-managed government reward program would strongly encourage companies to institute effective compliance departments. If internal reports became mandatory, the positive pressure caused by competition would be lost.

The SEC correctly recognized that the competition between internal corporate programs and a well-managed government reward program would strongly encourage companies to institute effective compliance departments.

This is a complete repudiation of the Chamber’s proposal to make reporting to “compliance” programs mandatory. The Commission described this cost-benefit analysis as follows:

“[W]e believe that the final rules, by encouraging internal reporting without mandating it, allows whistleblowers to balance the potential increase in the probability and magnitude of an award by participating in an effective internal compliance mechanism against the particular risks that may result from doing so. By allowing potential whistleblowers to make this assessment and encouraging them to report internally in situations where their tips will be appropriately addressed, the final rule should promote efficiency in how violations are reported and resolved. Furthermore, issuers who previously may have underinvested in internal compliance programs may respond to our rules by making improvements in corporate governance generally, and strengthening their internal compliance programs in particular.”Whistleblowers and their supporters are strongly urged to read this blog series and share it with friends. In addition, an Action Alert has been issued by the National Whistleblower Center so members of the public inform their representatives that the False Claims Act should not be “reformed” as proposed by the Chamber.