Top Whistleblower Attorney Revisits Arguments Against Whistleblower Award Laws and Demands Change

An extensive research paper published by leading whistleblower attorney Stephen M. Kohn and senior law clerk Melissa Revuelta provides ample evidence refuting seven major arguments made against the implementation of whistleblower awards. The paper, “Revisiting The Arguments Against Whistleblower Award Laws: It’s Time for a Change,” analyzes a growing body of data that underscores the effectiveness of rewarding whistleblowers.

Kohn and Revuelta revisit the major arguments the Bank of England Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) made against the whistleblower award provisions of the United States’ Dodd-Frank Act. The FCA/PRA report has been widely cited in arguments against whistleblower awards in the U.K. and elsewhere; but Kohn and Revuelta note that it was published only four years after the Dodd-Frank Act was enacted and is inconsistent with the empirical evidence that has emerged over the past decade.

The first criticism from the FCA/PRA report that is refuted is that “There is no empirical evidence of rewards leading to an increase in the quantity of disclosures.” Using data from the U.S. Securities and Exchange Commission (SEC), Kohn and Revuelta detail the exponential increase in tips received since the Dodd-Frank Act established the SEC Whistleblower Program. Following the first criticism, the FCA/PRA claimed that there is no empirical evidence of rewards leading to an increase in the quality of disclosures. The authors include testimony from a multitude of officials from the Commodity Futures Trading Commission (CFTC) and SEC including chairs, commissioners, directors, and enforcement officers discrediting this statement. 

The FCA/PRA report also asserted that rewards laws are unlikely to increase the number of successful prosecutions. Kohn and Revuelta dispute this by analyzing data from the Director of the United Kingdom’s Serious Fraud Office alongside statistics from the the Department of Justice on False Claims Act whistleblower cases. 

Next the FCA/PRA speculated that financial incentives might lead to more approaches from opportunist and uniformed parties, potentially damaging the reputation of innocent parties. Citing two empirical databases and researching an exhaustive list of cases, the authors conclude that out of 15,964 qui tam suits filed from 1986 to 2023, only 43 suits were shown to be frivolous (0.0027%). 

Additionally, the FCA/PRA report alleged that whistleblower award laws could potentially undermine the introduction and maintenance of effective internal reporting mechanisms. This allegation is not supported by empirical data and overshadows a much more important concern; retaliation. Kohn and Revuelta prove that the SEC consistently documents that approximately 80% of all whistleblowers initially filed internal complaints. Through a close analysis of SEC data, the authors conclude that the ability to obtain an award has not negatively impacted internal reporting mechanisms. 

The next criticism presented by the FCA/PRA report alleged that whistleblowers may delay reporting to maximize monetary gain. Kohn and Revuelta explain that in 2011, the SEC approved regulations which directly addressed this issue. In fact, delayed reporting results in a denied or reduced reward. Finally, the last criticism raised by the FCA/PRA report maintains that incentives benefit only a small number of whistleblowers while doing nothing for the majority of them. The authors present several strong arguments negating this while illustrating the profound positive effect whistleblower awards have in incentivizing legitimate reports. 

Lastly, Kohn and Revuelta go through the key elements which make up a successful whistleblower award program.

“Thus, the success of Dodd-Frank is not simply that it permits whistleblowers to obtain an award,” the authors explain. “The law creates an entire framework necessary to protect confidential reporting, incentivize reporting, and ensure that whistleblowers who risk losing their jobs, careers, reputations, and even their safety are properly compensated if their disclosures meet the requirements of the law.”

Kohn, a founding partner of the whistleblower defense firm Kohn, Kohn & Colapinto, is an Adjunct Professor of Law at Northeastern University and the Chairman of the Board of Directors of the National Whistleblower Center. Revuelta is a Senior Law Clerk at Kohn, Kohn and Colapinto and a graduate of University of California, Riverside. 

Download the paper HERE.