Does Whistleblowing Work?

Whistleblowing has proven to be the single most effective tool in the detection of waste, fraud, and abuse in the public and private sectors. Decades of empirical evidence show the impact whistleblowing has in enforcement efforts. Various government officials and Congressional leaders have repeatedly spoken out on the efficacy of whistleblower laws. 

Whistleblower awards laws are unparalleled in incentivizing insiders with knowledge of misconduct to come forward and cooperate with law enforcement. By offering monetary awards and anti-retaliation protections, whistleblower award laws allow individuals to risk their livelihoods in order to expose misconduct, fraud, and abuse. The success of whistleblowing ranges from the public sphere to the private. Whistleblowing is an effective check on fraud and abuse throughout all levels of government and is essential in exposing hard-to-detect crimes across the globe.

The False Claims Act (FCA), the nation’s first modern whistleblower award law, was originally passed in 1863 and then modernized in 1986. Since the 1986 amendments turned the FCA into a modern whistleblower award law, the statistics have clearly shown how effective whistleblowing is in rooting out government contracting fraud.

Since 1986, FCA whistleblowers have allowed the Department of Justice to recover over $70 billion in taxpayer dollars from fraudsters. Correspondingly, FCA whistleblowers have received over $8 billion in compensation for their whistleblowing.

The FCA statistics also show that as the benefits of whistleblowing, and the protections and awards offered to whistleblowers, became more well known, the recoveries caused by whistleblowers only continued to grow. For example, in 1992, the DOJ recovered $134 million thanks to whistleblowers. 25 years later, the agency was able to recover over $3 billion in 2017.

The success of the False Claims Act led Congress to pass a number of other whistleblower award laws in recent years. Similarly to the False Claims Act, the statistics show that these laws work.

In 2006, Congress modernized the IRS whistleblower law to create an effective award program. Since then, tax whistleblowers have allowed the IRS to collect over $6 billion in back taxes, interest, penalties, and criminal fines and sanctions. The IRS has in turn awarded over $1 billion to whistleblowers.

Passed in 2010, the Dodd-Frank Act established whistleblower programs at both the SEC and CFTC. These programs have both been immense successes and demonstrated the power of corporate whistleblowing to expose fraud and misconduct.

Whistleblowers have allowed the SEC to recover over $5 billion from corporate fraudsters. Since the SEC issued its first whistleblower award in 2012, it has awarded over $1.3 billion to over 270 individuals. The CFTC granted its first whistleblower award in 2014 and since then has awarded over $330 million to whistleblowers.

As public awareness around whistleblowing has grown, the statistics from both the SEC and the CFTC has become even stronger. The 2021 fiscal year was a record year for the SEC Whistleblower Program. That year, the SEC received a record 12,200 whistleblower tips and issued a record $564 million in whistleblower awards to a record 108 individuals.

While the numbers show that whistleblowing works, they do not tell the whole story. Individual examples of whistleblowing further highlight how effective whistleblowing is and its potential for change. The story of the UBS whistleblower Bradley Birkenfeld underscores how well whistleblowing works in the private sector while the story of FBI whistleblower Fred Whistehurst demonstrates the efficacy of whistleblowing in the public sector.

Bradley Birkenfeld was a UBS banker in Switzerland who assisted wealthy Americans in hiding their assets in Swiss bank accounts. After the IRS whistleblower award program was created in 2006, Birkenfeld voluntarily contacted U.S. authorities in May 2007. Birkenfeld’s whistleblowing had a seismic impact. His disclosure led directly to a groundbreaking legal settlement in which UBS agreed to pay $780 million in fines, and UBS and the Swiss Government agreed to turn over the names of thousands of Americans suspected of tax evasion. This in turn helped cause the dismantling of the illegal Swiss banking system as it existed at the time.

In the public sphere, FBI agent turned whistleblower Fredric Whitehurst offers a similar success story. Whitehurst was a Supervisory Special Agent and the FBI’s leading expert on explosives. He blew the whistle on misconduct within the FBI Crime Lab. Whitehurst alleged that Crime Lab employees were manufacturing evidence to support prosecutors and providing perjured trial testimony. Whitehurst’s whistleblowing led to a DOJ Inspector General investigation which fully vindicated Whitehurst.

After the investigation, old cases were ordered to be reexamined, and over fifty reforms were suggested, including the accreditation of the crime lab. The FBI agreed to implement every reform. Furthermore, as a result of Whitehurst’s whistleblowing, President Clinton issued a directive granting whistleblower rights to every FBI agent. Whitehurst also obtained a record-breaking $1.4 million settlement with the government.