Is whistleblowing an effective tool for the detection and prosecution of tax evasion, securities fraud, foreign bribery, money laundering, government contract frauds, or other significant economic crimes?
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.
Whistleblower Success Stories
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.
Government Officials, Elected Leaders, and Experts Agree: Whistleblowing Works
As whistleblower laws have gone into force in the U.S. over the past several years, top officials from across the federal government have continually spoken out in support of the laws and to emphasize the success of whistleblowing in exposing corruption, fraud, and misconduct. These officials include the leadership of law enforcement agencies which oversee whistleblower programs as well as elected leadership in Congress.
“[T]he False Claims Act has provided ordinary Americans with essential tools to combat fraud, to help recover damages, and to bring accountability to those who would take advantage of the United States government – and of American taxpayers.”
The SEC “whistleblower program . . . has rapidly become a tremendously effective force-multiplier, generating high-quality tips, and in some cases, virtual blueprints laying out an entire enterprise, directing us to the heart of the alleged fraud.”
“Empowering these whistleblowers to prosecute fraud proved to be smarter, faster, and more effective than just relying on the government.”
Senator Charles Grassley, Chairman of Senate Judiciary Committee, speech given on National Whistleblower Day (July 30, 2018) — Read the Speech
“Because those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth.”
Acting Assistant Attorney General Chad A. Readler
“The False Claims Act whistleblower law is ‘the most powerful tool the American people have to protect the government from fraud.’”
Former Assistant Attorney General Stuart Delery
“The False Claims Act and its [whistleblower] provisions remain the government’s most effective civil tool in protecting vital government programs from fraud schemes.”
Acting Associate Attorney General Bill Baer
“The taxpayers owe a debt of gratitude to those who often put much on the line to expose such [fraudulent] schemes.”
Assistant Attorney General Jody Hunt
Reports on the Efficacy of Whistleblowing
Over the years, there have been numerous reports documenting the fact that whistleblowing works. These include reports by government agencies summarizing the work of their whistleblower programs as well as academic research reports on whistleblowing.
The news media has also extensively covered the successes of whistleblower laws. From covering individual whistleblower success stories to highlight specific whistleblower programs to overviewing whistleblowing as a whole, these articles showcase the scope of the efficacy of whistleblowing as well as the increased public recognition of the importance of whistleblowing.
On January 24, the U.S. Securities and Exchange Commission (SEC) issued a $28 million award to joint whistleblowers who alerted the agency to ongoing fraud, allowing the SEC to return millions of dollars to harmed investors. Qualified SEC whistleblowers, individuals who voluntarily disclose original information that contributes to the success ...
On January 19, the U.S. Securities and Exchange Commission (SEC) awarded $18 million to three whistleblowers who separately made disclosures which contributed to the success of the same enforcement action. The whistleblowers’ voluntary disclosures led to millions of dollars being returned to harmed investors. Qualified SEC whistleblowers, individuals who voluntarily ...
Overall, the SEC has awarded approximately $1.2 billion to 268 individuals since issuing its first award in 2012. The CFTC has awarded approximately $330 million. The Department of Justice obtained more than $2.2 billion in settlements and judgments from civil cases involving fraud and false claims. Recoveries resulting from qui tam and qui tam cases brought under the False Claims Act from 1986 to 2019 amount to more than $62 billion paid to 13,281 individuals.
Top lawmakers, leaders, and leading whistleblower experts all recognized the tremendous impact and positive results of whistleblowing. Whistleblowers are supported by all political parties who confirm it’s effectiveness in detecting and prosecuting fraud, misconduct, and abuse.
Whistleblowing is important because it helps keep the economy and justice in balance. Whistleblowers have the power to hold individuals and entities accountable for their wrongdoing by speaking up and exposing the truth. This act of courage has helped save taxpayers and investors billions of dollars, but has also helped save countless lives and the environment.
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