There is no uniform definition of a whistleblower. However, the definition commonly used includes someone whose loyalty is to the truth, becomes an informant to the government on corporate crimes, or seeks monetary rewards under various whistleblower programs.
By Joseph Orr
Updated: September 20, 2023
Whistleblowing is the act wherein individuals, often termed “whistleblowers,” disclose wrongdoings, illegalities, or unethical practices they’ve either witnessed firsthand or come to know of within an organization. At its core, it’s about highlighting malpractices and ensuring that the truth sees the light of day. It doesn’t matter if you refer to it as “whistle blower,” “wistle blower,” or “whisle blower”; the central theme is someone taking a courageous step forward.
Continue reading to get a broader definition of a whistleblower, and how insiders can come forward to expose fraud and corruption.
Who is a Whistleblower?
Both private and federal employees can qualify as whistleblowers.
The spectrum is vast, from professionals on Wall Street revealing white-collar crimes to deckhands on fishing vessels exposing illicit fishing methods. What’s paramount is that the information they present is both original and complies with the legal prerequisites for whistleblowing.
A notable example that demonstrates the profound impact of whistleblowers is the Enron case. Sherron Watkins, who exposed the massive accounting fraud at Enron, led to transformative changes in corporate America. Watkins’ actions paved the way for the Sarbanes Oxley Act, shielding corporate whistleblowers against retaliation for reporting securities fraud.
Furthermore, in response to the 2008 financial crisis, the Dodd-Frank Act was instituted, offering monetary incentives for whistleblowers reporting financial malpractices to the SEC and CFTC. Watkins’ bravery earned her the title of Time Person of the Year in 2002.
Are Whistleblowers Protected by Law?
The U.S boasts over 50 distinct whistleblower laws, each catering to specific sectors and concerns. Most of these laws incorporate provisions against retaliation, protecting whistleblowers from unjust terminations, harassment, and other punitive actions.
The False Claims Act stands out as one of the oldest and most influential whistleblower laws, safeguarding both federal and private employees. It encourages “qui tam relators” with knowledge of frauds to step forward by filing a qui tam lawsuit, rewarding them, even if they were part of the misconduct initially. Also note: most states have enacted their own state False Claims Act laws.
The Anti-Money Laundering Act (AMLA) Whistleblower Reward Program mandates a minimum reward of 10% of the collected sanctions, ensuring significant compensation for valuable information. Its jurisdiction also encompasses violations of the International Emergency Economic Powers Act, sections 5 and 12 of the Trading With the Enemy Act, and the Foreign Narcotics Kingpin Designation Act, making it a comprehensive tool for holding violators accountable across various financial misconduct domains.
The Securities and Exchange Commission (SEC) Whistleblower Award Program, established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, protects and rewards individuals who come forward with information about securities law violations. Those who provide high-quality, original information leading to an enforcement action where over $1 million in sanctions is ordered can receive between 10% and 30% of the money collected.
The Commodity Futures Trading Commission (CFTC) Whistleblower Award Program encourages individuals with knowledge of violations of the Commodity Exchange Act to report to the Commission. Similar to the SEC program, whistleblowers can earn financial rewards if their information results in a successful enforcement action with sanctions exceeding $1 million, earning between 10% and 30% of the collected amount.
The Internal Revenue Service (IRS) Whistleblower Program incentivizes individuals to disclose substantial underpayments of taxes or fraudulent tax activities. Depending on the case’s specifics and the quality of the information provided, whistleblowers can receive between 15% and 30% of the collected proceeds if the taxes, penalties, interest, and other amounts in dispute exceed $2 million.
Importantly, to be eligible for a whistleblower reward under most of these laws, the disclosures must constitute “original information.” The landscape is vast, with numerous federal and state laws providing different levels of protection, depending on the nature of the disclosure and the whistleblower’s status.
Reporting Mechanisms for Whistleblowers
The paths whistleblowers can pursue when reporting wrongdoings vary. While many organizations have internal whistleblower offices, it’s essential for the whistleblower to be aware of their rights and potential repercussions.
Oftentimes, internal compliance programs can be traps. Companies may try to suppress the revealed fraud, binding whistleblowers with non-disclosure agreements (NDAs). The protection mechanisms differ for federal and private employees. While laws like the Dodd Frank Act permit whistleblowers to file claims anonymously, many still don’t offer confidential filing provisions.
For best practices, potential whistleblowers should consider reaching out to seasoned whistleblower attorneys. These experts ensure anonymity, guide through the legal intricacies, and enhance the prospects of obtaining a financial reward.
Whistleblowing plays an indispensable role in modern society. These individuals, driven by a commitment to ethics and transparency, ensure that malpractices don’t go unchecked. With the right legal knowledge and protections in place, whistleblowers can continue to be the pillars of accountability and justice in both corporate and governmental landscapes.
On September 19, 2018, news broke of $234 billion money laundering scheme. The scheme moved rubbles out of Russia, converted them to dollars at the Estonian branch of Danske Bank, and then moved the dollars to New York with the assistance of three correspondent banks (Bank of America, J.P Morgan, and Deutsche Bank).
Danske Bank admitted all of its internal controls designed to prevent money laundering had failed. The bank also revealed that the scheme had been reported to the highest levels of the bank by a whistleblower over four years before. The whistleblower’s identity was required to be secret. But it took only days for his name to leak out.
Soon the entire international banking world learned that the former Danske Bank manager Howard Wilkinson had exposed the largest money laundering scheme in history, and that the bank had tried to cover it up.
Kohn, Kohn and Colapinto and Athens-based Greek law firm of Pavlos K. Sarakis & Associates jointly represented Greek whistleblowers who proved that the multinational Swiss-based pharmaceutical company Novartis paid millions in bribes to illegally market drugs in violation of the Foreign Corrupt Practices Act. Novartis was required to pay over $300 million in sanctions and fines to the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ).
Daniel Richardson is a former Senior District Business Manager for Bristol-Myers Squibb (BMS). Richardson prevailed in one of the largest qui tam whistleblower cases filed against a major pharmaceutical company for “off label” marketing and illegal kickbacks. Richardson, in conjunction with other whistleblowers, held BMS accountable under the False Claims Act.
Based on frauds primarily related to federal and state Medicare and Medicaid programs, the company had to pay $515 million in fines and penalties. The whistleblowers, including Mr. Richardson, obtained their mandatory qui tam whistleblower rewards, once again demonstrating how the whistleblower reward laws are the most powerful tool for holding fraudsters accountable.
On September 27, the U.S. Commodity Futures Trading Commission (CFTC) issued a whistleblower award for $300,000. The awarded whistleblower provided the CFTC with original information which caused the agency to open an investigation that resulted in a successful enforcement action. According to the CFTC, the whistleblower provided a “particularly informative ...
On September 19, the U.S. Commodity Futures Trading Commission (CFTC) announced two separate whistleblower awards totaling $15 million. The awards were issued to two whistleblowers who voluntarily provided the agency with original information that led to separate enforcement actions. Through the CFTC Whistleblower Program, qualified whistleblowers are entitled to awards ...
On September 8, the U.S. Securities and Exchange Commission (SEC) announced settled charges filed against Monolith Resources LLC, a privately held energy and technology company headquartered in Lincoln, Nebraska. The SEC charged Monolith with using overly restrictive seperation agreements which violated Rule 21F-17 of the SEC Whistleblower Program. Rule ...
A whistleblower is a person who witnesses fraud, corruption, waste or abuse within a private or public organization and reports the crimes to law enforcement or other authorities. A whistleblower (whistle-blower) brings forth information of wrongdoing that would not have otherwise been known.
Across almost all whistleblower laws, an individual qualifies as a whistleblower if they bring specific, credible, and timely information to the government, media, or appropriate regulatory agencies, and those said entities take enforcement or public action on the information provided.
Those who decide to become whistleblowers are protected against retaliation when engaging in a “protected disclosure.” In other words, it is illegal for the government or any employer to retaliate against a whistleblower if they are reporting a violation of certain US laws. Regardless, those who would like to report violations and become a whistleblower should do so quietly without anyone knowing.
Rules for Whistleblowers
The ultimate guide to blowing the whistle and getting rewarded for doing what's right.
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