What Is A Whistleblower?

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.

The modern legal framework has evolved to not only support whistleblowers but also incentivize them. Current whistleblower laws allow individuals to file claims and potentially receive a portion of the proceeds that the government recovers from the exposed fraud. These U.S. laws include the Dodd-Frank Act, the Foreign Corrupt Practices Act, Commodity Exchange Act, qui tam, and IRS tax law.

Continue reading to get a broader definition of a whistleblower, and how insiders can come forward to expose fraud and corruption.

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.

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.

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.