Whistleblowers Urged to Come Forward with Wrongdoing in AI

Following the recent events at OpenAI, whistleblower advocates want to educate AI technology employees regarding their whistleblower protections in reporting securities violations, fraud, or misconduct to regulatory authorities.

“Given the risks of OpenAI’s most infamous technology, ChatGPT, compounded by widespread concerns regarding the lack of regulation of AI, the importance of whistleblowers as a tool to root out corruption shouldn’t be overlooked,” states whistleblower attorney Stephen M. Kohn, founding partner at Kohn, Kohn & Colapinto and Chair of the National Whistleblower Center.

The dismissal and reinstatement of Sam Altman as CEO of OpenAI between November 17 and November 21 over his candidness with the Board indicate significant internal turmoil. The Board cited Altman’s “miscommunication” and “lack of transparency” in their initial decision to remove him. In a blog post on the 17th, the company stated: “He was not consistently candid in his communications with the Board, hindering its ability to exercise its responsibilities.”

OpenAI’s November 17th blog post stated: “It is paramount that any C.E.O. be honest and transparent with his or her Board. We apologize for the abruptness of the process that we felt was required by the situation.”

On November 19, after a weekend of reinstatement talks, the Board reaffirmed its decision in a memo to employees, which explained that Altman’s “behavior and lack of transparency in his interactions with the Board undermined the Board’s ability to effectively supervise the company in the manner it was mandated to do.”

Though strategically vague, this language suggests the possibility of false statements and other fraudulent behavior at OpenAI, as he did at Loopt.

The existence of a fraud scheme by OpenAI could pose a significant risk to investors and the public.

Yet, curiously, the company’s largest investors – big names like Microsoft, Sequoia Capital, Thrive Capital, Khosla Ventures, and Tiger Global Management – sided with Altman. Microsoft has invested a cumulative $13 billion in OpenAI and owns 49% of the for-profit operating company, intentionally under half to prevent antitrust scrutiny. The other investors control the other 49%, and Board members of the non-profit control 2% of the company.

Their threat to sue the Board of Directors preceded the reinstatement of Altman and the subsequent dismissal of Board Members Helen Toner and Tasha McCauley. Upon their departure, Toner and McCauley urge an independent investigation into Altman’s leadership.

“The language of the OpenAI Board in acting so swiftly to remove Sam Altman leads me to wonder if this situation was spurred by an internal whistleblower,” said Kohn.

“If any insiders have evidence to reasonably believe that the content of the ‘misleading communication’ cited by the Board violated the law, they should file an anonymous report as soon as possible,” he continued.

Kohn urges those with information about potential fraud in the under-regulated industry to inform the appropriate agencies. Whistleblowers can receive monetary rewards for anonymously providing information that protects the public from harm caused by a potential fraud scheme. Reports can be made to the Securities & Exchange Commission, Department of Justice, Commodity Futures Trading Commission, and Consumer Financial Protection Bureau under the Dodd-Frank Act.

Under the SEC’s whistleblower program, for example, whistleblower tips that lead to a successful enforcement action may be entitled to an award of 10-30% of the sanctions collected by the government. They could still qualify for an award even if the company has self-reported the incident.

Kohn stated,“It is important for employees of OpenAI to know that they have the option and incentive to report wrongdoing, even if their company tells them otherwise.”