Back in August, Professor Scheuer discussed the first whistleblower award issued by the SEC here. Following a recent whistleblower award development, Susan Lyon from NerdWallet authored a blog post titled, Understanding the New SEC Whistleblower Program: Breaking down the Largest Whistleblowing Rewards in U.S. history. In this post, Susan discusses how the IRS recently paid a former UBS banker Bradley Birkenfeld $104 million for his role as a whistleblowing informant, who provided the IRS with valuable insider information, resulting in a giant settlement with UBS. Susan explains,
The Dodd-Frank Act’s whistleblower program, established under the SEC, is the most recent attempt at strengthening and speeding up federal whistleblower programs. While the DOJ, SEC, and IRS continue to push forth their own whistleblowing programs, the debate concerning proper retribution and consequences for such informants rages on.
Susan turned to five experts with the question: Is the SEC’s new program working, and is it better than the old IRS program? One expert—Institute Director and Professor of Corporate and Business Law Lawrence Hamermesh—provided the following insight:
“Clearly the one thing that Congress saw and wanted to fix was an insufficient incentive system for whistleblowers who had witnessed corporate misconduct. So they decided to effectively hold out a ‘carrot’ – a portion of the money recovered as a result of any information the whistleblower provided.
The big question is how this will interact with internal corporate grievance and reporting programs already in place. Firms were afraid the SEC program would take the wind out of their sails, but instead the program may actually bolster internal practices because the same person can now both report internally and to the SEC. The commission did an admirable job setting up a reasonable balance between them to harmonize the two mechanisms. We’ve now seen two claims addressed but the SEC can’t say much more about how well the program is working without threatening whistleblower anonymity.”
The remaining four experts include: (1) Tom Devine, Legal Director of the Governmental Accountability Project, who explains how the SEC has implemented the gold standard of whistleblower programs by protecting the whistleblower from industry retaliation; (2) Eva Marie Carney, Partner at RK&O LLP and former Assistant General Counsel at the SEC, who highlights the advantages of being able to anonymously report fraud to the SEC; (3) Professor Richard Moberly, Associate Dean at the University of Nebraska School of Law, who notes the unique aspects of the SEC program set up by Dodd-Frank in providing both strong retaliation protection as well as financial incentives; and (4) Professor Geoffrey Rapp, the Harold A. Anderson Professor of Law and Values at the University of Toledo College of Law, who draws attention to the key differences between SEC, IRS and FCA whistleblower programs.
To review Susan’s post and view the experts’ commentary, please visit here.