In a rare show of international unity, over 140 nations, (including every major nation in the world), signed the United Nations Convention Against Corruption. In the introduction to the Convention the Secretary-General of the United Nations wrote:
“Corruption is an insidious plague that has a wide range of corrosive effects on societies. It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life and allows organized crime, terrorism and other threats to human security to flourish.”
Unquestionably, the key to a successful fraud detection program are whistleblower reward laws designed to protect and encourage “insiders” to report misconduct. The United States reward laws have been extraordinarily successful, and have worldwide reach. Since 2011, whistleblowers from over 82 countries have filed whistleblower claims and in 2014 over $30 million U.S. dollars was paid to non-U.S. citizens under these laws. Many of these claims focus on violations of the Foreign Corrupt Practices Act.
The U.S. regulators responsible for implementing the whistleblower reward laws have strongly praised them and have explained how they are crucial instruments in fighting fraud and corruption. In the words of these officials:
Whistleblower reward laws are “the government’s most potent civil weapon in addressing fraud against the taxpayers.” Statement of the Acting Assistant Attorney General, Civil Division of the Department of Justice.
Whistleblower reward laws “generate much needed revenue by recovering billions of dollars lost each year through fraud and abuse on behalf of Government agencies, entitlement programs, and the general fund.” Department of Justice, Civil Division Fiscal Year 2012 Budget Requests.
Whistleblower reward laws have “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.” Statement of the Attorney General of the United States.
Summary of the Report
Fact #1: Whistleblower Reward Laws Are Needed
Whistleblowers are by far the most common and most effective source of information around the world.
The University of Chicago Booth School of Economics found that – “Although whistleblowers are the single most common and most valuable source of information on fraud and corruption, only a small fraction of employees who come forward report to anyone outside the company.”
Fact #2: Whistleblower Reward Laws Work
Reward laws are the most important tool to uncover and punish fraud this is demonstrated by the comparison chart by the amounts recovered as a result of qui tam whistleblowers vs. non-qui tam cases.
Fact #3: Employees Outside the USA are Already Benefiting from American Reward Laws
Foreign nationals have been paid over $30 million under U.S. whistleblower reward laws.
Foreign nationals in over 83 countries have applied for rewards.
Fact #4: America’s Oldest Whistleblower Reward Law, the False Claims Act, has had Remarkable Success in Protecting Whistleblowers and Exposing Fraud
The Department of Justice praised the False Claims Act, by the Civil Division attorneys generating much-needed revenue by recovering “billions of dollars lost each year through fraud and abuse on behalf of Government agencies, entitlement programs, and the general fund.”
Assistant Attorney General of the Civil Division of the DOJ stating that after 25 years, the whistleblower reward program “remains the government’s most potent civil weapon in addressing fraud against the taxpayers.”
Fact #5: Newly Enacted Securities, Tax and Foreign Bribery Rewards Laws are also “Tremendously Effective”
The Department of Justice is not the only agency to experience such success with whistleblower reward programs. Other agencies, including the Securities and Exchange Commission, the Internal Revenue Service, and the Commodity Futures Trading Commission have seen remarkable success with their own programs as well.
Many government agencies praised the IRS Whistleblower program stating “whistleblower information can be an important tool in our compliance efforts” and the CFTC Whistleblower program attracting “high-quality tips and cooperation we might not otherwise receive and is already having an impact on the Commission’s enforcement mission.”
Conclusion:
- Whistleblower reward laws address both the short-term and long-term problems caused by the realistic fear employees experience when they consider blowing the whistle.
- Whistleblower reward laws create an incentive for employees to take a risk and report fraud.
- Whistleblower reward laws establish safe and protected channels for reporting.
- Reward laws place a premium on raising concerns that are valid, well documented, and provable. Unlike retaliation laws, the only way to prevail in a reward law is to be right about the wrongdoing.
- Reward laws give employees a choice: report internally or report through a government-protected channel that can offer real financial security. This creates a powerful motivation for companies to compete with government programs by creating independent and effective compliance programs.
- Reward laws provide a safe channel for employees to report their allegations to law enforcement confidentially, and, if appropriate, become a confidential informant.
- Reward laws permit employees who disclose their fraud-based allegations to the government to obtain protection from retaliation as government witnesses under the criminal obstruction of justice laws, along with traditional employment discrimination laws.
- Reward laws permit the appropriate authorities to obtain evidence of fraud and conduct effective investigations designed to protect the public interest.
