Whistleblowers Are Better Protected, but Still Face Retaliation

Is this a good time to be a corporate whistleblower? Probably, according to a panel of watchdog experts, with some caveats.

The ACFE’s 2020 Report to the Nations shows that tips remain the most common way for fraud to be detected, which accounted for 43% of the survey respondents’ cases. However, panelist Stephen Kohn, a longtime counsel to whistleblowers, said employees should think twice before they report problems internally.

“My message to members is, don't fall on your sword,” said Kohn, chairman of the board of the National Whistleblower Center and partner, Kohn, Kohn & Colapinto LLP. “If you raise a concern, if you issue an audit report, if you make an internal complaint — and you get resistance from the company — don't set your hair on fire,” he said.

Kohn said that internal reporting triggered approximately 95% of the retaliation cases his firm has studied. “So, internal reporting places you at risk. … The culture hasn't changed yet, and you have to be very careful when you raise a concern.

“You have an alternative way to report anonymously and confidentially, and get that information to appropriate law enforcement officials.” That alternative is the U.S. Securities and Exchange Commission (SEC) Office of the Whistleblower managed by Jane Norberg, another panelist.

“I think the No. 1 thing companies can do is not hide that employees have the right to go directly to the SEC or the Department of Justice,” said Kohn, who represents Howard Wilkinson, Danske Bank whistleblower, 2020 ACFE Guardian Award recipient and a 31st Annual ACFE Global Fraud Conference keynote speaker.

Celebrating whistleblowers’ rights
Panelist Tom Mueller, author of “Crisis of Conscience: Whistleblowing in an Age of Fraud,” said organizations’ top management must always send the message that they celebrate their employees’ right to speak out truthfully. Organizations must “incentivize and promote people who blow the whistle in a way that actually brings facts forward,” Mueller said. “That they’ll be embraced and not punished. … [Management] needs to signal to everyone in the organization [that whistleblowing] is a key role as a good employee and they’re not loose cannons that need to be silenced.”

Rebecca Jarvis, ABC’s chief business, economics and technology correspondent, moderated the wide-ranging panel discussion, during the Monday Afternoon General Session.

Norberg said the three main components of the SEC's whistleblower program are: 1) confidentiality 2) anti-retaliation protections and 3) monetary awards. “The SEC will not identify directly or indirectly the identity of a whistleblower outside of the commission except in certain limited circumstances,” she said. “The whistleblower can also report to the SEC anonymously as long as they have counsel that we can communicate with.” (Norberg said that anything she said during the panel discussion were her own views and weren’t necessarily reflective of the SEC commissioners or the SEC staff.)

Protection against retaliation, she said, means that a company or an individual can’t fire, suspend, demote, threaten or harass a whistleblower because they brought information to the SEC about a possible securities law violation.

Norberg said that the SEC, via the Office of the Whistleblower, which the U.S. Dodd-Frank Act enabled, has awarded more than $500 million to 83 whistleblowers since issuing its first award in 2012. On June 4, the SEC announced a record nearly $50 million whistleblower award to an individual who provided what Norberg said was detailed, firsthand observations of misconduct by a company, which resulted in a successful enforcement action and a significant amount of money returned to harmed investors.

She said that whistleblowers’ awards have resulted in the SEC ordering more than $2 billion in sanctions, which include more than $1 billion in disgorgement in ill-gotten gains. Whistleblowers’ awards are worth it, she said.

“That's a critical point,” Mueller said. “The whistleblower bounty payout reward is only a tiny fraction of the monies recovered … for the investors.”

“10, 15, 20 years ago, all my whistleblowers complained about the government investigators,” Kohn said. But he said the SEC is now extremely helpful and effective.

Norberg said that the SEC regularly trains its investigators to understand whistleblowers’ mindsets.

Kohn said he supports the U.S. Senate’s Whistleblower Programs Improvement Act of 2019, which he said would shorten governmental delays in whistleblower cases and fix the U.S. Supreme Court decision, Digital Realty Trust v. Somers. The decision, he said, removes whistleblowers’ retaliation protections under the Dodd-Frank Act.

Mueller said it doesn’t matter if whistleblowers come forward because they care about the future of the world or they hate their bosses. “As long as people come forward with actionable information about wrongdoing … we shouldn't care why,” he said.

Employees still need to confront the corporate “cults of secrecy and money” and the “bonus culture that focuses on milestone payments” so that corporations can serve society and themselves, Mueller said.

Changes with a magic wand
At the end of the discussion, Jarvis asked the panel participants if they could wave a magic wand, what would they change in the whistleblower system.

“I would have a uniform whistleblower reward program across all critical [U.S. governmental] programs with mandatory rewards and strict time limits,” Kohn said. “There shouldn't be the loopholes that exist.”

“I would block corporate financing of the government, in general, and corporate entity and government entities in particular,” Mueller said. “And I would nail shut the revolving door [of executives between industry and regulatory agencies].”

“I think that if I could wave a magic wand,” Norberg said, “I would like for companies and the public to celebrate whistleblowers and not treat them with distrust … and recognize the courage and sacrifice that it takes to step forward … and really treat them as the heroes they really are.”