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As companies adjust to the new whistleblowing regimes under the Dodd-Frank Act, what changes do you recommend that they make to their existing compliance programs to ensure they are adequately prepared to manage whistleblowers and/or CFTC inquiries in response to whistleblower complaints?
Companies should make sure that their compliance systems and cultures have certain common sense features and characteristics.
First, company management, compliance and legal personnel should be well acquainted with the anti-retaliation provisions of the Dodd-Frank Act and the Sarbanes-Oxley Act. The anti-retaliation provisions of the Dodd-Frank Act are written broadly. Companies should develop careful, conscientious and consistent policies and procedures for responding to internal whistleblowers that limit the possibility of actions that could be deemed retaliatory.
Second, companies should have well-publicized compliance systems that provide clear and easy-to-use reporting mechanisms. I believe it is particularly important for companies to allow employees to report anonymously.
Last, it is to a company’s benefit to establish and promote a culture where whistleblowers feel comfortable in reporting violations. An ethical tone at the top is essential to encourage whistleblowers to report internally.
How will you determine whether a whistleblower will receive a reward and, if so, how much? What factors will you consider?
First, there are detailed eligibility criteria. The whistleblower must have provided the information voluntarily; i.e., before being asked for it by authorities. The information must also have been “original information.” While there are many factors to the definition of “original information,” the basic idea is that it must be information not already known to us that is derived from (i) the whistleblower’s independent knowledge (information that is not generally known or available to the public), or (ii) the whistleblower’s independent analysis (the whistleblower’s examination and evaluation of information that may be publicly available but which reveals information that is not generally known). Some kinds of information cannot be considered for an award, including improperly disclosed attorney-client communications. Likewise, certain persons are not eligible for an award, including employees of certain government agencies and self-regulatory organizations, persons convicted of criminal violations for the conduct at issue, and persons who make false statements or omissions to the CFTC.
Assuming that the whistleblower meets all eligibility requirements, we consider numerous factors to determine what amount of award is appropriate. We may increase the award based on: the significance of the whistleblower’s information; how much assistance the whistleblower provided; our law enforcement interests; and whether, and how much, the whistleblower participated in an internal compliance system. On the other hand, we may reduce the award based on: whether the whistleblower was involved in, or culpable for, the conduct at issue; whether the whistleblower unreasonably delayed reporting a violation to us; and whether the whistleblower interfered with an internal compliance system.
If a whistleblower is implicated in the company’s misconduct, does it preclude their eligibility for an award?
It depends. A whistleblower who is convicted criminally for the misconduct at issue is not eligible for an award. A culpable whistleblower who is not convicted criminally still cannot collect an award based on a sanction levied against him/her or any entity whose liability is based primarily on conduct that the whistleblower principally directed, planned or initiated. In some cases, that limit may preclude the whistleblower from receiving any award. That being said, there will be situations where a whistleblower with limited culpability will be able to collect an award based on information that led to sanctions being levied against others.
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Tomorrow: Part IV of the interview with Vincente Martinez of the CFTC Whistleblower Program.
Jessica Tillipman is a contributing editor of the FCPA Blog. She’s the Assistant Dean for Field Placement and Professorial Lecturer in Law at The George Washington University Law School. She also teaches an Anti-Corruption seminar that focuses on corruption control issues in government procurement.