Corporate whistleblowers may be perceived to fall into one or more of several categories. The first category we should consider is for those who blow the whistle because they feel it is the right thing to do. The second is for those who blow the whistle in anticipation of a reward, such as those offered by the SEC’s whisteblower program.
Some will say that those individuals falling into the first category are brave and righteous; others may find the thought of whistleblowing in exchange for money to be abhorrent. But there are some whistleblowers who will fall into a space somewhere in between, an overlapping category where the whistleblower comes to the fore in order to rectify a wrong and gets rewarded for their troubles.
When a person makes the decision to go to the authorities, regardless of their motivation, the likelihood is they will at best be ostracized to some degree by their employers and co-workers. While one can understand the negative perspective of their employer, surely their workmates will stand by them? But perhaps they don’t want to be seen as an associate of the troublemaker and thereby damage their own career prospects. It matters not if there is legislation in place intended to protect the whistleblower: they are vulnerable to reprisal.
Moreover, if a person goes to a prospective employer and cites whistleblowing as the reason they left their previous employ, will they be welcomed with open arms? Will they be seen as a fine, upstanding individual with high moral values, somebody who will be an asset to the company … or as a potential agitator? Whistleblowing can seriously damage your future employment prospects, let alone your current career.
Having written on this subject previously for the FCPA Blog, I know it attracts a lot of attention, especially since it has been incentivized by the SEC. One UK-based commentator on a blog piece I wrote, deplored the SEC process, citing the scheme as being open to abuse by those prepared to lie in order to gain a reward in the process. I do not concur with this position. There are checks and balances — and the rules of evidence — in place that should prevent any possibility of this sort of deceitful scenario playing out.
SEC civil securities fraud and FCPA enforcement lawyers are not unaware of the risk of an exaggerated or falsely predicated whistleblower complaint. Moreover, SEC whistleblowers don’t get paid a reward unless and until (a) they produce new material information, or (b) an original analysis of available information which (c) leads to a recovery or monetary sanction being paid by a violator of the law.
In effect, any representations from a whistleblower have to stand stringent scrutiny and no doubt a meaningful and persuasive defense from the organization concerned, in order to convince the SEC to progress their petition for a reward.
Establishing a whistleblower’s motivation for whistleblowing may be hindered by blurred lines between a courageous agent of justice and self interest. Thankfully, there are no such issues with successful gymnast Dominique Moceanu. She has decided to speak out on the grounds that in doing so, she may be able to prevent other youngsters from being subjected to what she has described as ‘abusive’ coaching methods. The Washington Post article by Elizabeth Svoboda describing Ms. Moceanu’s stance is an interesting read.
As a specialist lawyer in the field of international fraud investigation and cross-border asset recovery, I am familiar with the SEC program and the hurdles whistleblowers must navigate in order to secure a monetary reward. In this instance, the article provides us with the opportunity to explore the psyche of the whistleblower.
I concur with Ms. Svoboda’s position — that whistleblowing is indeed a risky business. My initial post on this subject goes back to last year, and centered upon the plight of a Spanish whistleblower, Ana Garrido. Her story mirrors one alluded to in Ms. Svoboda’s piece, of an individual represented by the lawyer Carney Shegerian, who lost everything by speaking out about his employer’s flawed safety practices.
It is unsurprising that most prefer to keep schtum. The article makes some extremely interesting points. I welcome the description of whistleblowers being characterized as “social heroes.” I also agree with the premise that whistleblowers are more likely to come to the fore where their organization has a track record in rectifying problems. In other words people are encouraged to blow the whistle on unethical or unlawful behaviour if their organization can be trusted to do the right thing, rather than conducting a witch hunt to identify and punish the source.
Predictably a whistleblower is likely to have a long work history, according to an Ohio State University study. Again one would associate whistleblowing with older types rather than the young.This is also to be expected.
The psychology of a whistleblower is an interesting subject, especially for those lawyers who specialize in representing them, and those who may act on their information. It is a similar story in law enforcement, where detectives seek to establish the motive behind an informant’s desire to pass them intelligence.
If the informant is driven by a sense of right and wrong, then perhaps a little more weight can be attached to the information being passed. If they are seemingly driven purely by financial rewards, then the detectives will be more wary of the intelligence they receive. In addition, it is not unheard of for one drug dealer to pass intelligence on another in order to see them eliminated from the equation. Informant handling can be a murky world.
Whistleblowing can also be an equally shadowy pastime, depending on the motivation of the blower. It is now an integral part of the justice and regulatory systems. It is imperative that all countries adopt a whistleblowing policy, for reward or otherwise, that protects what is a Human Intelligence Source.
As Haile Selassie once said: “Throughout history, it has been the inaction of those who could have acted; the indifference of those who should have known better, the silence of the voice of justice when it mattered most, that has made it possible for evil to triumph.”
Government ministers and big businesses alike need to understand that their minions may report their apparently negligent or corrupt practices to the relevant authorities. Whistleblowing is a deterrent against unworthy activity, and the motive and desire to report unworthy conduct needs to be nurtured and embraced.
____
Martin Kenney, pictured above, is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice based in the BVI and focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors. He was recently selected as one of the Top 40 Thought Leaders of the Legal Profession in 2017 by Who’s Who Legal International.
5 Comments
An important issue that is often omitted from discussion of whistleblowers is that in the vast majority of situations, the regulatory agency or police force that receives the information does not act on it. This is not because the information is not important in reality, but that most cases do not get investigated, regardless of how serious the corruption is.
In addition, since the police won't get involved in the actual corruption case, they will definitely not get involved in laying charges to protect the whistleblower in reality. Legislation exists but not enforced by the police. Thus, the whistleblower needs to know, before acting, that chances are extremely slim that anything will be done with the information, and that the whistleblower runs huge risks which may well materialize without any real benefits to the whistleblower.
This is an insightful distillation of a complex issue. The salient point Martin offers which in my view can help advance the often overly-simplistic and fractious whistleblower debate is identifying that grey zone where heroism and self-interest can overlap. Doing good and causing harm might appear diametrically different. And of course they are in deed and outcome, irrespective of intent. But the underpinning decision-making drivers (akin to choice architecture in Richard Thaler’s vocabulary) as between ethical pro-social action and unethical misconduct are closely entwined. There are many factors at play in the run-up to enactment for good Samaritans and malicious actors alike. Inasmuch as whistleblowing is, or certainly ought to be, fundamentally accepted as a generally positive instrument against corruption and wrongdoing, it deserves to be more rigorously understood. This post is an excellent step in the right direction.
The significant risks to a "whistleblower"–as so well-described by Martin Kenney–are real and intimidating. These risks are not limited to reporting potential wrong-doing to regulators or law enforcement; raising concerns internally is also risky. Taking the step into the unknown, by calling out unethical or potentially unlawful behavior, takes courage. Speaking up can take an enormous toll on the person raising the issue–financially, professionally, socially, physically and emotionally.
As noted in earlier comments, the debate over the motivations of a "whistleblower" can be overly simplistic and mistakenly binary. The prerequisites to guaranteeing a reward are substantial. Financial benefit can hardly be the sole (or even primary) motivation for reporting good faith concerns.
If whistleblower protections and rewards are perceived as threats to an organization's ability to "wash their dirty laundry" internally, then these "incentives" are doing exactly what they ought to. They should motivate organizations to listen and take action when employees raise concerns internally–an effective "early warning" system–long before issues can snowball and well before an employee feels their only option is to report something externally.
After all, isn't raising concerns exactly what we are telling employees they are required to do under our codes of conduct? Yet, retaliation (or fear of it) for raising concerns is real, as is the perception that the organization won't follow through on reports anyway. We should focus our energy on creating and sustaining cultures of candor and trust that encourage speaking up. Perhaps, we could stop calling these colleagues "whistleblowers" when they raise issues internally. That would be a good first step.
As a former SEC lawyer who has been representing SEC and CFTC whistleblowers since the start of the program, I can agree with many of Mr. Kenney's observations. I would add the following, based on many conversations with would-be whistleblowers, a number of cases submitted, investigations begun, and some awards received or in process. First, most whistleblowers are well-motivated. I don't think the money is a big factor (if they haggle over the fee I don't take the case). Second, they come from all over the world, all ages, all levels of authority, and are in general fearless. By the time they call me they have crossed the Rubicon. Most have raised the issue with the employer in one form or another, to no avail. Many are turned off by the actions of superiors, including compliance and legal. Most have documents, and many have "smoking gun" emails. Third, I tell them up front the process is long (four or five years in some cases) and they may experience retaliation, subtle or otherwise. Fourth, the agencies do a very good job of protecting their identify, in my experience. Fifth, I have to stress that they file their cases soon, as the Supreme Court's recent Kokesh case (5 year statute of limitations) may now lead the agencies to decline anything older that 3 or 4 years.
Dear Mr. Hurson, you have hit all the points I was seeking to make, that (a) whistleblowing is here to stay; (b) financial reward is not ordinarily the main motivator and most whistleblowers are courageous and right-minded people; (c) employers ignore their anti-corruption compliance responsibilities at their peril; and finally (d) that the blower needs to be aware of their vulnerability to retribution.
Your advice regarding the need for a prompt filing of a claim within 3 years or so is valuable and will hopefully act as a catalyst for those who are contemplating their position. Thank you.
Comments are closed for this article!