Kudos to the Wall Street Journal. Through a freedom of information request, they obtained the demographics of some 6500 whistleblowers who have come forward to the SEC. Those folks range in occupation from adult entertainers (four of them) to an “ex-wife” and a pastor. What they all have in common, however, is their decision to blow the whistle on corporate financial fraud.
The SEC is one of the big three whistleblower programs. Although program participants can remain anonymous, the Journal was able to get very broad demographic information on those who have participated in the SEC’s whistleblower program.
The oldest of the whistleblower programs are the IRS whistleblower program which traces its roots back to 1867 and the False Claims Act which also traces it roots back to the Civil War era in 1863. By contrast, the SEC’s program is just three years old. All three laws pay bounties of up to 30% of whatever the government collects from wrongdoers.
So who are all these people coming forward to report fraud? Less than 1% are senior executives or board members. That surprised us as our experience suggests a higher percentage of managers as whistleblowers.
Roughly 5% were retired while another 5% were investors.
In our experience, whistleblowers are most often employees or vendors. To qualify for the programs, one must generally have inside or confidential information about fraud. Usually those folks are corporate insiders.
Many folks complain internally and try to get senior management to fix the problem. Only after they are ignored or face retaliation for speaking up do they approach regulators. We believe many of the 365 retirees quit or retired after getting no satisfaction from management.
To date, very few people have received rewards from the SEC. According to the Journal, the SEC has prosecuted just 5 cases, although the 8 whistleblowers in those cases earned $15 million in whistleblower award compensation.
The SEC and IRS program are very opaque. Once filed, there is very little feedback and no right of appeal if the agencies decide not to pursue the information. Luckily, whistleblowers can almost always remain anonymous in both programs.
The False Claims Act, however, allows whistleblowers to file a lawsuit in the name of the government. The Justice Department is afforded an opportunity to investigate and intervene, however, the whistleblower (called a relator) can pursue the case privately if the government declines to take action. In other words, whistleblowers in False Claims Act cases have far more control.
Although we understand many of the demographics in the SEC data, some just defies explanation. The sex industry workers and hospitality workers are perhaps the most interesting group. If there is a lesson here, perhaps executives should be careful when under the influence of alcohol or while at a brothel. (The Journal interviewed one brothel worker who said her clients “constantly reveal material, non public material.”
There is no explanation offered about the priest or pastor. Perhaps what is said in the confessional is no longer confidential either.
Of course, if corporations didn’t commit fraud or cheat on their taxes there would be no need to watch one’s words. As whistleblower lawyers, we don’t see any dip in our business for the foreseeable future, however. Some companies and individuals will try to cheat on their taxes and rip off taxpayers and a growing number of whistleblowers will be ready to intervene.
Whistleblower photo courtesy of Dave Winer – scriptingnews
Mahany & Ertl is a boutique, national law firm that represents whistleblowers and helps them collect the maximum possible award while also protecting them from retaliation. If you have inside information about unpaid taxes, corporate misconduct or fraud against the government, please give us a call. For more information, contact attorney Brian Mahany at or by telephone at (direct). All inquiries are kept in confidence.