A whistleblower is a person who exposes information or activities within a private, public, or government organization that is deemed illegal, unethical, or incorrect. This can include a variety of issues such as fraud, corruption, safety violations, or other forms of misconduct. Governmental and corporate protections for whistleblowers can vary, but many jurisdictions have laws in place to protect whistleblowers from retaliation by management.

While the definition of a whistleblower seems straightforward, these cases often are complex and unique, with each situation presenting its own set of challenges. It is important to note that a whistleblower case cannot and should not be manufactured or pursued with malicious intent. Instead, such cases often begin with an individual, usually an employee, noticing something that is illegal or unethical and making the decision to take action.

Reporting via a whistleblower reward program

The first question on the mind of a potential whistleblower usually is whether to report the perceived misconduct internally, to company management, or externally, to government regulators. One of the reasons why whistleblowers prefer to report internally first is that they may hope to resolve the issue without exposing the organization to public scrutiny or legal action. The whistleblower may also feel a sense of loyalty or attachment to their employer and want to give management a chance to correct the problem. However, internal reporting can also be risky, as whistleblowers may face retaliation from their managers or co-workers, such as harassment, demotion, termination, or even physical threats. Therefore, whistleblowers should document their concerns and actions, seek legal advice, and be aware of their rights and protections under the law.

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A prototypical whistleblower is an insider, who witness wrongdoing in their companies, according to , founder of , adding that when these whistleblowers report internally, however, they often face rejection and retaliation from their employers, which is a mistake and contrary to what management should do.

And if the whistleblower is a former employee, chances are very good that they’ve been fired or otherwise retaliated against for trying to blow the whistle internally, Alexander explains. On the other hand, whistleblowers do not have to be insiders or former insiders, they may also be competitors or outsiders with unique, non-public information.

After internal reporting, the case may progress to external reporting if internal reporting does not resolve it. Whistleblowers may decide to tell the government about the fraud as a means of addressing it. In fact, there are various whistleblower reward programs in the United States that allow individuals to do so via formal mechanisms.

Different programs have different procedures; for example, the False Claims Act needs a legal action to be initiated before advancing to the next steps. Government agency cases — such as those filed with the Securities and Exchange Commission (), or the Commodity Futures Trading Commission () — do not involve filing a legal suit, but they have a common process. Alexander explains that due to the complexity of the different programs, people often seek out counsel to triage the tip and guide them through the whistleblower process. Depending on the type of tip, the filings can go to the SEC, the CFTC, the Financial Crimes Enforcement Network () or even through the . Each program is different, but the underlying principle is the same — they each provide a formal path for individuals to report corporate or government fraud to the correct government agency to address the particular issue.

US whistleblower protection programs

In the United States, several laws provide protections for whistleblowers in order to better encourage the reporting of illegal or unethical activities and to shield whistleblowers from retaliation. These laws are separate, but related, to the whistleblower incentive or reward laws. Here are some key federal whistleblower protection laws:

• • • Whistleblower Protection Act (WPA) of 1989 — This act protects federal employees who disclose information about government misconduct. It prohibits retaliation against employees who report waste, fraud, abuse, or other violations.
    • Sarbanes-Oxley Act (SOX) of 2002 — This law provides protections for employees of publicly traded companies who report corporate fraud. It includes provisions for reinstatement, back pay, and compensation for damages in cases of retaliation.
    • Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 — This act established the whistleblower programs within the SEC and CFTC, which both offer financial rewards for information leading to successful enforcement actions. It also provides protections against retaliation.
    • Occupational Safety and Health Act (OSHA) — This act protects employees who report violations of workplace safety and health standards. OSHA enforces whistleblower provisions under more than 20 federal laws.
    • False Claims Act (FCA) — Also known as the Lincoln Law, this act allows individuals (known as relators) to file lawsuits on behalf of the government against entities that may be committing fraud involving federal programs. It includes provisions for financial rewards and protections against retaliation.
    • National Defense Authorization Act (NDAA) — This law includes provisions that protect whistleblowers in the defense industry, including contractors and subcontractors, who report fraud, waste, or abuse.
    • Whistleblower Protection Enhancement Act (WPEA) of 2012 — This act strengthens the protections provided under the 1989 WPA, including expanding the scope of protected disclosures and improving remedies for whistleblowers.

In addition to these federal laws, many states have their own whistleblower protection statutes that cover a range of industries and activities within their jurisdiction.

Resolution of a whistleblower case

Once a whistleblower case is resolved, there may be ways for the whistleblower to collect a reward, Alexander says. For example, whistleblowers can get a reward if the government uses their information to take action. The award often is a portion of the money that the government recovers, usually 15% to 30% for the False Claims Act and 10% to 30% for the agency programs. The award also depends on how much the whistleblower contributed, including how many tips they provided, what type of tip, and how engaged the whistleblower was (for example, how many meetings or how much information the whistleblower gave in a tip).

After the case is resolved, the organization may make changes to prevent future misconduct, such as updating policies, enhancing training programs, or strengthening internal controls, especially if it is being compelled by federal agencies to do so.

The new pilot program, announced in April by the DOJ’s criminal division, explicitly offers to forego prosecutions for individuals who cooperate with investigations into wrongdoing at their employer. It builds upon earlier efforts to credit companies for voluntarily reporting internal misconduct.

The Pilot Program on Voluntary Self-Disclosure for Individuals offers non-prosecution agreements (NPAs) to individuals who proactively provide original information to the DOJ’s criminal division concerning specified types of corporate criminal misconduct. “Receiving such information will help us investigate and prosecute criminal conduct that might otherwise go undetected or be impossible to prove, and will, in turn, further encourage companies to create compliance programs that help prevent, detect, and remediate misconduct and to report misconduct when it occurs,” the DOJ stated in .

Experts said the program will raise the bar for companies by offering NPAs to participants in misconduct, a key distinction from earlier policies.

“This marks the first time a DOJ program has explicitly offered to forego prosecution of an individual in exchange for their cooperation against a company,” the law firm Paul Weiss said in an .

Targeting certain violations

Although the program applies broadly to misconduct by any public or private company, it emphasizes corporate malfeasance at banks, investment funds, and healthcare providers. Specifically, the program targets violations that are:

• • • by financial institutions, their insiders or agents, including schemes covered by statutes related to money laundering, anti-money laundering, registration of money transmitting businesses, fraud, and fraud against or compliance with financial institution regulators
    • related to the integrity of financial markets undertaken by financial institutions, investment advisors, or investment funds; by or through public companies or private companies with 50 or more employees; or by any insiders or agents of any such entities
    • related to foreign corruption and bribery by, through, or related to public or private companies, including violations of the , the , and anti-money laundering statutes
    • related to healthcare fraud or illegal healthcare kickbacks by or through public companies or private companies with 50 or more employees

Experts noted that the DOJ program complements other regulatory efforts to encourage whistleblowers to provide information that could help expose corporate misconduct.

“These whistleblower programs supplement existing programs with other enforcement authorities, such as the [Securities and Exchange Commission],” said law firm Wilmer Hale in a note to clients. “We expect to see continued attention on and incentives for whistleblowers, not just from the DOJ but also from other enforcement authorities.”

Retaliation problem with internal whistleblowing programs

Recent studies have pointed to deficiencies in corporate whistleblowing programs that encourage employees to come forward when witnessing behavior that puts their organization at risk. A major hurdle has been the risk of retaliation against employees.

±·±ð·ÉÌý in January showed that corporate whistleblowers who report through internal channels face higher rates of retaliation than those who report to the government. The study, which examined eight years of whistleblower retaliation cases under the Dodd-Frank Act and the Sarbanes-Oxley Act (SOX), found that more than 90% of the retaliation cases involved internal whistleblowers, the authors said in an .

“These findings are of particular importance in light of Congressional efforts to amend the Dodd-Frank Act to extend anti-retaliation protections for internal whistleblowers. They also validate the importance of regulations by the  (SEC) and  (CFTC) that explicitly do not require whistleblowers to make internal reports prior to qualifying for a reward under the Dodd-Frank,” the authors said.

Compliance programs need review

With regulators and enforcement authorities coaxing employees to disclose corporate wrongdoing amid persistent retaliatory threats at many organizations, corporations would be wise to review their compliance policies, experts said.

“The probability of detection for wrongdoers continues to increase with this program and the other federal bounty programs,” said , an attorney at , a law firm that helps corporate whistleblowers. “Responsible organizations would be wise to redouble their efforts to create a culture where people blow the whistle internally. And, where violations have occurred, smart companies will self-report to federal law enforcement and regulatory organizations — before it is too late.”

Other firms offered similar advice. Since the DOJ program will cover a range of potential misconduct, including fraud and bribery, “companies should consider reviewing and updating their whistleblowing policies and procedures (or adopting them if needed),” Paul Weiss told clients. “These policies and procedures should address the assessment and prompt internal investigation of allegations of misconduct, as well as non-retaliation against whistleblowers (and avenues for whistleblowers to seek recourse in the event there is retaliation).”

Additionally, companies should consider developing a clear framework to encourage and guide the prompt internal reporting of potential violations. Such frameworks position firms to determine whether, when, and how to be first in the door to self-report potential violations.

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