It’s more important than ever to investigate and evaluate the complaints of employee whistleblowers. After nearly a year since the first monetary award to an anonymous whistleblower under the Dodd-Frank financial reform statute, the Securities and Exchange Commission (SEC) this week announced its second monetary award, along with a promise that its pace will increase significantly in the next six months.
To be eligible for an award, a whistleblower must provide, in the SEC’s view, voluntary, original and significant information that leads to a successful enforcement of a securities law violation.
It is no surprise that employees have found their way to the SEC’s program, with its potential to recover 10 percent to 30 percent of any government recovery of $1 million or more. Private attorneys advertise directly to potential employee claimants. One lawyer bought the website “” and placed ads in theaters before showings of the film Wall Street: Money Never Sleeps, according to The New York Times (“Hazy Future for Thriving S.E.C. Whistleblower Effort,” April 23, 2013).
What is surprising is that more than four out of five whistleblowers told the SEC that they had reported the suspected violations internally to their employers before going to the government, according to the Times article.
And those whistleblowers had help. Stephen Cohen, associate director of the agency’s Division of Enforcement, told a Corporate Crime Reporter conference last month, “The net effect of this is that whistleblowers, and in some instances counsel, are putting together information for us, sometimes in huge reports with evidence, with documents, bringing it to us, and giving us sometimes a roadmap, sometimes a starting place for us to do an investigation, at least pointing us in the right direction -- sometimes helping us all along the way to the end.”
In this climate, employee complaints and tips require investigation and response. A tip may amount to no more than a routine accounting or supply chain issue, or it may be tomorrow’s enforcement or class action. An early, independent evaluation can tell the difference.
And as with most things in life, the advantage goes to the one who has the best information, before the government knocks.