Will 2012 be the “Year of the Whistleblower”?

By US Daily Review Staff.

The increased reach of U.S. whistleblower laws and a growing interest overseas in whistleblower programs will make 2012 the Year of the Whistleblower, predicts Phillips & Cohen LLP, a law firm that has specialized in representing whistleblowers for nearly 25 years.

A harbinger of the year to come can be seen in the flood of whistleblower submissions the Securities and Exchange Commission received in the first seven weeks after it adopted the final rules for its new program whistleblower reward program created by the Dodd-Frank Act. From August 12 to Sept. 30, the SEC received 334 whistleblower submissions.

As a result of Dodd-Frank, the U.S. now has four robust whistleblower programs that offer substantial rewards to private citizens who expose fraud against the government, investor fraud and foreign bribery by corporations: The SEC’s and the Commodity Futures Trading Commission’s programs created by Dodd-Frank; the Internal Revenue Service’s whistleblower reward program for claims exceeding $2 million; and one for Medicare fraud, defense contractor fraud and other types of fraud through the “qui tam” (whistleblower) provisions of the False Claims Act.

“The SEC and CFTC quickly recognized the value of whistleblowers and are very responsive to the information whistleblowers provide,” said Erika A. Kelton, a whistleblower attorney with Phillips & Cohen in Washington, DC. “These new programs, which are attracting high-quality information from insiders around the world, combined with the responsiveness of government agencies, will make 2012 a blockbuster year for securities and fraud enforcement.  Early success also will make it difficult for Congressional opponents to dilute the highly effective SEC whistleblower program.”

Eric R. Havian, a whistleblower attorney with Phillips & Cohen in San Francisco, said he expects the five-year-old IRS program, which so far has yielded few results, to get back on track in 2012.

“The IRS has indicated that it expects to make a number of awards in 2012 and make its program more transparent so that it’s clearer whether the IRS is following up on whistleblower information,” Havian said. “Those developments, combined with the outstanding track record the IRS for protecting the identity of whistleblowers, will encourage more high-level executives to come forward with information about substantial tax law violations.”

Phillips & Cohen pioneered the use of “qui tam” whistleblower cases under the modern-day False Claims Act and is a leader in whistleblower cases brought under the False Claims Act as well as the IRS, SEC and CFTC whistleblower reward programs. Whistleblower cases brought by the firm have resulted in governments recovering more than $7 billion in civil settlements and criminal fines, making it the nation’s most successful whistleblower firm. (See www.phillipsandcohen.com.)

Here are Phillips & Cohen’s Top Five predictions about whistleblower programs in 2012:

1)  Whistleblower recoveries are likely to more than double in 2012 compared to the record amount of $2.8 billion recovered in fiscal year 2011 – and the criminal fines from those cases will add billions more. Civil recoveries from “qui tam” cases in FY 2009 and FY 2010 were $1.99 billion and $2.39 billion respectively.

2)  The SEC will make its first award under the Dodd-Frank whistleblower program. The SEC began pursuing cases based on information whistleblowers provided immediately after Dodd-Frank was signed into law in 2010.

3)  After a slow start, the IRS whistleblower program will start to regain some momentum, as rewards will be made.

4)  Congress will beat back any attempts to weaken or kill the SEC whistleblower program, such as the bill proposed by Rep.Michael Grimm (R-NY). Grimm’s bill would require whistleblowers to report their claims to company management before disclosing to the SEC. Such a requirement would discourage most if not all whistleblowers as they likely would get fired or suffer retaliation in other ways. As SEC Chairman Mary Schapiro said in a letter to Rep. Barney Frank (D-MA) earlier this month, “Making significant changes in the program before it has had an opportunity to demonstrate its full value seems premature, particularly in the absence of any evidence of problems with the current program.”

5)  Given the success of the U.S. programs, more countries will begin to consider and adopt programs to encourage and protect whistleblowers. For example, India is considering a law that would protect whistleblowers who disclose corruption by any public servant.

SOURCE Phillips & Cohen LLP

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

Leave a comment

Your email address will not be published.