ALM Properties, Inc.
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The Undeniable Truth About Corporate Misconduct and Whistleblowers
Last weeks outsized bounty award of $104 million to former UBS AG banker-turned-whistleblower Bradley Birkenfeld has commentators lighting up the Twitterverse with outrage and the Wall Street Journal calling Birkenfelds tale one of sordidness piled on sordidness. Seems his 2007 testimony regarding thousands of U.S. tax dodgers netted the Internal Revenue Service a $780 million fine and the names of 5,000 potential tax cheats from the Swiss banking giantnot to mention potential recovery of over $5 billion in unpaid taxes.
OK, on to the undeniable truths about corporate whistleblowers:
Undeniable Truth No. 1
Whistleblowers are not always model citizens (gasp). Sometimes they are very close to the misconductthats how they know about it. This is the same reason that in developing the Dodd-Frank whistleblower program, the U.S. Securities and Exchange Commission declined to exclude whistleblowers involved in the misconduct unless criminally convicted: it makes no sense to automatically exclude the people most likely to have the information. Ever heard of the U.S. Department of Justices antitrust leniency program?
Undeniable Truth No. 2
Whistleblower bounty programs help create a level playing field. Without these programs, the deck is always stacked against the mere mortal employee or regulator slaving away in the trenches trying to unravel the facts. The large, well-resourced financial institution holds all the cards (and the data). But the introduction of large financial rewards creates incentives for others, such as plaintiffs law firms (or in some cases, hedge funds investing in a whistleblower case for a percentage of the bounty), to support a whistleblower and thus even the score. Harry Markopolos is, no doubt, well versed in Undeniable Truth No. 2 [PDF].
Undeniable Truth No. 3
Sometimes it takes a thief to catch a thief. Who better to unravel the mysteries of complex business misconduct than a whistleblower steeped in the nuances, tricks, and practices of the fraudulent scheme? Wal-Marts alleged massive Mexican bribery scheme, which was splashed across the headlines earlier this year, wasnt uncovered by a regulator or a compliance officer, but by the ex-Wal-Mart executive who for years was allegedly at the center of the bribery-palooza. See Undeniable Truth No. 1.