The Employment Law Group® attorney Jason Zuckerman is quoted in an article titled Whistle-blower Debate Heats Up on CFO.com regarding the Securities and Exchange Commission’s proposed regulations for implementing the whistleblower provisions of the Dodd-Frank Act. The Act requires the SEC to provide a monetary reward to whistle-blowers who voluntarily report original information leading to the recovery of more than $1 million from the accused companies. Zuckerman compares the new whistleblower program to the highly successful qui tam provisions of the False Claims Act where a financial incentive helped the government recover over 28 billion dollars:
“The evidence is clear that providing a financial incentive for people to report corporate fraud has worked very well,” says Jason Zuckerman, a principal of The Employment Law Group®, which represents whistle-blowers.
Regarding a projected increase in tips, Zuckerman states:
. . . if you were to talk to people who lost their life savings to corporate fraud, “you would find it hard to argue that, if the SEC has to take some time to separate the wheat from the chaff, then this program is not worthwhile.”
Those opposed to the rules also see an issue with the Dodd-Frank Act allowing whistle-blowers to report allegations of fraud directly to the SEC.
To be eligible for protection under the whistleblower provisions in the Sarbanes-Oxley Act, [whistleblowers previously] have had to first inform their employers through internal compliance programs.
If a CEO is behind an illegal scheme to stimulate short-term profits, the company’s compliance program is unlikely to be effective, Zuckerman points out, and an internal “investigation” could include tampering with evidence or witnesses.
Most whistleblowers do not want to change careers and would readily report fraud through their employer’s compliance program if they believed their employer would not retaliate against them. The whistleblower, not the employer, is in the best position to decide whether to report illegal activity directly to the SEC or through the employer’s compliance program. Click here to learn more about the Dodd-frank Act.