Whistleblower Awards – Ever Larger?
The Securities and Exchange Commission’s recent astronomical $22 million award to a whistleblower[1] raises the question: will these awards continue to grow? $22 million is on the high end of most whistleblower awards, but given general public concern about federal government overspending and overreaching, even lesser award amounts seem excessive to some.[2] However, rewarding whistleblowers who do come forward may discourage or prevent further corporate malfeasance and thus actually limit award amounts in the future. The $22 million award in question may have been so high because the whistleblower’s tip led to the discovery that the company, Monsanto, had improperly accounted for tens of millions of dollars, resulting in material misstatement of its earnings for three years and an $80 million fine.[3] However, the SEC makes large awards fairly regularly, including its largest of $30 million in 2014.[4] In fact, its program permits awards of 10 to 30 percent to whistleblowers in cases resulting in $1 million or more in sanctions and has awarded more than $100 million in the last five years.[5] A few years ago, the United States attorney general pushed for larger awards to encourage whistleblowers to come forward.[6]
Similar to the SEC’s program, the Internal Revenue Service’s whistleblower program allows awards of 15 to 30 percent of taxes, penalties, and interest collected if the total amount is over $2 million.[7] Also like the SEC, the IRS has made some enormous awards, including its largest, $104 million for revealing how a bank encouraged tax evasion by its customers.[8] The IRS revised its whistleblower program in 2006 to generate higher awards and draw out whistleblowers.[9]
Many are still skeptical of the efficacy of whistleblower programs and awards.[10] Others point to a recent awardee who turned down his award as evidence that whistleblowers are out for the general good, not the money.[11] Either way, federal agencies have noted a general increase in reporting throughout the history of the programs, and it seems that whistleblowers receive larger and larger awards over time.[12]
— By Julia Damron, Esq., Barnes Law
Julia Damron is an associate attorney with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Rubenfeld, Samuel, “SEC Issues $22M Whistleblower Award”, Wall St. J. Risk & Compliance J., Aug. 30, 2016, http://blogs.wsj.com/riskandcompliance/2016/08/30/sec-issues-22-million-whistleblower-award/; Sullivan, Casey, “Monsanto Whistleblower Award Mutates Out of Control”, FindLaw In House Blog, Sept. 2, 2016, http://blogs.findlaw.com/in_house/2016/09/monsanto-whistleblower-award-mutates-out-of-control.html.
[2] “SEC Whistleblower Turns Down $8.25M Whistleblower Award”, Zuckerman Law, https://www.zuckermanlaw.com/sec-whistleblower-turns-8-25m-whistleblower-award/, last visited Sept. 3, 2016; Sullivan, supra.
[3] Rubenfeld, supra.
[4] Ensign, Rachel Louise, “SEC to Pay $30 Million Whistleblower Award, Its Largest Yet”, Wall St. J., Sept. 22, 2014, http://www.wsj.com/articles/sec-to-pay-30-million-whistleblower-award-its-largest-yet-1411406612.
[5] “SEC Whistleblower Program Surpasses $100 Million in Awards”, U.S. Securities & Exchange Comm’n, Aug. 30. 2016, https://www.sec.gov/news/pressrelease/2016-173.html.
[6] Ensign, supra.
[7] http://www.barneslawllp.com/submitting-claim-irs-whistleblower-office/; https://www.irs.gov/uac/whistleblower-office-at-a-glance; 26 U.S.C. § 6103.
[8] Kocieniewski, David, “Whistle-Blower Awarded $104 Million by I.R.S.”, N.Y. Times, Sept. 11, 2012, http://www.nytimes.com/2012/09/12/business/whistle-blower-awarded-104-million-by-irs.html?_r=0.
[9] Id.
[10] “SEC Whistleblower Turns Down $8.25M Whistleblower Award”, supra.
[11] Id.
[12] Sullivan, supra.