Should Culpable Whistleblowers Be Eligible for Rewards?

John Doe is a whistleblower who provided critical information to the U.S. Securities and Exchange Commission (SEC) regarding an international bribery scheme, assisting the agency in bringing a successful enforcement action. Doe timely filed an application for reward under a provision of federal law that directs the SEC to pay an award to whistleblowers who voluntarily provide original information to the agency, contingent on such information leading to a successful SEC enforcement action with monetary sanctions exceeding $1 million. Yet, in Doe’s case, the SEC denied his application for a reward—and the courts upheld this denial—because Doe himself had already pleaded guilty to bribery charges related to the same scheme he helped expose. Under the relevant statute, the SEC is barred from paying an award to any whistleblower who is convicted of a criminal violation “related to the [enforcement] action for which the whistleblower otherwise could receive an award.” In other words, if a whistleblower provides the SEC with information on a particular corruption scheme but is convicted of a crime related to that same scheme, as in Doe’s case, they are ineligible for reward.

What about whistleblowers who are culpable in the unlawful scheme they help expose, but who have not been criminally convicted in connection with that scheme? The SEC has explicitly declined to institute a rule barring culpable but non-convicted whistleblowers from receiving an award. Therefore, participants in an unlawful scheme, including a bribery scheme, may still receive an award if they blow the whistle on the offense, so long as they are not convicted for their role. The SEC’s position has been criticized as both unfair and potentially harmful. During the agency’s rulemaking process, several commenters, including a group of senior corporate executives and the American Bar Association, advocated for a more stringent rule in order to avoid incentivizing violations of securities laws. Recently, a Bloomberg Law article branded the program as “enrich[ing] fraudsters,” reflecting the continuing sentiment that no culpable whistleblower should be eligible for reward.

These criticisms are misplaced. While it is undoubtedly important to ensure that whistleblowers cannot profit from their own wrongdoing, it would be unwise to implement a more stringent standard than the one set out in the SEC’s current rule.

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When and Why Do Whistleblower Reward Programs Succeed?

It is often difficult to expose and unravel corruption schemes without the cooperation of insiders. Yet would-be whistleblowers are frequently deterred from making disclosures due to the personal and professional risks of doing so. One increasingly popular way that countries are addressing this problem is through whistleblower reward programs. While such programs vary widely in their specifics, most operate under the same basic framework, offering a whistleblower who discloses material nonpublic information that leads to an enforcement action a monetary reward—typically, a percentage of the fines imposed on the liable parties—as an inducement to come forward.

In the United States, which pioneered this mechanism, whistleblower reward programs have seen broad success. Between 1986 and 2020, whistleblower cases under the False Claims Act (FCA) brought in $46.5 billion in penalties, with whistleblowers receiving $7.8 billion in rewards. And this is only under the FCA—other U.S. whistleblower reward programs have also led to the recovery of significant additional sums. For example, under the whistleblower program created by the Dodd-Frank Act, which was created in 2011, whistleblower tips have contributed to at least $2 billion in financial remedies for violations of the securities laws, with over $720 million awarded to whistleblowers. The success of whistleblower reward programs in the United States has inspired similar programs in several other countries, including South Korea, Canada, Nigeria, Ghana, Hungary, and Kenya. But not all of these programs have been similarly successful. For example, in Ghana, the first country in Africa to introduce a whistleblower reward program, no rewards are known to have been issued—in fact, few have made use of the Ghanaian Whistleblower Act’s provisions at all.

What factors help explain when a whistleblower reward program will work as intended? There is no easy or simple answer—the issue is complex, and the effect of any given program depends in part on details of the program’s design, including the prerequisites for receiving a reward and the scope of the program, as well as the country’s culture around whistleblowing. That said, two factors stand out as key indicators of whether a whistleblower reward program will succeed in encouraging substantial numbers of whistleblowers to come forward:

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Passing Whistleblower Legislation Is the Next Step in the DRC’s Fight Against Corruption

In November of 2021, over 3.5 million documents were leaked from a bank in the Democratic Republic of the Congo (DRC). This so-called “Congo Hold-Up” leak, which included bank statements, emails, contracts, and corporate records, revealed that former Congolese President Joseph Kabila and his inner circle embezzled at least $138 million in public funds between 2013 and 2018. Investigations by media outlets and NGOs exposed a pervasive network of corruption involving the DRC’s Central Bank and national electoral commission, as well as the country’s minerals-for-infrastructure deal with China, a United Nations peacekeeping mission in the Central African Republic, and more. In response, the head of the DRC’s Inspectorate General of Finance (IGF) condemned the bank’s role in facilitating the corruption, and the Congolese Minister of Justice announced the opening of an investigation to address the allegations. 

Complex corruption schemes such as the one described above are often revealed by whistleblowers. The DRC in particular has a history of whistleblowers exposing corruption, often at great personal risk (for example, here and here). Yet instead of being publicly recognized for their contributions and afforded government protection, these whistleblowers are forced to conceal their identities to avoid retaliation by those they exposed. Their fears are well-founded: The DRC offers little to no legal protection for whistleblowers, and many Congolese whistleblowers have been forced into hiding or exile due to threats, intimidationassault, and even death sentences. This must change. It is high time for the DRC to pass comprehensive whistleblower protection legislation, and there may be an unusual window of opportunity to do so now.

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