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  • Writer's pictureJessica Tillipman

Whistleblower rewards work. So why isn’t the world embracing them?

Water Droplet

Corruption is notoriously difficult to detect. As I describe in the book that I recently published with Professor Sope Williams, The Routledge Handbook of Public Procurement Corruption, to help expose illegal activities, governments often rely on a series of tools designed to incentivize disclosures of wrongdoing. The most powerful incentive, by far, is whistleblower rewards. Yet despite evidence demonstrating the effectiveness of whistleblower programs, very few governments embrace them.


It is well accepted that whistleblowing is a risky endeavor–often resulting in grave consequences for the brave individuals who step forward to report wrongdoing. Unfortunately, many whistleblowers experience severe retaliation both professionally and personally because of their actions. To reduce the risk of backlash these individuals may encounter, many governments have passed whistleblower laws to protect them against retaliation.


To further incentivize the reporting of illegal activity, some governments offer whistleblowers financial “rewards” for disclosing information that leads to successful enforcement actions. The United States utilizes two different models in its whistleblower reward programs. The “qui tam” model, associated with the False Claims Act, empowers whistleblowers (qui tam relators) to file “fraud” cases on behalf of the U.S. government. If the case is successful, whistleblowers receive a 10 to 30 percent share of the recoveries. Notably, this “qui tam” model enables whistleblowers to litigate fraud cases on behalf of the government even when the government declines to intervene in the matter itself. Widely considered one of the most powerful anti-fraud statutes in the world, annual False Claims Act recoveries often exceed a billion dollars.


In contrast, the other whistleblower reward programs in the United States use a “gatekeeper” model. The Dodd-Frank whistleblower program is a prominent example of this model. In a “gatekeeper” model, the government retains the exclusive right to bring an enforcement action based on the information shared by the whistleblower. But if the case is successful (resulting in over $1m in sanctions), a whistleblower may still receive between 10 and 30 percent of the money collected. U.S. agencies, such as the Internal Revenue Service and the Treasury Department, also maintain similar rewards programs.


To be clear: when it comes to whistleblower rewards, the United States is all in – making them available in an ever-growing list of enforcement actions. Indeed, in April 2024, the U.S. Department of Justice (DOJ) announced that it would be creating a new, department-wide whistleblower rewards program to further incentivize reporting of corporate or financial misconduct to the DOJ.


When you consider the data, it is easy to see why the United States has firmly embraced this tool. Whistleblower rewards work. A 2021 study found that rewards programs help expose corporate misconduct. Similarly, a 2021 working paper found that “whistleblower reward programs work well and increase detection and deterrence of crime in a cost-effective way.” Yet another study found that “offering financial rewards to whistleblowers can make a regulator more effective, deters wrongdoing, and strengthens the internal governance of regulated entities.”


Despite many governments' desire to increase whistleblower reporting, few have implemented rewards programs (and those that have are significantly more limited in scope and scale than in the United States). Critics often argue that rewards programs encourage abuse and frivolous lawsuits. Although any program offering monetary incentives has the potential to be abused, studies have shown that with appropriate safeguards, the potential for abuse can be minimized. For example, in the United States, the DOJ has been increasingly exercising its authority to dismiss meritless qui tam cases (though many critics reasonably argue that DOJ could be even more aggressive in this regard). In addition, the agencies that utilize the “gatekeeper” model maintain the ability to weed out cases with little likelihood of success.


Critics also often complain that rewards programs undermine corporate whistleblowing programs by encouraging individuals to avoid internal reporting channels in favor of government rewards. Yet numerous studies and reports have debunked this claim, finding that the overwhelming majority of whistleblowers first report their concerns internally before sharing this information with the government.


Others raise concerns over the possibility that whistleblower reward programs create an opportunity for false reports, opportunistic reports, entrapment, and conflicts of interest. Nevertheless, statistics illustrate that these worries are misplaced and do not outweigh the benefits of rewards programs.


Further, countries may perceive the complex nature of reward program administration as a costly bar to implementation. While it is true that any government program that pays reward money to individuals will have its fair share of bureaucratic red tape, a rough back-of-the-envelope analysis demonstrates how these programs can pay for themselves.


And of course, there is my personal favorite: that whistleblowing rewards are morally distasteful or simply “wacky.” Frankly, I do not have a satisfying response to critics who claim that whistleblowers’ motives must be pure and altruistic. If we required this of all cooperators in government enforcement actions, the U.S. criminal justice system would crumble.


This leads me back to my initial question. If whistleblower rewards programs work, why aren’t more governments adopting them? Whether it is genuine concern about the potential for abuse, the complexity of administration, or simply a lack of inertia, governments desiring to increase the reporting of wrongdoing should strongly consider the benefits of buttressing any current reporting incentives with a rewards program. With an increasing number of studies demonstrating that the benefits of these programs outweigh the costs, rewards should be considered a global “best practice” alongside anti-retaliation protections in whistleblowing regimes.



Jessica Tillipman

Jessica Tillipman is the Associate Dean for Government Procurement Law at The George Washington University Law School. She would like to thank GW Law student, Brittany Broome, for her excellent assistance and contributions to this post.



 

Note: Some actions initiated against individuals in the first quarter of 2024 may have been filed under seal, so the view may change in the coming months as indictments are unsealed by the courts.

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