During one of the breakout sessions of the 2014 Global Ethics Summit, experts discussed current developments of the SEC whistleblower program. The panel was moderated by Jordan A. Thomas of Labaton Sucharow, and featured Stephen Donovan, Chief Ethics and Compliance Officer, International Paper and Randy Stephens, JD, CCEP, VP, Ethical Leadership Group, NAVEX Global.
Also on the panel was, Michael J. Osnato, Jr. Chief of Complex Financial Instruments Unit, Division of Enforcement, SEC, who spoke about enforcement priorities, based on his own perspective, not that of the entire Commission. The SEC takes triage of whistleblower tips seriously, as it has to sift through thousands of tips a year. The Commission looks at the context of the tip, taking into account other information on the company and other data that the agency has collected, adding the credible info coming from the tipster to the database of existing information. Of note, he stated that he expects future awards to tipsters to make the $14 million award of October 2013 look like “pocket change.”
“In a small but meaningful percentage of our enforcement actions, we have whistleblowers,” Osnato said, stating that, when credible, the information from these whistleblowers is vital in investigations relating to big banks. Often these whistleblowers are executives that bring with them data that can be incredibly useful. This has increased the efficiency of cases by orders of magnitude.
Osnato emphasized the fact that the SEC remains “professionally skeptical” about the information brought by whistleblowers, treating them with more scrutiny than any witness, verifying and questioning them to make sure it gets a fair read on what the whistleblower is saying.
He noted that, from what he sees, most whistleblowers who ultimately come to the SEC do report internally, which impacts the awards given out by the SEC. Though there is a lot of “white noise” in the system, Osnato sees that the $14 million award caused people to take note, and has helped increase the quality of tips.
Donovan stated that his goal is to create a culture of ethical operations, because the company has seen that taking a professional tack in each aspect of the business is the best way to operate, and having the right culture is key. This culture includes letting workers know that they can raise issues and that those issues will be addressed in a fair manner. He recommends researching organizational justice, so employees know they are treated fairly. His company has designed its helpline to ensure that all complaints are taken seriously.
Stephens pointed out that its important to make sure that companies need to get more efficient when investigating matters reported via helplines. The trend is going in the opposite direction, and he finds that troubling. While increase in awareness of helpline options is good, that means that an increase in calls will result in an increase in work that must be done to investigate concerns. In the end though, streamlining internal reporting and due diligence can help companies avoid whistleblower situations.
For more on whistleblowers, check out the following: