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Confidentiality spurs whistleblowing tips

GC and forensic analyst Jeff Windham explains how Dodd-Frank whistleblower protection has increased tips

According to the Association of Certified Fraud Examiner’s 2014 Report to the Nations, more than 40 percent of all fraud cases are detected by tips, and half of those tips come from employees. In the years since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the focus on whistleblowers has become intense. With the establishment of a whistleblower hotline and the opportunity to reap a substantial reward if a tip results in sanctions, the stage is set for a huge increase in whistleblower activity. 

Jeff Windham, general counsel and senior forensic analyst for Forensic Strategic Solutions, Inc., believes that one element in particular has given potential whistleblowers the confidence to phone in their tips. “Confidentiality. That is usually the biggest concern that I hear,” he says. When people contact Windham, they first ask about confidentiality and never give their names. “We now refer them directly to the fraud hotline at the SEC (Securities and Exchange Commission), thanks to the confidentiality provisions.”

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FURTHER READING:

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Law firm wants to see more protection from SEC for whistleblowers

Pro-whistleblower organizations ask SEC to clarify protections for employees

Employers fight back against whistleblowers

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Of course, even with confidentiality clauses in place, companies are still concerned with rooting out whistleblowers within their organization. This highlights the second prong of protection  concerning potential whistleblowers: retaliation. “It goes hand in hand with confidentiality concerns,” Windham explains. “If it is found out who blew the whistle, then retaliation will follow. I am not sure that Dodd-Frank has done enough. There are still internal witch hunts.” This uncertainty can make potential whistleblowers hesitant and, though Dodd-Frank is a step in the right direction, it is not foolproof.

Another factor that could have contributed to the rise in whistleblower tips – the SEC now receives thousands a year – is the so-called “bounty” system that rewards tipsters with a percentage of any money collected as a result of their information. There was an enormous award handed out in the fall of 2013. “That $14 million award gets people’s attention and raises awareness,” says Windham. Of course, the other awards handed out by the SEC have been much smaller, so the biggest advantage in the process is the amount of attention it brings to the whistleblower program.

“Overall, Dodd-Frank has been a very successful piece of legislation,” says Windham. “The hotline is fantastic, the number of tips is going up. It might not be perfect, but overall, it’s very useful.”

For someone who is intimately familiar with whistleblower horror stories, times when tipsters lost their careers or their livelihood, Windham sees this as a step in the right direction, and he credits the increased confidentiality for the majority of its success.

Senior Editor

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Rich Steeves

Richard P. Steeves is Senior Editor of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A. in English Literature...

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