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FRAUDSTERS PAY – THE PUBLIC PROFITS: A Cost-Benefit Analysis of Whistleblower Reward Laws
Article By
Stephen M. Kohn
Grace Schepis
Kohn, Kohn & Colapinto
Whistleblower & Qui Tam Blog
Monday, August 29, 2022
Whistleblowing has always been controversial. But with the advent of whistleblower reward laws, anecdotal (pro and con) has been replaced by objective data. The costs and benefits of a whistleblower program can be evaluated based on the income obtained in whistleblower cases compared with the costs of operating a whistleblower office and paying compensation to fully qualified “insiders” who take the risk and blow the whistle.
The amount of sanctions obtained by the government in whistleblower cases is staggering. Under the False Claims Act alone over $48.22 billion has been collected directly from whistleblower-initiated lawsuits since the law was amended in 1986. Under the Securities and Exchange Act, which contains a relatively new whistleblower reward provision included as part of the Dodd-Frank Wall Street reforms, the Securities and Exchange Commission (“SEC) also recognizes the significant positive impact that paying rewards has had on the Commission’s ability to police Wall Street crooks. As recently explained by Commission Chair Gary Gensler, the SEC’s whistleblower program has already obtained over $5 billion in sanctions and directly paid to harmed investors over $1.3 billion in restitution. Likewise, the Internal Revenue Service (IRS) whistleblower reward program has leveraged whistleblower disclosures to recover multi-billions from Swiss banks and taxpayers who tried to hide their wealth offshore.
However, it is the whistleblower reward program sponsored by the Commodity Futures Trading Commission (“CFTC”) that provides the best empirical data to truly judge the profitability and impact of incentivizing whistleblowing...
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