Whistleblowers are the first line of defense against corruption, fraud, and wrongdoing and the single most effective source for information about fraud and other illegal activities. Despite the risk to their professional and personal lives, individuals with original information about unlawful activity regularly come forward to report crimes that would otherwise go undetected.
Recent articles by whistleblower experts and corporate ethics professionals have pointed to the infrastructure bill put forth by the Biden Administration as an opportunity to improve corporate ethics laws. On April 12th, JD Supra published an article by leading whistleblower attorney Stephen M. Kohn entitled Congress Needs to Enact an Effective Ethics Agenda. Kohn is a founding partner at the whistleblower law firm Kohn, Kohn & Colapinto, LLP and the Chairman of the Board of the National Whistleblower Center. In his article, he argues that “Congress has historically failed to prioritize anti-corruption legislation.” He cites “the number of special interests that benefit from the loopholes in whistleblower protections” as the reason for Congress’ lack of urgency in enacting stronger laws. These reforms are “needed to help restore faith in government institutions and hold fraudsters accountable,” Kohn writes.
On April 27th, Whistleblower Network News published “Big Money Government Programs Attract Fraudsters: The American Jobs Plan Needs Whistleblower Protections,” an Op-Ed from its Senior Fellow for Ethics and Policy Sherron Watkins. Watkins urges Congress to include whistleblower provisions, similar to those in the Dodd-Frank Act and the False Claims Act in the American Jobs Plan.
“Whistleblowers are a check and balance on abuses of power and outright fraud,” Watkins explains. “However, the history of retaliation against whistleblowers has shown speaking up is too risky without legal protections. Legal protections that include a bounty reward system, like those in Dodd-Frank and the False Claims Act, have proven to be the most effective at encouraging whistleblowing and protecting whistleblowers. Bounty programs attract legal advocacy support for the whistleblower, which is critical.”
Last year WNN conducted a Marist poll that found that 82% of Americans think Congress should strengthen whistleblower laws a priority. Notably, likely voters shared this viewpoint across demographic and political groups. The American Jobs Plan, with its $1.9 trillion price tag, presents the perfect opportunity to increase corporate accountability by strengthening anti-corruption laws.
The bills listed below will improve corporate ethics and ensure whistleblowers are protected and awarded for uncovering corporate fraud. This section is reproduced (with permission) from Kohn’s article:
1. Clarify the scope of the False Claims Act.
The FCA is recognized as America’s most effective anti-corruption law. Since it was modernized by a bipartisan effort led by Senator Charles Grassley and former Congressman Howard Berman, taxpayers have directly recovered over $65 billion in sanctions from fraudsters. Large corporations that illegally profit from government contracts have long tried to kill this law. Currently, the law is under attack in the court by corporations trying to escape liability for fraud, claiming willful violations of contracting requirements are not “material,” even if they cost the taxpayers millions. Senator Charles Grassley is proposing a bi-partisan amendment to close this loophole.
2. Fix the Anti-Money Laundering Act of 2020.
Money laundering is extremely difficult to detect. The essence of money laundering is to hide the source of ill-gotten wealth. Without insider information, this multi-trillion dollar highly corrupt international business cannot be stopped. Last term, Congress passed the Anti-Money Laundering (“AML”) Act of 2020. Although a first start, the AML law contained crippling weakness highlighted by an ineffective whistleblower law. Unlike the Dodd-Frank and False Claims Acts, the AML law does not guarantee whistleblower any meaningful compensation and is unfunded. The anti-retaliation provisions of the law do not cover employees at FDIC-insured institutions or credit unions.
The fix needed for this law is simple. The Senate had unanimously passed a version of the law modeled on the Dodd-Frank Act. The original Senate version of the law needs to be reintroduced and approved.
3. Pass the Financial Compensation for Whistleblowers Act.
The Consumer Financial Protection Bureau (CFPB) plays a central role in protecting consumers from unfair, abusive, and deceptive scams in a wide range of areas, including auto loans, home mortgages, reverse mortgages, credit cards, payday loans, and coronavirus payments. In 2019 the Trump-appointed CFPB leadership urged Congress to amend the laws to incentivize informants based on the highly successful SEC reward program.
Bills were introduced in the House and Senate modeled on the Dodd-Frank Act. The proposals would permit anonymous reporting and incentivize whistleblowers to report frauds. This law is needed to stop fraudsters from preying on the most vulnerable Americans.
4. Pass the Wildlife Trafficking Whistleblower Law.
Most people do not see wildlife trafficking as big business. But it is. The illegal trade in timber, fish, and animals is a multi-billion dollar business. A joint report issued by INTERPOL and the United Nations estimates that crimes implicating illegal fishing, lumbering, and animal trafficking are estimated between $91 billion and $258 billion annually. Supported by all major wildlife protection organizations, including the Association of Zoos and Aquariums, a bill to incentivize whistleblowers was introduced in the House of Representatives. This bill has strong bipartisan support and no known opposition. It should be reintroduced and quickly passed.
5. Pass the Public Company Accounting Whistleblower Act.
Auditors are notoriously subjected to pressure to water down their results. A study by the Institute of Internal Auditors found that 55% of Chief Audit Executives were directed to omit findings from reports, and 49% were directed not to audit “high-risk areas. Congress introduced the PCAWA to fix this problem. It is based on the highly successful Dodd-Frank Act (DFA) and needs to be passed
6. Close the loopholes in the Dodd-Frank Act with Whistleblower Programs Improvement Act and CFTC Fund Management Act.
A bipartisan group of Senators introduced the Whistleblower Programs Improvement Act in 2019. The bill is very straightforward. It closes loopholes in the DFA by protecting employees who report concerns internally to their bosses from being fired. It also requires that the SEC and Commodity Futures Trading Commission (CFTC) issue decisions in whistleblower cases within one year. An additional bill was introduced to this term to ensure that the CTFC would have funds available to make timely payments to whistleblowers. These fixes are not controversial.
7. Improve the Antitrust Law Enforcement Reform Act.
Last term, Congress approved a broad anti-retaliation law covering employees who report antitrust violations. This term, Congress is poised to finish the job. The Senate introduced a whistleblower reward law modeled on the Dodd-Frank Act. Unfortunately, the bill does not track essential provisions in the highly successful DFA. As introduced, the bill does not ensure that whistleblowers will be paid any awards, regardless of their sacrifices or contributions. The bill should be amended to conform to Dodd-Frank.
The National Whistleblower Center has started a grassroots campaign to urge Congress to enact the Corporate Ethics Agenda. You can join the campaign here.