You would be hard-pressed to find someone who disagrees with the conclusion that U.S. whistleblower reward programs are among the most effective anti-corruption tools ever imagined.
One such program alone – the False Claims Act – has helped the government collect more than $62 billion in settlements and fines since 1986. That’s enough money to cover the annual cost of sending 4.3 million students to public school in the U.S. The program’s success, the Department of Justice said this past January, is a “testament to…the fortitude of whistleblowers who report fraud.”
South Korea also can be proud. Through 2016, $117 million in public benefits have been realized thanks to whistleblowers, who received a total of $12 million in rewards in more than 4,000 cases. These numbers soared after South Korea passed an excellent whistleblower protection law in 2011.
Yet, the Bank of England told a UK Parliamentary committee there is “no empirical evidence” that rewards have led to more or better whistleblower disclosures.
A Swedish-German study that is growing in notoriety and influence was quick to correct the record. Statements like the Bank of England’s are “at best problematic and at worst incorrect,” concludes Myths and Numbers on Whistleblower Rewards by the Stockholm School of Economics and Leibniz Information Centre for Economics.
The report is a must-read for reward skeptics – and also for advocates who believe every country should thank citizens for their courage and public service by offering them a percentage of the funds they help to recover.
With clear evidence and data, the Swedish-German report soundly refutes the Bank of England’s faulty observation.
Whistleblower disclosures to the U.S. Securities and Exchange Commission catapulted 40 percent within four years after the Dodd-Frank Act fully took effect – to 4,218 reports in 2016. Similarly, reports of government contracting fraud soared from just a few to more than 500 annually after the False Claims Act was strengthened in 1986. And, after the Internal Revenue Service’s rewards system was improved in 2006, annual disclosures doubled within less than a decade.
The Swedish-German report dispels many other misconceptions, including:
- encouraging fraudulent claims: fake reports to U.S. agencies are rare, likely because this is subject to prosecution and civil damages,
- high administrative costs: the monetary benefits of the False Claims Act outweigh costs by as much as 52-to-1, and
- encouraging entrapment: a 2014 study by the National Whistleblower Center found no instances of entrapment in more than 10,000 reward cases.
The report calls out European commentators for making statements “that have no empirical backing or that are in open contrast to the available evidence from independent research.” It concludes that U.S. reward programs have been “competently designed” to overcome any potential drawbacks.
Now is the perfect time for European lawmakers to make amends and change course. The EU passed a Directive on whistleblower protection last October. The 27 member countries have until the end of next year to pass their own national-level laws. Though the Directive does not include a reward system, countries are free to adopt one of their own.
EU countries would be wise to follow the advice of former Assistant U.S. Attorney General Stuart Delery, who called the False Claims Act “the most powerful tool the American people have to protect the government from fraud.” Europeans should demand access to the same tools to protect their own public institutions and democratic systems from abuse.
