Beware the Whistleblowers

Published by
Judy Warner

Judy Warner

Today guest blogger Judy Warner, managing editor of NACD Directorship, shares her thoughts about the implications of the new whistleblower program and the board’s oversight role in corporate compliance.

Harry Markopolos writes emphatically about the need to compensate corporate whistleblowers in his book, No One Would Listen: A True Financial Thriller, released  this year by John Wiley & Sons.

The independent fraud investigator feared for his life for nearly a decade as he sought to expose Bernie Madoff’s $65 billion dollar Ponzi scheme to the government, the media—anyone who would listen. That all changed when Madoff confessed to his sons, and, in effect, turned himself in, exposing a financial fraud that resulted in his conviction and the loss of individual fortunes many times over. The Dodd-Frank Act creates a new whistleblower program, with new protections and potentially large cash rewards for individuals, like Markopolos, who provide information about securities law violations to the SEC.

Under the terms of the new law, the Commission will pay a whistleblower between 10 and 30 percent of any monetary sanctions in excess of $1 million dollars that the SEC recovers as a result of the whistleblower’s assistance.

A story by Marcia Coyle in The National Law Journal, published July 19, 2010, on www.law.com, reports that some corporate attorneys see the new program as a bounty and warns that even companies with robust compliance programs face increased risk. “You could have a perfect compliance program and still have no legal defense,” said FCPA specialist Richard Cassin of Cassin Law (www.cassinlaw.com) in Singapore. “We kind of depend on prosecutorial discretion. The Department of Justice (which shares enforcement authority with the SEC) will come down less hard, but still, when companies have employees who go rogue, companies are strictly liable. I don’t like it because I think it’s a disincentive to maintain a good, robust compliance program, and to self-report violations.”

Markopolos will speak specifically about the implications of the new whistleblower program and the board’s oversight role in corporate compliance at the NACD Directorship Forum on November 9 in New York City. To register, visit directorship.com/events.

Judy Warner is managing editor of NACD Directorship, the official magazine of NACD. A journalist for more than 30 years, Warner now manages the creation of all Directorship products, including its magazine, events, website, and newsletters. Warner joined the Directorship team in 2007 from ComAve, LLC, an independent marketing consulting firm she founded and ran for eight years. Warner was formerly the New England bureau chief and editor for Adweek magazine and a senior editor for Marketing Computers. She began her journalism career in the newsroom of The Boston Globe.

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