Compliance Glossary

Whistleblower

What is a Whistleblower?

A whistleblower is an individual who reports or exposes wrongdoing within a private or public company or government organization. Whistleblowers are often employees of the organization who have become aware of some wrongdoing while performing their job duties, but they may also be contractors, vendors, clients, or anyone else who becomes aware of illegal activity within the organization.

In some cases, a whistleblower reports wrongdoing directly to an HR manager or a member of the executive leadership team. In other cases, a whistleblower might take evidence directly to the media or to government regulators.

What is a Whistleblower Program?

A whistleblower program offers an incentive, usually in cash, to individuals who come forward with information or evidence relating to alleged wrongdoing. 

The United States Securities and Exchange Commission (SEC) maintains a whistleblower incentive program and is authorized by Congress to supply monetary awards to qualifying individuals who present information that leads to a Commission enforcement action with over $1,000,000 in sanctions. These awards range in size from 10% to 30% of the total funds collected.

Whistleblower programs create a strong financial incentive for individuals to report suspicious activity or wrongdoing within their organizations.

What is Whistleblower Retaliation?

While whistleblowers are sometimes celebrated or rewarded for reporting illegal or unethical conduct, they are also frequently punished by the organizations whose bad behavior they report. Whistleblower retaliation may include actions such as:

  • Terminating the whistleblower from employment with the firm
  • Suspending the whistleblower from performing their job duties
  • Demoting the whistleblower or reassigning them to a new department
  • Reducing or garnishing the whistleblower’s wages
  • Harassing or intimidating the whistleblower in the workplace
  • Blacklisting the whistleblower from advancement opportunities within the organization
  • Notifying other organizations of the identity of the whistleblower

What is an Example of a Whistleblower?

Many prominent cases of corporate wrongdoing were discovered because a whistleblower came forward with evidence. Two notable examples include:

  • Everett Stern – In 2011, Stern, an employee of HSBC, blew the whistle when he discovered that the multinational investment bank had failed to detect, prevent, or report billions of dollars in money laundering transactions. This failure of internal controls resulted in an investigation by the SEC and a massive fine of $1.92 billion.
  • John Kopchinski – In 2009, Kopchinski, an employee of Pfizer, launched a whistleblower lawsuit against his employer that alleged illegal marketing of a prescription painkiller drug. Pfizer was eventually levied a criminal fine of $1.3 billion, the largest ever imposed against any company.

How Do Whistleblower Protections Work?

In the United States, whistleblowers who report certain types of corporate finance crimes to the SEC are legally protected from whistleblower retaliation by the Sarbanes-Oxley Act of 2002.

Section 806 of the Act prohibits any officer, contractor, subcontractor, or agent of a publicly traded company from retaliating against an employee who reports one of six protected categories of violations: securities fraud, shareholder fraud, bank fraud, wire fraud, mail fraud, or violating SEC regulations. 

Retaliatory adverse employment actions are defined broadly in the Act, and whistleblowers who suffer retaliation may be entitled to reinstatement in their job role, back pay with interest, and compensation for special damages (litigation costs, etc.) that resulted from the action.

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