Government Whistleblower and Compliance Programs Share Same Goals

Whistleblower programs and companies’ internal compliance processes aren’t in competition for information from whistleblowers. Counsel representing individuals who participate in government whistleblower programs understand that such a conclusion has it all wrong.

Before turning to external reward programs, whistleblowers most often report to internal compliance first. Fears are unfounded about internal compliance and whistleblower programs working at cross-purposes. Both initiatives serve the same purpose: to deter and root out fraud and violations.

The chance of an award is a secondary motivation for most whistleblowers. They are generally motivated by their own ethical standards, keeping their jobs, preventing harm to others, and responding to ineffective internal reporting. Also, no whistleblower program guarantees any reward for simply reporting.

Most whistleblowers are more concerned with potentially having their identity revealed and losing their career than with the likelihood of an award. The personal and professional cost of whistleblowing is higher than the chances of receiving an award.

Internal Reporting First

According to the Securities and Exchange Commission’s fiscal year 2017 annual report to Congress on its whistleblower program, about 62% of award recipients from fiscal years 2012 to 2017 were current or former insiders of the entities they reported about. Of these, nearly 83% raised their concerns internally to supervisors, compliance personnel, or through internal reporting mechanisms before reporting to the SEC.

Similarly, an analysis of nine years of data on Dodd-Frank and Sarbanes-Oxley whistleblowers found that over 90% of those who brought retaliation cases had reported internally first.

As the data shows, reporting to the government through a whistleblower program most often results from a failure of an internal compliance program—not because the whistleblower reward program was a more tempting opportunity. In cases where whistleblowers don’t report internally first, they typically recognize that doing so would be futile due to a company’s disregard for compliance, pervasive fraud directed from the highest levels of the company, or practice of punishing those who speak up.

Whistleblower Risks

Whistleblowers are painted as rushing to report any minor technical violation or de minimis issue to government agencies, but this ignores the reality of the steep costs many face for reporting internally or externally. Unfortunately, blowing the whistle isn’t a riskless or costless path.

Many whistleblowers hesitate to come forward or try to do so anonymously from fear of harassment, harm to their reputation, or other retaliation. According to a 2023 study from the Ethics and Compliance Initiative, almost half of employees globally who reported misconduct internally experienced retaliation.

Many were harassed to the point that they left their chosen professional field or even moved. Employers have even been known to sue whistleblowers, sometimes on frivolous grounds, as a form of intimidation or retaliation, and defending these lawsuits can be expensive.

Complements, not Competitors

We must encourage whistleblowers to come forward and protect them when they do. Corporate compliance and government whistleblower programs each seek to deter fraud, protect taxpayers and investors, and ensure that industries compete on an even field.

Corporate compliance programs aren’t an end in themselves, and if they don’t succeed, it’s critical to have other ways to accomplish the same ends. The two types of programs work as complements, not competitors. Whistleblowers naturally report internally, but when the compliance process fails, they need and deserve external protections.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Emily Stabile is partner at Phillips & Cohen and has worked on whistleblower cases involving government frauds and tax and financial frauds.

Samuel E. Brown is partner at Phillips & Cohen and represents clients in False Claims Act cases and whistleblower claims.

Write for Us: Author Guidelines