Robert PlotkinKurt E. WolfeIn our last blog, we addressed the importance – and benefits – of voluntarily disclosing instances of fraud or corruption to appropriate US and/or UK regulators.  Of course, corporates do not always have the opportunity to identify and voluntarily disclose instances of fraud or corruption before an enterprising insider blows the whistle on some potential violation.  In June, our London Partner Adam Greaves posted an instructive article on Bribery Library comparing whistleblower laws in the US and the UK.  Simply put, the US and the UK have in place vastly different whistleblower schemes: while the US offer handsome rewards as a means of encouraging whistleblowers, the UK declines to provide whistleblowers any remuneration whatsoever, and the UK government insists it has no plans to mirror the US system. 

In May 2011, the SEC adopted a final set of rules implementing its Whistleblower Incentives and Protection program, which handsomely rewards whistleblowers who voluntarily provide original information that leads to a successful enforcement action in which sanctions exceed $1 million.  To incentivize would-be whistleblowers, the program offers an award of 10-30% of the amount collected in the SEC enforcement action and certain related actions that rely upon the same original information.  The impact of the SEC’s new whistleblower rules is yet to be determined, as the rules are not effective until August 12, 2011.  The SEC, however, already claims to be receiving an appreciable uptick in high-quality tips from whistleblowers. 

The DOJ, too, has an existing framework for encouraging whistleblowers to come forward with information regarding possible violations of the laws.  Through the qui tam provisions of the False Claims Act, whistleblowers can bring lawsuits on behalf of the United States against defendants that allegedly perpetrated some fraud against the United States government.  Under the False Claims Act, whistleblowers are given a mandatory award of 15-25% of any sanction or settlement achieved in the lawsuit, and in certain circumstances they can be awarded attorneys’ fees. 

The FCA has been an immensely popular outlet for whistleblowers.  Since its inception, whistleblowers’ recoveries in FCA matters are estimated to be in the billions; perhaps as high as $20 billion.  In 2009, for example, a former Pfizer sales rep was awarded $51.5 million for his role as a whistleblower in an investigation of Pfizer’s marketing practices.  And in December 2010, a Florida-based professional whistleblower company called Ven-a-Care was awarded $88.4 million in connection with a $421 million settlement between the US government and three drug manufacturers.

The SFO and MOJ have offered precious little public guidance on whistleblowers.  In its Guidance on the Bribery Act, for example, the MOJ identifies ‘speak up’ or ‘whistleblowing’ procedures (later referred to as ‘protection and procedures for confidential reporting of bribery (whistleblowing)’) as nothing more than an aspect corporates should include in their bribery prevention policies.  Indeed, to the extent the MOJ and SFO deal with whistleblowers at all, their guidance relates principally to ways companies can devise or improve effective internal whistleblowing or ‘speak up’ policies. 

In fact, the SFO and MOJ appear disinclined to implement a whistleblower incentives program.  Adam Greaves explains:

“Sources close to the UK government insist that the Dodd-Frank Act will not be mirrored in the UK. It seems that the general establishment feeling is that this type of legal device, which is intended to bring crime out in to the open, is far too mercenary an approach and that it would give rise to all sorts of ethical concerns.” 

Still, it would appear, particularly in the Bribery Act era, the UK is primed to consider some sort of whistleblower program as a means of ferreting out fraud and corruption.  As recently reported here on Bribery Library, in the UK ‘using whistleblowers is standard investigative procedure world-wide against cartels, including in the UK.  Indeed, it seems that these days the UK Office of Fair Trading (OFT) (the competition law regulator) will not investigate suspected cartels without a whistleblower’.


The McGuireWoods Guest Bloggers are Robert Plotkin, a partner based in McGuireWoods LLP’s Washington and New York offices and head of the firm’s SEC Enforcement Defense group, and Kurt E. Wolfe, an associate based in McGuireWoods LLP’s Washington office and a member of the firm’s Government, Regulatory and Criminal Investigations department.