Our nation’s whistleblower laws serve as an indispensable portal to truth, integrity and corporate responsibility. However, there are some downsides to stepping up to report fraud, namely the very possible risk of facing retaliation by an employer. Some retaliation is blatant (e.g., immediate termination) while other forms can be much more subtle, accruing over time. While laws are in place to protect and compensate employees who have endured the effects of workplace retaliation, it still continues to infiltrate the fraud-reporting process. As such, a national non-profit, non-partisan group has stepped forward to provide insight and protections against this necessary by-product of fraud exposure, and has recently provided a report to Congress on its findings.
Over a series of posts, we will examine the results of a study conducted by the National Whistleblower Center (“NWC”) entitled “Whistleblower Reward Laws: Reform or Enhance?” The study covers ten crucial areas affecting whistleblowers and the retaliation they sometimes face, including a conclusory section supporting the need for a “robust” False Claims Act to protect whistleblowers, who ultimately protect taxpayers. In today’s post, we will cover several topics relating to an employee blowing the whistle on a fraud-committing employer, including reasons why many employees are reluctant to come forward.
The Essential and Reluctant Nature of Employee Reporting
The Congressional report begins with a review of the importance of employee reporting in light of the dozen other methods through which government entities receive information of fraud. According to statistics, tips from internal employees account for the vast majority of initial detections, followed by management review and internal audits. The report included a quote from the National Association of Certified Fraud examiners explaining “[w]hile tips have consistently been the most common way to detect fraud, the impact of tips is, if anything, understated by the fact that so many organizations fail to implement fraud reporting systems.”
Despite the overwhelming number of fraud cases initially detected by tips, the NWC reports that most employees are still hesitant to disclose information relating to possible unlawful activity. According to a study by the Ethics Resource Center, over 40 percent of employees who witness fraud or misconduct do not report this conduct to anyone. This is surprising in light of the 2002 Sarbanes-Oxley Act which required the implementation of internal reporting procedures for any publicly-traded company. In a select study of employees who witnessed fraud in 2009, 40 percent either did not disclose at all or relayed the information to an immediate supervisor. Twenty-eight percent disclosed to someone else within the company while two percent disclosed to someone outside of the company. The remaining one percent disclosed to a hotline. This represents a critical problem facing corporate compliance programs and government regulatory agencies in that employees are fearful and hesitant to come forward, despite great strides in whistleblower protections.
On that topic, tomorrow’s post will discuss some additional findings by the NWC, namely ways in which the False Claims Act has effectuated greater reporting and worked to incentivize integrity and enhance the reporting experience for all whistleblowers willing to come forward.
Fearful of Reporting?
If you fall into the category of employees who is hesitant to come forward with allegations of fraud or misconduct, a whistleblower attorney can help you overcome your fear of retaliation and bring justice and light to ongoing fraud and taxpayer abuse. Whistleblowers are in a position not only to collect a percentage of the final award, but can also help recover significant sums of money on behalf of taxpayers, thereby keeping costs under control for Americans as a whole.