TheCorporateCounsel.net

October 15, 2014

Whistleblowers: How to Evaluate Hotline Providers

With whistleblowing such a hot topic, it’s a good time to gain an in-house perspective on how to evaluate the many firms that assist companies to process whistleblower tips (we maintain a list of hotline providers in our “Whistleblowers” Practice Area). In this podcast, Joe Kolomyjec of Lionbridge Technologies addresses how to evaluate and select whistleblower hotline providers, including:

– Who within the company is involved with evaluating & selecting a hotline provider?
– What are the main factors that you initially considered important in evaluating hotline providers for Lionbridge?
– Did those factors change during the vetting process?
– How many hotline providers did you initially consider? How did you learn of providers to consider?
– How many vendors did you interview? Were all of the interviews telephonic?
– Were there any surprises during the process?

As noted in this Akin Gump blog, the Supreme Court declined last week to review the 11th Circuit’s decision in U.S. v. Esquenazi, leaving standing the appellate court’s expansive definition of “foreign official” under the FCPA.

Whistleblowers: Is New York’s AG a Better Alternative Than The SEC?

I would think “no” given that the SEC just blessed a $30 million payout to a whistleblower. But this Bloomberg article notes that some whistleblowers become frustrated with the SEC and turn to the New York Attorney General to report suspected violations.

Whistleblowers: Impact on SEC Enforcement & DOJ Cases

This study examines the impact of whistleblowers on the outcomes of SEC and DOJ enforcement actions for financial misrepresentation and found significant increases in penalties against firms and individuals when a whistleblower is involved. This suggests that whistleblowers are valuable to the SEC and DOJ – perhaps explaining why the SEC is willing to pay out $30 million to a single whistleblower! Here are some of the observations:

– 145 of the 1,133 enforcement actions (12.8%) during 1978-2012 have some form of whistleblower involvement.
– Average total monetary penalties assessed against firms in the 145 enforcement actions associated with whistleblower complaints was $143.9mm compared to $33.29mm for the 988 enforcement actions without a whistleblower.
– Average total monetary penalties assed against individual respondents in the 145 enforcement actions associated with whistleblower complaints was $63.6mm compared to $16.7mm for individual respondents in the 988 enforcement actions without a whistleblower.
– Average prison term of convicted respondents was 39.4 months in the 145 enforcement actions associated with whistleblower complaints compared to 17.9 months for the 988 enforcement actions without a whistleblower.
– Presence of a whistleblower increases the length of time needed to complete the enforcement action by 10% (approximately 10 months).
– Likelihood of an enforcement action given the filing of a whistleblower complaint increases to 20.5% compared to 4.3% without. This represents a 4.8x increase in the risk of an enforcement action for firms that have a whistleblower complaint filed against them.
– Estimated increase in total penalties associated with whistleblower involvement is $21.27 billion or 30.3% of the total $70.13 billion total penalties assessed in all 1,133 enforcement actions.

Take a moment to participate in our “Quick Survey on Whistleblower Policies & Procedures” and our “Quick Survey on Earnings Releases & Earnings Calls.”

– Broc Romanek