Recent developments in how the government investigates and prosecutes enforcement actions have created new challenges for handling internal investigations. The size of government bounties awarded to whistleblowing employees are breaking records, and the government has made clear that it highly values inside information to advance its enforcement efforts. In particular, the government now is seeking to use whistleblowing awards as a lure for compliance personnel, who often are directly involved in internal investigations. At the same time, the government has been using perceived inadequacies in internal investigations to justify increased penalties for corporate wrongdoing and has punished employees involved in compliance and internal investigations for failing to respond adequately to reports of misconduct. These developments call for increased care in managing internal investigations.
Skyrocketing Whistleblower Awards
The U.S. Securities and Exchange Commission (SEC) first obtained statutory authority to create a whistleblower program in 2010, when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.1 It issued its first whistleblower award of “nearly $50,000″ in August 2012.2 Since then, reported whistleblower awards have been increasing in value at a dizzying pace. In September of this year, the SEC announced that it planned to award more than $30 million to a whistleblower who provided information that led to a successful enforcement action.3 The award set a new record for the SEC’s whistleblower program, surpassing the previous record of $14 million announced less than a year earlier. As the director of the SEC’s Division of Enforcement explained, the “record-breaking award sends a strong message about our commitment to whistleblowers and the value they bring to law enforcement.”4
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