Is whistle-blowing a get-rich-quick scheme for desperate employees?

A large payout of $737 million has already been awarded to approximately 133 individual whistle-blowers since the SEC issued its first payment in 2012. Most tipsters waiting months or even years after the agency wraps up its investigations to get their awards.

The U.S. Securities and Exchange Commission has received 6,900 tips alleging white-collar malfeasance in the fiscal year that ended Sept. 30, 2020 a 31% jump from the previous 12-month record. Officials at the agency, which pays whistle-blowers for information that leads to successful investigations, say the surge really started gaining traction in March when COVID-19 forced millions to relocate to their sofas from office cubicles.

Intended or not, the SEC itself has played a big role in encouraging informants to come forward by showing how lucrative whistle-blowing can be. Since the pandemic hit the U.S., the agency has paid out some $330 million in awards, including an eye-popping $114 million to a single tipster in October. While the payments are tied to SEC investigations that almost certainly predate coronavirus, the amount of money going out the door is unprecedented in the decade since the regulator started its whistle-blower program.

Once a company is alleged to be doing fraudulent activities, they are immediately found guilty in the public eye and the accusers stand to make millions as the company executives rush to settle to avoid the negative press. The whistleblower may receive a reward of 10 percent to 30 percent of what the government recovers. In 2019 the Justice Department recovered $3 Billion and $2.2 Billion in 2020 from companies and individuals from False Claims Act Cases. Each case should be evaluated with the utmost scrutiny with transparency. The Justice system needs to be held accountable as well in cases in which claims are not merited and how these funds are used.

Authors

Dr. Fabio J. Pencle is a medical doctorpreneur and Associate Professor. He holds a master’s in business administration.

Dr. Jason A. Seale is a medical doctorpreneur. He holds a master’s in business administration degree