Harry Markopolos writes emphatically about the need to compensate corporate whistleblowers in his book, “No One Would Listen.” The independent fraud investigator who for nearly a decade feared for his life as he sought to expose Bernie Madoff’s $65-billion Ponzi scheme to the government, the media, anyone who would listen. That all changed when Madoff confessed to his sons and in effective turned himself in, exposing a financial fraud that resulted in his conviction and the loss of individual fortunes many times over. The Dodd-Frank Act creates a new whistleblower program with new protections and potentially large cash rewards for individuals, like Markopolos, who provide information about securities law violations to the SEC.
Under terms of the bill, the Commission will pay whistleblowers between 10 and 30 percent of any monetary sanctions in excess of $1 million that the SEC recovers as a result of the whistleblower’s assistance.
A story in The National Law Journal, published today on Law.com, reports that some corporate attorneys see the new program as a bounty and warn that even companies with robust compliance programs face increased risk.
“You could have a perfect compliance program and still have no legal defense,” FCPA specialist Richard Cassin of Cassin Law in Singapore told The National Law Journal. “We kind of depend on prosecutorial discretion. The Department of Justice (which shares enforcement authority with the SEC) will come down less hard, but still, when companies have employees who go rogue, companies are strictly liable. I don’t like it because I think it’s a disincentive to maintain a good, robust compliance program and to self report violations.”
Markopolos will speak specifically about the implications of the new whistleblower program and the board’s oversight role in corporate compliance at The NACD Directorship Forum on November 9 in New York City. To register, visit directorship.com/events.