Whistleblowers: Incentives, Disincentives, and Protection Strategies

Foreword xiii    Acknowledgments xv     Introduction 1     PART I: THE WHISTLEBLOWERS AND THE DODD-FRANK INCENTIVES     Chapter 1: The Dramatic Expansion of Whistleblower Awards under Dodd-Frank 11     Whistleblower Provisions of Dodd-Frank 13     What Is    Original Information   ? 14     What Are Violations of the Federal Securities Laws? 15     Rule 10b-5: Market Manipulation 19     Violating the Accounting Standards 20     False Financial Statements by Public Companies 20     Other Securities Laws 22     Protections for Whistleblowers 23     Commodity Exchange Act 23     Notes 25     Chapter 2: The Remarkable Story of Cheryl Eckard and the $96 Million Bounty under the False Claims Act 27     Who Is Cheryl Eckard? 27     Eckard   s Post-termination Activities 28     Eckard   s Superiors 29     Background Allegations 30     Alleged Violations 31     Timeline of Eckard   s Alleged Activities 33     The Lessons of Glaxo 40     Notes 42     Chapter 3: The Pfi zer Whistleblowers Who Collected Over $100 Million under the False Claims Act 45     John Kopchinski 46     Bextra 47     The Complaint 48     Pfizer Lessons 51     Notes 53     PART II: DISINCENTIVES AND FACTORS MOTIVATING PUBLIC DISCLOSURE     Chapter 4: Disincentives to Internal Whistleblowers 57     Financial Disincentives 58     Nonfi nancial Disincentives 59     Contractual Commitments and Fiduciary Duties 60     Ethics Resource Center Survey 61     Reinstatement as a Remedy 62     Empirical Study 65     Notes 67     Chapter 5: Women as Whistleblowers: Factors Motivating Public Whistleblowing 69     Sherron Watkins 69     Cynthia Cooper 71     Coleen Rowley 71     External Reporting by Internal Whistleblowers 72     Whistleblower Anonymity 74     Notes 74     PART III: ORGANIZATIONAL BEST PRACTICES     Chapter 6: Why Should Organizations Adopt a Robust Whistleblower System? 79     Diminishment of Shareholder Wealth 80     Boards of Directors 81     We Were Duped! 82     Executive Whistleblowers 84     Why Independent Directors Cannot Rely Solely on Independent or Internal Auditors 86     Legal Standard 89     Caremark 90     Recommended Strategy 91     Criminal Liability of an Organization 92     Responsible Corporate Officer Doctrine 93     The Acme Markets Case 94     The U.S. Department of Justice Criminal Guidelines 96     The Disadvantages of a Robust Whistleblower System 97     Notes 98     Chapter 7: Establishing a Robust Whistleblower System 103     Problems with the Current Whistleblower System 104     Initial Steps 107     Elements of a Robust Whistleblower Policy 108     Independent Directors Must Be in Charge 109     The Whistleblower Program Must Be Independently Administered 111     Whistleblower Complaints Should be Investigated by Independent Counsel Reporting Directly to the Independent Directors 113     There Should Be No Presumption that Anonymous Complaints Are Less Deserving of Investigation 117     Motivations and Personality of the Whistleblower Are Not Relevant to the Truth of the Allegations 118     Absolute Protection of Whistleblowers    Identity Is Essential 119     Assess the Effectiveness of Hotlines and Provide Employee Compliance Training 123     Independent Counsel Should Report the Status and Results of the Investigation 124     Internal Whistleblowers Should Receive Meaningful Monetary Rewards 125     The Whistleblower Policy Must Be Communicated Effectively 127     There Should Be Milder Sanctions for Whistleblowers Involved in Illegal Group Activity 130     Retaliation Claims Should Be Independently Investigated 131     The Director of Corporate Compliance Should Become the Eyes and Ears of the Independent Directors 132     Major Dos and Don   ts for CEOs 134     Notes 135     PART IV: STATUTORY INCENTIVES AND SEC AWARD REGULATIONS     Chapter 8: The False Claims Act: Qui Tam Cases 141     What Is a False Claim? 142     False Claims Act Bounties 144     U.S. Department of Justice Memorandum 146     Statute of Limitations 149     Notes 150     Chapter 9: IRS Whistleblowers 153     Section 7623(b): Mandatory Whistleblower Awards 155     Reduction of Award Percentage 156     Section 7623(a): Discretionary Awards 157     Form 211 158     IRS Whistleblowers Awards 159     IRS Award Determinations 160     Award Administrative Proceedings 162     Appeal to Tax Court 164     Duration of Process and Award Payment 164     Confi dentiality of Whistleblower 165     Right to Counsel 165     IRS Contracts 165     Disqualifi cation of U.S. Treasury Department Federal Employees 166     Notes 167     Chapter 10: Other Statutory Incentives and Protections for Whistleblowers 169     Act to Prevent Pollution from Ships 169     False Patent Marking Statute 170     U.S. Tariff Act of 1930 172     State False Claims Statutes 173     Whistleblower Protections 179     Barker v. UBS 180     Other Statutory Whistleblower Protections 185     Notes 186     Chapter 11: A Step-by-Step Guide to SEC Whistleblowers Awards under Dodd-Frank 189     Summary 190     SEC Investor Protection Fund 194     Does the Whistleblower Need an Attorney? 195     Step-by-Step Guide 196     Determining Whether the Over $1 Million Threshold Is 202     Satisfied Determining the Amount of an Award 202     Must an Employee Comply with the Company   s Internal Compliance Program? 204     Confidentiality 205     Nonwaiver of Whistleblower Rights 205     Appeals 205     Anti-retaliation Provision 206     Notes 206     Appendix 1: IRS Form 211 207     Appendix 2: SEC Form TCR: Tip, Complaint or Referral 211     Appendix 3: SEC Form WB-APP: Application for Award for Original Information Submitted Pursuant to Section 21F of the Securities Exchange Act of 1934 229     Appendix 4: SEC Whistleblower Rules 239     About the Author 265     Index 267