The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd- Frank") became a federal law in the US in 2010. With the passage of the Dodd-Frank US federal law they later created as part of this legislation the US Securities and Exchange Commission ("SEC") Office of the Whistleblower ("OWB"). The very large lucrative pay-outs for whistleblowing is a considerable attraction for individuals considering that one can achieve in the range of between 10% and 30% of the amount that the US SEC secures through a settlement or a court decision.
There have been many complaints from large corporations in the US that it undermines a company's good internal compliance programme. Some of the US business institutions together with the American Bar Association ("ABA") wanted the SEC to request company whistleblowers to firstly go through the company's own internal compliance programme before they whistle-blowed. In the end, it was a double-edged sword result for US business because the SEC rule encouraged potential whistleblowers to report first through a company's internal compliance programme because the whistleblower gets credit for doing so if he, likewise, within 120 days reports the same information to the SEC. In addition, the whistleblower will still get the benefit even if the company does its own internal investigation and reports the results to the SEC. Even in that scenario, the whistleblower may qualify again for the percentage range as previously described. Corporate in-house lawyers are also allowed participate in the percentage award programme but with limitations, for example, anything learnt in the solicitor client relationship unless waived is not allowed.
The SEC OWB programme commenced in August 2011 and is now in operation for over a year. In August 2012 they actually paid out the first award of approximately €40,000. The Chief of the SEC OWB programme has stated that they are getting approximately eight tips a day and the SEC have now just published the first annual report on the Dodd- Frank Whistleblower programme for 2012 which confirms that within the 12 months from August 2011 to August 2012 they received 3,000 Tips, Complaints and Referrals ("TCR"). The report breaks down the fact that so far all of the 50 US States have given TCRs. Of these, California had the most at 435; followed by New York with 246; Florida with 212; and Texas with 159. Within the 143 enforcement judgments already issued so far during 2012 the potential pay-out to whistleblowers could be in the region of €140 million and they have €340 million in the fund.
The other interesting fact is that of the 3,000 TCRs 324 were from abroad and involved 49 countries. Of those 49 countries Ireland was ranked 8th with 9 TCRs after the UK 74; Canada 46; India 33; China 27; Australia 21; South Africa 10; and Israel 10. Germany had 8 TCRs and Venezuela 6. With Ireland's nine you can envisage that some Irish based people may well get the benefit of this US award programme from the SEC OWB. TCRs from Ireland may increase as you do not have to be an employee of the company that you make the TCR on. The added danger to this is that as a result of the Irish whistleblowers actions, even with possible SEC involvement, one can seriously envisage that the US Department of Justice (DoJ) will not be far behind which could result in a criminal indictment of the company and/or several of the directors, wherever they are located.
The Irish Government are committed to a comprehensive whistleblower protection law and they want to enact legislation to protect whistleblowers who speak out against corruption or wrongdoings by an employer so on the 27 of February 2012 the General Scheme of the Protected Disclosure in the Public Interest Bill 2012 was published. It is a bit of a mouthful but it is known as the Whistleblowers Bill. One can also breathe a sigh of relief as there is no compensation or reward programme contained in it.
One of the major stories that was reported in September 2012 was the payment of €82 million to a former UBS AG banker by the US Internal Revenue Service ("IRS"). It was reported as being the highest whistleblower award in history given to an individual. However, one has to appreciate that the information he provided concerning wealthy US taxpayers hiding money in offshore accounts netted the IRS more than €3 billion from the many US taxpayers with offshore accounts. It is evident that other US agencies also offer monetary benefits to individuals who whistle-blow. The SEC is the most recent while the IRS programme is older but it would seem that the SEC advocate that their whistle-blowing programme is quicker in paying while the IRS take several years to crystallise into an actual award as those kinds of cases require additional work. In Ireland, there is no legislative reference to percentage or award amounts to be paid.
We have legislation dating back to 1890; the Inland Revenue Regulation Act which allowed under section 32 the then Revenue to make tax free awards to whistleblowers where information leads to the recovery of unpaid taxes. This particular section was carried into force in the Irish State by the Adoption of Enactments Act 1922 and it has not been repealed to this date. The reward amounts are miniscule in the present date. However, there is also a guideline to the Revenue Commissioners staff for when they receive unsolicited information from the public (O.I. 2005 No. 7). In considering the guidelines one is bemused by the fact that the Revenue Commissioners believe that we are already a nation of whistleblowers as we are willing to provide such information to the Revenue Commissioners without reward. Hence the principle caveat in these guidelines being that Revenue Commissioners official being on such calls is that they are not allowed mention the word "reward" but are only allowed acknowledge that the Revenue Commissioners do and give "rewards" if the whistleblower raises it first. It also acknowledges that any such payments made are very small and in the Irish Times on 14 September 2012 the Revenue Commissioners confirmed that they paid whistleblowers the following:- "€2,500 in 2011, €2,000 in 2010, and €2,350 in 2009." This is a clear indication of how miniscule such Irish payments have been.
Unfortunately, the Irish Revenue Commissioners have not disclosed how many actual whistleblowers contact them out of their civic duty with relevant information. However, one wonders if this would change if the public whistleblower understood that you could be rewarded for such information but you have to ask for it first as against being offered it in the first instance.
Ireland is obviously nowhere near the US on whistleblower awards but it is evident that the SEC OWB has received 9 TCRs from Ireland in its first year of operation and that some of those may possibly get very significant awards of money for such whistle-blowing from Uncle Sam as against the Irish State. Is it another case of an Irish solution for an Irish problem as this time it is the US that pays?
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
