Under new US legislation, individuals who whistleblow in relation to corrupt activities stand to make millions from their disclosure. The US Financial Reform Bill, which was passed by Congress on 15 July 2010, sets out a new regime to encourage whistleblowing in relation to security law violations, for example, violations of the Foreign Corrupt Practices Act 1977 ("FCPA").
The Bill provides that, where an individual whistleblows and the information provided results in the government collecting at least $1m, the whistleblower will be entitled to a reward of between 10% and 30% of the sum recovered. The whistleblower will also be entitled to a share of the funds recovered by other government agencies in "related actions", for example, the Department of Justice.
The information provided must be "original information" which has not already been made available to the Securities and Exchange Commissioner ("SEC") by another source. Considering that fines of hundreds of millions are regularly imposed in US corruption cases - recent cases include Siemens and BAE - it is not surprising that this new program will provide an enormous incentive for individuals to whistleblow.
UK companies who operate in the US and are subject to the FCPA should be aware of this legislation and should look out for updates regarding enactment of the provisions.
Whilst the new UK Bribery Act does not come into force until April 2011, it will no doubt encourage whistleblowing. There are not currently any plans to offer monetary incentives for whistleblowers reporting bribery offences, however, whether the UK will soon follow the US method of offering rewards remains to be seen.
The only incentive which is currently used in the UK is that companies may be offered leniency for reporting their wrongdoing instead of waiting to be caught out by the authorities. For example, under UK competition law, companies that report their involvement in a cartel may be offered 100% leniency from fines providing they are first to report to the Office of Fair Trading.
Although UK law does not currently provide incentives for employees who whistleblow, (although the OFT has suggested that it might do so in the future) the Public Interest Disclosure Act 1998 provides protection for employees who report on the following matters: criminal offences; breaches of legal obligations; miscarriages of justice; dangers to the health and safety of individuals; damage to the environment; or deliberate covering up of information regarding any of the above. This means that employees will be more confident in reporting wrongdoing. Furthermore, if employees suffer retaliation for whistleblowing they may raise an action against their employer for compensation.
The best way for all companies to mitigate the risk of whistleblowing is to implement and maintain strong compliance and regulatory programs to limit the possibility of a breach occurring in the first place. In addition, procedures should be established to allow employees to quickly and discretely report any activities they are concerned about. Employers should ensure employees are protected from any form of retaliation in relation to the whistleblowing. Having appropriate procedures will ensure that any breaches can be dealt with internally prior to the relevant regulatory body becoming involved.
MacRoberts provide detailed training and compliance programmes in the areas of competition law, data protection and prevention of bribery.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.