Amy Deen Westbrook on Cash Bounties and FCPA Enforcement

In 2018, Amy Deen Westbrook, published a paper titled Cash for Your Conscience: Do Whistleblower Incentives Improve Enforcement of the Foreign Corrupt Practices Act? (Washington and Lee Law Review, 2018).

Amy Deen Westbrook

Whether whistleblower bounties improve FCPA enforcement is an open question. But it is clear that Westbrook favors bounties for employees who blow the whistle on corporate crime and wrongdoing.

Westbrook is a Professor of Law at the Washburn University School of Law in Topeka, Kansas. 

“I do like the bounty programs,” Westbrook told Corporate Crime Reporter in an interview last month. “I don’t think they are perfect. I don’t think they are necessarily compensatory mechanisms for the vast majority of whistleblowers. Anti-retaliation programs are the key to that. But they do help encourage whistleblowing.” 

“The United States is one of the few countries in the world that has adopted bounty programs. You don’t see this in other countries. The UK specifically rejected bounty programs. They looked at our bounty provisions back in 2014. And they decided – no, we see no evidence that the United States is getting more or better tips as a result. They benefit a small number of people and they require a costly governance structure and we don’t want one of those. In a very long report, they said – the U.S. system is not worth it.”

“But the United States has a slightly different relationship to the whistleblower. Look at the role of whistleblowers in our political system or look back to 2002 when Time magazine made the Enron and WorldCom whistleblowers people of the year. That commitment to doing the right thing is an important part of the U.S. psyche. Doing the right thing is something that is difficult especially in the whistleblower context. Anything we can do to encourage doing the right thing is important.”

“That said, there are studies that show that compensating people for altruistic behavior is negative. It’s a theory called motivational crowding. The idea is that if you pay someone to do the right thing, if you frame reporting behavior as a commodity by paying monetary rewards, that may actually crowd out or suppress internal moral motivation. An external monetary award can undermine people’s motivation to engage in their moral or civic duty. They show studies that when children are paid to perform altruistic acts, if you stop paying them they stop doing them.” 

“But those instances might be different from the case of an employee who is looking at fraudulent or criminal behavior in their organization. That employee is in a very difficult position. The employee has a duty to the public. The employee has a duty of loyalty to her employer. And that employee has a duty to maybe family members or other persons who rely on her, and to herself. Given the difficulty of the position that employee finds herself in, anything that helps promote the decision to report is a positive thing. That’s why I’m in favor, although I understand the arguments against them.”

You are the author of an article titled – Cash for Your Conscience: Do Whistleblower Incentives Improve Enforcement of the Foreign Corrupt Practices Act? It was published in 2018. How did you come about writing that article?

“I have a long standing interest in whistleblower incentives and bounty systems. My focus is on corporate governance. How do you create a world in which you foster a corporate culture where fiduciary duties are well understood, where employees and other agents understand the norms and laws and see things like bribery of foreign officials as a threat to the company, not as a way to get ahead.”

“I became interested in what happened after Dodd-Frank set up the SEC’s whistleblower program and began giving incentives to employees to come forward to the SEC to report things like accounting fraud and foreign bribery. My other interest is in the Foreign Corrupt Practices Act (FCPA). And this is where those two interests intersected strongly.”

“Compliance and enforcement of an anti-corruption regime could be increased efficiently by simplifying the moral calculus for a whistleblower. Being a whistleblower has obviously difficult employment consequences. We can agree that it has very negative employment consequences. How do they balance their loyalty to a corporation, their agency for fiduciary duty, with their loyalty to society at large, to the general public?”

“The SEC whistleblower program has paid a total of 87 individuals over the past eight or nine years. That is of course a fraction of the 37,000 tips they have received over that time. But it does add a new variable to the SEC enforcement program.”

“We have had the False Claims Act since 1863. The IRS has paid out awards under its program for reports of tax evasion. But the SEC was another high profile program. And it has been fairly effective, maybe not in paying awards to everyone who has reported. But it certainly has received enough press coverage to operate as a deterrent. I wanted to look more closely at that.”

Do we know of those 87 cases, how many are FCPA cases?

“We don’t. Every year, the Office of the Whistleblower reports the percentage of all the tips which are FCPA related. The number of FCPA tips are usually around five percent of all tips. But we don’t have a lot of data as to which of the SEC whistleblower awards were FCPA whistleblowers as opposed to fraud, or insider trading or market manipulation whistleblowers.”

There are some cases where the whistleblower goes public after the award is made. 

“Yes. And we can learn that there have been FCPA awards because of that. And we can learn in some cases the award was not an FCPA. The largest award was last month when a Bank of New York Mellon currency trader received a $50 million award. That is unlikely to be an FCPA case.”

“And you see several cases in which the identities of whistleblowers are known because they disagree with the SEC’s determination and they sue. In some of those, they remain John Doe, but in some of them their identity is revealed. There was one of those, I think it was in the Deutsche Bank case. There were five whistleblowers, but only two of the five received awards and one of the three who did not get an award sued and lost.”

Today is the tenth anniversary of the Dodd-Frank law which gave birth to this whistleblower program. Is the program working?

“If you ask the SEC, it’s working. The number of tips are up. The overall level of compliance is pretty robust. Compliance is vibrant in terms of efforts by companies to set up a system where corporate crime, fraud, accounting malfeasance are deterred or at least detected and then handled.”

“But on the other hand you can argue that the SEC’s Office of the Whistleblower gets a lot of press but not that many individuals are actually receiving an award. If the idea is to publicize, then it is arguably succeeding. If the idea is to provide compensation to individuals who blow the whistle and who suffer as a result, then the numbers wouldn’t bear that out.”

[For the complete q/a format Interview with Amy Deen Westbrook, see 34 Corporate Crime Reporter 31(13)), August 3, 2020, print edition only.]

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