In House - The FindLaw Corporate Counsel Blog

Today's Lesson: It Pays to Be a Low-Down Sni -- Whistleblower

Wondering how a once loyal employee could blow the whistle on the company? We'll tell you how: money. (Or a strong commitment to the rule of law. But money helps even then.)

But one of the more difficult issues that an in house lawyer might have to do deal with is the occasional whistleblower. Just a few decades ago, whistleblowing was something that companies only expected from disgruntled employees. But now, there's real profit to be had for the employee out to make some additional cash. Here's what the in-house practitioner should know.

$68,000,000

Sixty-eight million dollars, or thereabouts. This is the amount of money that the SEC's whistleblower program has paid out to snitches --er, whistleblowers since it first began in 2011, right in there with the tidal wave of financial reforms following the sub-prime mortgage crash. The program encourages blowing the horn on one's company by awarding behavior that "voluntarily provide[s] the SEC with unique and useful information that leads to a successful enforcement action."

No Anonymous Tipster-ing

In the words of Ephrat Livni, "dropping a dime will not suffice." Those who blow the whistle must be prepared to work with the agency in a very intimate way. In its charge to protect the public and maintain confidence of fair, orderly and efficient markets, the SEC will come after your company (and possibly you, GC) if a whistleblower uncovers any information that suggests a scheme to willful flout the laws. If an employee knows of something illicit in your basement, it could be worth their time to out you.

The "plus" side -- if that's the right term -- out of this is that the tipster's identity will be revealed sooner or later, though this won't help your company at all. Retaliatory actions are illegal under federal and state laws. So do not encourage agents of the company to get any smart ideas. If anything, not firing is the preferred choice.

Tread Lightly

As the company legal counsel, it is your job to make yourself aware of potential federal and state non-compliance issues that need to be resolved, including potential securities and other offerings violations that might be on someone's disclosure list. Extirpate any practices that are willful and reckless. Strongly encourage open and honest disclosures to the company's investors, stakeholders and shareholders. Have the books checked by an independent accountant quarterly.

And if the company doesn't want to go through these expenditures to cover itself, you might want to start looking for work elsewhere...

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