Wednesday 21 February 2018

Payments to whistleblowers an idea worth some thought

U.S. President Barack Obama applauds after signing the Dodd-Frank Wall Street Reform and Consumer Protection Act during a ceremony at the Ronald Reagan Building and International Trade Center in Washington, D.C.
U.S. President Barack Obama applauds after signing the Dodd-Frank Wall Street Reform and Consumer Protection Act during a ceremony at the Ronald Reagan Building and International Trade Center in Washington, D.C.

THE Dodd-Frank Wall Street Reform And Consumer Protection Act became a federal law in the US in 2010. As part of the passage of Dodd-Frank, the powerful US Securities and Exchange Commission created the Office of the Whistleblower.

The potential lucrative payouts for whistleblowing are considerable: individual tipsters can achieve in the range of between 10pc and 30pc of the amount that the SEC secures through a settlement or a court decision.

The OWB programme, which commenced in August 2011, paid out its first award of approximately €40,000 in August 2012.

In August 2013, they paid out their largest sum to date to a whistleblower -- $14million -- in a case where the SEC also recovered substantial investor funds.

The SEC advocate that their whistle-blowing programme is quicker in paying while the US Inland Revenue Service (IRS) take several years to crystallise into an actual award as those kinds of cases require additional work.

In the first annual report on the whistleblower programme for 2012 the OWB received (in 2012) 3,000 Tips, Complaints and Referrals (TCR).

In the second annual report for 2013 the number of TCR have now risen to 3,238 which is an increase of approximately 8pc from 2012.

Of the 3,000 TCRs in 2012 some 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.

In 2013 the TCRs from abroad have now risen to 402. Again, the UK has the biggest number at 66; Canada 62; China 53; Russia 20 and Ireland is now in joint fifth position with India at 18.

Now that Ireland has 18 TCRs it is only a matter of time before Ireland-based people benefit from the OWB award programme.

TCRs from Ireland will continue to 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 is committed to a comprehensive whistleblower protection law and it wants to enact legislation to protect whistleblowers who speak out against corruption or wrongdoings by an employer. So on 3 July 2013, the Public Disclosure Bill 2013 was published.

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.

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. The section, despite its antiquity, has not been repealed.

There is also a guideline to the Revenue Commissioners staff for when they receive unsolicited information from the public.

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 to 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 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 some of those in Ireland who provided tips to the OWB may possibly get very significant awards for such whistle-blowing from Uncle Sam as against the Irish State.

In other words, is Ireland's first US whistleblower millionaire far behind?

Gregory Glynn is Head of Litigation and Dispute Resolution at Arthur Cox solicitors

Irish Independent

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