Looking back on the last year, 2012 proved to be an interesting year for whistleblowers in the United States. President Obama signed a bill affording greater protection to federal employees who report abuses, the SEC paid out its first whistleblower reward, and the IRS paid the largest whistleblower reward in its history. Each of these events emphasizes the value our government puts on the disclosure of illegal conduct and the importance of reporting illegal conduct across the board.

Legislative Action by President Obama

On November 27, 2012 President Obama signed S. 743, the Whistleblower Protection Enhancement Act (WPEA) which provided greater protection for whistleblowers in a number of different situations but most notably, provides greater ability to punish those who retaliate against government whistleblowers. The WPEA also clarified the scope and extent of current whistleblower laws and extended protection to government scientists who challenge censorship and TSA employees who were not previously protected.

First SEC Payout

The Securities and Exchange Commission (SEC) instituted a reward program to prevent and prosecute financial fraud in 2011. On August 21, 2012 federal securities regulators announced the first reward payment under the new program. While the agency kept the name of the whistleblower a secret, they did announce that the individual has been paid approximated $50,000 for the information they provided that led to nearly $1,000,000 in sanctions, $150,000 has been collected so far. The whistleblower stands to collect 30% of any of fees collected by the SEC.

Largest Reward Paid by IRS

In 2012, the IRS paid $104 million to whistleblower Bradley Birkenfeld for the information he provided about his former employer, Swiss bank, UBS AG.  Mr. Birkenfeld is one of only 3 – 5 people who were expected to receive a reward from the IRS in 2012. IRS rewards are typically confidential but Mr. Birkenfeld decided to disclose his reward which has led to a significant uptick in recent misconduct reports to the IRS. The IRS has emphasized the importance of payment of rewards as information like that reported by Mr. Birkenfeld protects the American taxpayers from unscrupulous individuals who intend to avoid paying their fair share of taxes.

While rewards the size Mr. Birkenfeld realized are rare, the message is clear. Reporting misconduct is not only the right thing to do, but it may come with significant financial incentives. The additional protections created by the WPEA allow federal employees to report misconduct and ultimately encourage the private sector to protect itself by creating safe avenues for employees to report misconduct.