Wednesday, December 31, 2014

Too Many Incentives for Whistleblowers

Too Many Incentives for Whistleblowers

Congress and various federal agencies continue to expand the role of and financial awards to whistleblowers.  Steven Davidoff Solomon, the Deal Professor of Deal Book, wrote a thoughtful year-end post on the subject.  Mr. Solomon questions whether the rising number of big awards and the increasing presence of lawyers seeking clients on a contingent-fee basis represent appropriate public policy.[1]  He also points out that sometimes wrongdoers are able to profit by also being whistleblowers.

I think Mr. Solomon’s concerns about the big awards are well founded.  Although whistleblowers are putting their careers at risk, I don’t think they should be sharing a portion of any settlement or judgment the government gets from a company.  Rather, the government ought to set aside a portion of the proceeds to compensate whistleblowers who lose their jobs as a result of their action.  Whistleblowers should be compensated for their economic loss rather than enriched.  Moreover, the compensation shouldn’t depend solely on whether the government reaches a settlement or wins a case.

There’s also something perverse about Congress’s continuing encouragement of private whistleblowers while simultaneously stripping the regulatory agencies of their authority and budgets.  If the regulators were properly funded, perhaps we wouldn’t have to rely as heavily on whistleblowers to unearth improprieties.


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