Whistleblower Programs Beefed Up for Federal Agencies

Burned by its failure to catch the Bernard Madoff Ponzi scheme, despite years of warnings from a tipster, the Securities and Exchange Commission couldn’t say no when Congress ordered it to pay whistleblowers.

There’s little love in official Washington for the Edward Snowden kind that takes secrets to the media. But people who turn in their bosses or companies to the government are viewed as heroes — eligible for compensation — in more and more corners of the federal bureaucracy.

“Let’s face it, blowing whistles is a career limiting, if not a career-ending act,” said Sean X. McKessy, chief of the SEC’s Office of the Whistleblower. In the high-dollar world of securities, he said, only a significant financial incentive would counterbalance that.

“We now have rewarded six people who have enabled us to prevent an ongoing fraud or conduct from getting worse,” he said. “I think that sends a message.”

Skeptics are countering that if the modest number of payouts doesn’t increase this year, faith in the program will wane.

“I have to tell you that the program has had small returns so far,” said Patrick Burns, co-director of Taxpayers Against Fraud, a nonprofit group that backs whistleblowers. “The SEC is an apple tree. … We think it will produce more apples in the future.”

The Dodd-Frank financial reform law requires that when the SEC gets a tip that results in a payment by the company of $1 million or more, the whistleblower gets between 10 and 30 percent of the amount recovered. Awards should tend to the high side when the whistleblower tried to report the fraud within the company first.

The SEC’s Office of the Whistleblower has so far paid $14.88 million to its six whistleblowers. That total, though, is dominated by one $14 million payout on a case the SEC declines to detail.

Click here to read more in the Pittsburgh Post-Gazette.