When whistleblowers feed the government information about corporate malfeasance, the damage can be even more costly than expected. Even before the Securities and Exchange Commission started offering sizeable bounties for actionable information, the assistance of one or more tipsters in an enforcement action increased penalties by 30 percent and nearly doubled prison sentences.
That’s the conclusion of a new research paper, “The Impact of Whistleblowers on Financial Misrepresentation Enforcement Actions,” authored by Andrew Call of Arizona State University, Gerald Martin of American University, Nathan Sharp of Texas A&M University, and Jaron Wilde of the University of Iowa. The researchers compiled datasets of employee whistleblowing allegations obtained from the U.S. government and all enforcement actions for financial misrepresentation to investigate the effect of employee whistleblowers on the consequences of financial misrepresentation enforcement actions by the Securities and Exchange Commission and Department of Justice, and the effects whistleblowers have on penalties, prison sentences, and duration of regulatory enforcement actions for financial misrepresentation.
