Alexander I. Platt (University of Kansas School of Law) has posted The Whistleblower Industrial Complex on SSRN. Here is the abstract:
Ten years ago, the Securities and Exchange Commission made its first “bounty” payment to an individual who’d tipped the agency off to illegal activity. Since then, the agency’s whistleblower program and others like it around the government have grown rapidly, received universal acclaim, and become a core element of corporate law enforcement.
Yet, despite the growth, acclaim, and wide acceptance of these programs, little is known about how they actually work. Last year, the SEC received an average of 49 tips every single work day. The program’s success depends on the SEC’s ability to efficiently and reliably sift through this flood of tips and determine which ones merit further investigation. But, to date, the agency’s tip-sifting process has been entirely shrouded in secrecy.
This paper breaks new ground, offering a rare glimpse “under the hood” of the SEC’s whistleblower program. Using information obtained under the Freedom of Information Act, I present the first empirical examination of private whistleblower attorneys’ role in shaping the SEC’s selection of tips to investigate and reward. Among other things, I find that tipsters represented by lawyers outperform unrepresented ones, repeat-player lawyers outperform first-timers, and lawyers who used to work at the SEC outperform just about everybody. I also find that solo practitioners and traditional plaintiffs’ firms have done well, while female lawyers and large defense-side firms have not.
Drawing on these findings, the paper proposes a set of reforms to further elucidate and enhance the critical role played by these private actors in this important public program.
