WHISTLEBLOWING – MANAGING RISK THROUGH EFFECTIVE RESPONSE

RC: How do corporates perceive the concept of whistleblowing? Are they taking a proactive approach, or is there still a need for increased awareness?

Kang: Companies are certainly becoming increasingly aware of the risks and issues posed by whistleblowers. The publicity surrounding recent high-dollar whistleblower awards – such as the $30m award announced by the SEC in September 2014—has certainly helped get the word out. That said, many companies have still not taken the affirmative step of re-evaluating their compliance policies and programs in light of the increase in whistleblowing activity. In today’s environment, all major companies should have a well-defined process for responding to and managing whistleblower complaints. For example, the Fifth Circuit recently held that a company’s identification of an employee as a whistleblower in a document preservation notice was an “adverse action” under the anti-retaliatory provisions of the Sarbanes-Oxley Act. Therefore, companies failing to establish well-defined internal processes for managing employee complaints can result in companies not only paying large penalties under the False Claims Act, but also potentially being accused of having engaged in retaliatory conduct.

Hedley: Corporations understand that their employees are critical in uncovering major misconduct. They also have a much better chance of detecting misconduct in a timely fashion if they take proactive steps to help ensure employees know they have an affirmative obligation to report misconduct, and, importantly, that they can do so without fear of retaliation. With respect to awareness of whistleblower mechanisms, there is always a need for increased awareness. There is always room for improvement and this is especially true for those organisations that happen to place lower on the ‘maturity scale’ of compliance programs.

Apr-Jun 2015 Issue

Alston + Bird LLP

Arnold & Porter LLP

KPMG LLP

Sullivan & Cromwell LLP