Anonymous tips serve as the No.1 fraud detection tool available, according to the ACFE’s 2010 Report to the Nations on Occupational Fraud and Abuse, which states that tips are the leading source of initial detection of occupational fraud with a discovery rate of 40 percent. As helpful as tips are in the fight against fraud, those brave enough to come forward may be putting their jobs at risk. However, the key to protection can be as easy as understanding the legal provisions.
Several whistleblower protection laws and rules are in place to prevent retaliation against whistleblowers, including the Whistleblower Protection Act of 1989, Sarbanes-Oxley Act (SOX) and the Dodd-Frank Reform Act. But even with these protections, retaliation still occurs. In Tides v. The Boeing Co., the Ninth Circuit Court excluded two auditors from SOX whistleblower protection because the whistleblowers went to the media instead of approved recipients such as supervisors, law enforcement and Congress. These two Boeing auditors were not the first to make the mistake of going first to the media. An Air Marshall did the same thing in 2009 when he expressed concern that Air Marshalls would not be flying on long, non-stop flights in order to accommodate budget constraints.
Aside from the importance of using the right channels for anonymous tips, courts have also expressed concern over informants coming forward with wild accusations. In 2006, a whistleblower went to authorities with office gossip about possible fraudulent misstatements by Northwestern University made in efforts to secure a more favorable bond rating and loans. When the claims proved baseless, the courts denied the informant whistleblower status citing inadequate evidence.
These cases show that prospective whistleblowers should be mindful of the elements that allow for protection. Unfortunately, such confusion on what it takes to qualify for whistleblower protection may silence many, possibly explaining why most tips come in anonymously or from company outsiders, with just 49 percent of tips coming from employees, per the Report to the Nations. Employers who wish to mobilize their workforce to fight fraud should do their best to ensure that whistleblowers feel comfortable coming forward in spite of what they may fear by putting in place vigorous whistleblower protection programs in their organizations that can include whistleblower hotlines and anonymous update mechanisms.
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