In this era of whistleblower risk, companies need to prepare for whistleblower complaints which are made outside the company. Whistleblowers are not required to report complaints internally nor wait for any specific period of time to benefit under the SEC whistleblower program.
Instead, whistleblowers have an incentive to wait for 120 days before contacting the government. Under the SEC’s whistleblower regulations, a whistleblower is entitled to a larger award if he or she waited 120 days after reporting the complaint internally to contact the government.
I have repeatedly advocated for companies to create whistleblower triage programs which are designed to identify and assess whistleblower complaints before or immediately after the complaint is lodged with the government. If identified early, a company can determine how to respond to a whistleblower complaint an minimize any risk of a government enforcement action.
As part of a triage program, a compliance officer needs to work closely with human resources and others inside the company to develop whistleblower intelligence. What do I mean?
Human resources gathers valuable intelligence on employees and can identify those who are unhappy. These employees are at risk for becoming whistleblowers. Once identified, a proactive strategy for addressing their concerns should be developed and executed.
A list of unhappy employees should be created. Initially, it has to be emphasized that no action, formal or informal, should be taken against any of these employees to avoid any appearance of “retaliation.” To the contrary, the company should bend over backwards to contact the employee and hear the employee’s concerns. The potential whistleblower should be dealt with respectfully and should be given a chance to articulate his or her specific concerns.
A proactive approach to potential whistleblowers is very risky. Every interaction is risky and can be “used” against the company. Some basic rules need to be followed:
1. Listen to the Whistleblower – In dealing with a whistleblower, it is critical to listen to the whistleblowers concerns. The whistleblower must be given an opportunity to describe all of his or her concerns. While listening, it is important for the company representatives to avoid prejudging any issue, suggesting that the whistleblower is wrong, and brushing aside any of his or her specific concerns. A company representative should take notes during the meeting and write down all of the whistleblowers concerns.
2. Do Not Overpromise: At the conclusion of an initial meeting with a whistleblower, the company representative should inform the whistleblower that the company will review the allegations, conduct a “preliminary” investigation and report back to the whistleblower during, or at the conclusion of, any investigation. It is important to inform the whistleblower that the company will continue to keep the whistleblower informed and may have follow-up questions as the review of this matter continues. Every interaction with the whistleblower should be documented so that a record of every step is maintained.
3. Conduct a Fair Investigation – Depending on the nature of the allegations, a follow up inquiry should be conducted. The steps taken in the investigation should be documented.
Any investigation and resolution of an allegation should be fully explained. The facts should be described and any credibility determinations should be recorded. If necessary, the whistleblower should be contacted and interviewed on any follow up issues identified during the investigation.
As allegations are resolved against a whistleblower, a company representative should meet with the whistleblower and describe to the whistleblower the results of the inquiry. The resolution of an investigation does not require a lengthy explanation of how the company reached its determination, nor should the specific steps taken during the investigation be described.
The whistleblower will request that company representative explain why the whistleblower’s allegations were rejected. The company representative should be very careful to limit any disclosure of how the investigation was conducted and the reasons for the company’s determination. As always, every interaction and communications with the whistleblower should be documented.
If the whistleblower’s complaint has merit, the company should respond immediately and take steps to correct the problem. The whistleblower should be informed of the result of the investigation and the steps taken to correct a problem. The whistleblower should be thanked and even rewarded for bringing the issue to the company’s attention