WashU Expert: Should attorney whistleblowers be financially rewarded?

When lawyers blow the whistle on clients, should they be financially rewarded by the government?

Kathleen Clark, JD, professor of law at Washington University in St. Louis, and co-author Nancy Moore, JD, of Boston University School of Law, tackle this issue in their article, “Financial Rewards for Whistleblowing Lawyers,” slated for the November issue of the Boston College Law Review.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, if the U.S. Securities and Exchange Commission (SEC) issues a sanction greater than $1 million as a result of a whistleblower’s tip, the whistleblower can receive between 10 and 30 percent of the sanction amount.

The SEC receives thousands of these tips every year, and has issued over $50 million in whistleblower awards.

But can lawyers take advantage of these financial incentives?

“The SEC will be deciding whether to grant whistleblowing awards to lawyers through a secret proceeding that lacks an adversary presentation of issues and is largely insulated from judicial scrutiny,” Clark said.

Thus, Clark and Moore wrote in the paper, a company that might view itself as harmed by a lawyer-whistleblower’s disclosure to the SEC may never have an opportunity to contest the lawyer-whistleblower’s initial tip or eventual award.

Under another federal statute, the False Claims Act, whistleblowers have been granted more than $4 billion in awards.

While no lawyers have been named publicly as trying to collect an award under Dodd-Frank, the study analyzes several False Claims Act cases in which lawyers sought whistleblower awards.

The article is the first to conduct an in-depth analysis of legal ethics concerns that are key to determining whether a lawyer may receive a whistleblowing award under these federal programs.