Constantine Cannon Attorneys Explain How the Recent Conviction of Theranos COO Sunny Balwani Underlines the Need to Expand Whistleblower Rewards Programs

As Gordon Schnell and Max Voldman explain in Fortune, the Balwani conviction closed a chapter that began several years ago when whistleblowers at the company reported to the press and authorities what they saw as something very wrong in Elizabeth Holmes’ biotech startup.  They followed a path many whistleblowers have taken, risking their own careers and livelihoods, to stop what they saw as serious fraud and misbehavior.

Like with Theranos, many of these whistleblowers have exposed corporate malfeasance in the world of financial fraud, reporting their complaints and concerns to the SEC under the SEC Whistleblower Rewards Program created under Dodd-Frank.  Until recently, the SEC was an agency asleep at the switch, creating a Wild West of Enrons and Madoffs running amok.  This all changed with the SEC program under which successful whistleblowers can receive a 10-30% cut of any SEC recovery.  In the decade since the program launched, whistleblowers have led the agency to recover roughly $5 billion, re-energizing this once moribund enforcer.

In their Fortune piece, Mr. Schnell and Mr. Voldman point to the many other whistleblower rewards programs that have become critical to assisting the government in its effort to police fraud and corporate misconduct.  The most prominent of these programs is the False Claims Act, which allows whistleblowers to act as private attorneys general who can sue in the government’s name and take a hefty slice of any recovery (15-30%).  Using this law, whistleblowers have been responsible for roughly 70% of the $70 billion the government has recovered under the statute over the past several decades.

Mr. Schnell and Mr. Voldman also point to the recently enacted Motor Vehicle Safety Whistleblower Act, which like the SEC program provides auto safety whistleblowers up to 30% of any NHTSA recoveries.  And they point to the various programs which provide rewards for whistleblowers reporting on money laundering, and foreign corruption and kleptocracy.  They are especially important programs these days in the wake of Russia’s horrific campaign against Ukraine.

According to Mr. Schnell and Mr. Voldman, “whistleblowers provide a window into the fraud and misbehavior that would otherwise go undetected . . . [and] make this world a better and safer place for all of us.”  All the more reason they argue as to why Congress should move to fill the significant whistleblower gaps that remain in such areas as antitrust, fair trade, consumer protection, environmental safety, clinical trial fraud, and wildlife endangerment, just to name a few.

In closing, Mr. Schnell and Mr. Voldman acknowledge the long way we have come “in changing the narrative of the whistleblower as a snitch or meddler to the brave and selfless heroes they truly are.” But they argue there is a lot more we can do “to more broadly embrace the critical role of whistleblowers,” and how if we do so, “[w]e will all be the better for it.”

Click here to read the full article in Fortune.

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