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FCPA Blog Daily News

« Koehler: Individual Prosecutions Lag Corporate Settlements | Main | Steal This Form »
Tuesday
Sep202011

Where Ombudsmen And Whistleblowers Meet

 
If you listen closely, you can hear the growing avalanche of whistleblower complaints. Unlike the pre-UK Bribery Act hysteria, business concerns about a significant rise in whistleblower complaints are legitimate. Whether there will be 30,000 complaints filed annually with the SEC is hard to predict. Even if the number of complaints filed is less than 30,000, companies need to prepare.
 
Much has been written lately about how to make internal reporting more attractive to whistleblowers. Under the current rules, whistleblowers have to file a complaint with a company and wait 120 days before going to the SEC. There are a few exceptions to the general rule.
 
One idea for making internal reporting more attractive may be the creation of a Whistleblower Ombudsman.  Under this proposal, a company would create a separate and independent office which would report directly to senior management and/or the Board of Directors. The Ombudsman would be responsible for investigating and recommending to the Company actions needed to resolve the whistleblower’s complaint. If necessary, the Ombudsman could coordinate with the SEC, so that the company could lodge a legitimate cooperation claim in the event that the Ombudsman determines that there is merit to the complaint under SEC statutes and regulations.
 
The Ombudsman procedure has two attractive benefits – first, it will create a legitimate and credible procedure for the company to offer to whistleblowers; and second, it may relieve some of the pressure on the company to self-report potential violations within the 120-day initial waiting period by creating an “institutional” reporting system which can be monitored for timely investigations of potential violations.
 
More importantly, the independence of the Ombudsman will demonstrate the company’s credible claim to address wrongdoing, at every level, of the company’s operations. Independence is the key. Credibility must be maintained and fair resolution of complaints must be the norm.
 
This is an interesting idea and one I encourage companies to examine carefully.

___________

Michael Volkov is a partner at Mayer Brown LLP in Washington, D.C. His practice focuses on white collar defense, compliance and litigation. He regularly counsels and represents clients on FCPA and UK Anti-Bribery Act issues. He can be contacted here.

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