As the Financial Times recently reported, banks are bracing for the “deepest job cuts since the financial crisis,” with “super brutal” layoffs. Non-bank lenders and service providers have already been suffering with several rounds of layoffs and potentially more to come. Former employees, particularly disgruntled ones, may have information they want to share with the government. An Insider article highlighted that remote work has resulted in a flurry of complaints from whistleblowers. If true, even current employees, including those whose complaints or grievances fall on deaf ears, could also be potential whistleblowers.
Alston & Bird partners Nanci Weissgold, Joey Burby and Cara Peterman (assisted ably by Charlotte Bohn, Andrew Brown and Melissa Malpass, and special thanks to them) addressed today’s challenging economic conditions and how companies can protect themselves during an expected rise in whistleblowing by disgruntled current and former employees. The webinar slides address:
- What you need to know about government whistleblower reward programs and laws with whistleblower incentives and protections, including the False Claims Act, FIRREA, and the SEC whistleblower program.
- Recent trends, developments, major settlements and awards in whistleblower-related settlements and litigation.
- Best practices for businesses when responding to, reducing, and defending against whistleblower reports.
Best Practices for Responding to Whistleblower Reports
#1: Keep complaints internal. It is critical to have procedures in place for employees (as well as contractors and other agents) to report compliance concerns. internally.
- Establish a compliance hotline or other means of anonymous
- have a anti-retaliation policy to protect employees making a report.
- Promote these policies and procedures, and train employees about them.
This is a required element of an effective compliance program under the guidance of the DOJ and SEC, and is a factor in their collection decisions; also considered under the US Sentencing Guidelines to determine corporate penalties.
Additionally, internal complaints allow companies to investigate and redress (if necessary) and consider whether or how to disclose information. The 2023 revisions to DOJ’s Corporate Compliance Policy strongly encourage self-disclosure, offering significant incentives to companies that do so.
#2: Maintain a robust Compliance Management System (CMS). A strong CMS is one that establishes compliance responsibilities, communicates those responsibilities to employees, ensures that responsibilities are carried out and met, takes corrective action, and updates tools, systems, and processes as necessary.
Tailored to the size of the company’s operations, a CMS requires:
- A strong board of directors and management oversight – “tone at the top.”
- Complete written policies and procedures to demonstrate an understanding of all applicable laws and regulations.
- Training on all applicable laws to ensure employees can perform their duties.
- Monitoring and testing based on a risk assessment carried out through three lines of defense:
(1) functions that own and manage risk; (2) functions that oversee risk; and (3) functions that provide independent assurance.
- Timely corrective action that remedies past problems and prospectively prevents recurrence.
- Response to consumer complaints, root cause analysis and action across the company.
#3: time is of the essence. Whether you learn of a whistleblower report internally or through a government agency contact, you should initiate an internal investigation into the subject of the report. immediately. DOJ takes the immediacy of self-disclosure into account in determining whether to file charges. If there is ongoing problem behavior, you want to stop it and eliminate potential liability.
- What the investigation will entail and how it will be conducted will vary depending on the seriousness of the allegation and how credible it appears.
- Internal or external attorneys generally must conduct the investigation to ensure that communications and work product are protected by the attorney-client privilege.
- Some basic steps are common to almost all internal investigations:
- Make sure all potentially relevant documents (including emails and instant messages) are preserved.
- Collect and review relevant documents.
- Interview the employees involved (using upjohn warning).
As whistleblower reports are likely to increase, financial institutions need to ensure they are adequately prepared to address them.