So how will the upcoming financial reform legislation affect future whistleblowers? Well, the House-Senate conference committee approved July 16 an amendment that will improve the value of whistleblower complaints within the SEC (SEC news). According to a press release from Rep. Ed Royce (R-Calif.), a senior member of the Financial Services Committee and co-founder of the proposal, the Whistleblower Amendment will create a separate office within the agency to "better protect whistleblowers and ensure their concerns are being acted upon by the SEC."

Empowering whistleblowers may help thwart the type of corporate abuses (fraud news) that led to the financial crisis as "whistleblower tips were responsible for detecting 54 percent of fraud schemes at public companies," noted the release. "External audits, like those conducted by the SEC, accounted for four percent of fraud cases detected."

Another whistleblower provision to be considered by the conference committee could lead to a substantial increase in multi-million dollar awards to whistleblowers. It would allow employee whistleblowers to receive up to 30 percent of the fines collected from corporations who violate the Foreign Corrupt Practices Act.

According to a recent study by professors at the University of Chicago and the University of Toronto, that might be a much needed driving force for the whistleblower community. A 2008 report titled, "Who Blows the Whistle on Corporate Fraud?" found that incentives to become a whistleblower are "weak." The study's authors concluded that "the role of monetary incentives should be expanded," and they suggested extending the Federal Civil False Claims Act to corporate frauds, allowing those whistleblowers to receive a percentage of the money recovered.

As Swiss banker turned whistleblower Bradley Birkenfeld and former CFO George Fort demonstrate, whistleblowers sometimes pay a hefty price. "In 82 percent of cases with named employees, the individual alleges that they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light," said the study's authors. "Many of them are quoted saying, ‘If I had to do it over again, I wouldn't.'"

Perhaps a monetary incentive would motivate more members of the financial services industry to blow the whistle on corporate fraud. But it could also prove dangerous, possibly leading to more false alarms driven by nice, big payouts. Future whistleblowers will just have to wait and see whether the final reform legislation will help or hinder their ability to make a case.

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