Madam, – A question on The Irish Timeswebsite, "Do you believe new whistleblower legislation is necessary to fight white-collar crime?", is important in light of the accounting scandals at Anglo Irish Bank that have sullied the reputation of Irish business.
Simply passing whistleblower protection legislation that prevents an employer from retaliating against a whistleblower is unlikely to help prevent accounting fraud in Ireland, however. Such legislation does not seem to have been effective in curbing white-collar crime here in the US. It is likely to be even less effective in the smaller more closely interconnected world of Irish business.
A forthcoming study to be published in the Journal of Finance, (www.afajof.org/afa/forthcoming/ 4820p.pdf) provides some insights as to what type of whistleblower legislation might be effective in Ireland. In this study, the authors track how major accounting frauds were uncovered here in the US. They found that whistleblowers are much more likely to reveal accounting frauds in the healthcare industry than in other industries. The intriguing explanation for this result is that much of the accounting fraud in the healthcare industry in the US is committed against the government. And, thanks to the Federal Civil False Claims Act, when a fraud is committed against the government a whistleblower can claim between 15 and 30 per cent of the money recovered by the government (some whistleblowers have been paid rewards of up to $40 million under this legislation).
The implication of the results are clear: strong monetary incentives dramatically alter the effectiveness of whistleblowers as a mechanism for curbing major white-collar crime. – Yours, etc,