Jaron Wilde
24 The Iowa Ledger
“The awards for whistleblowing can be substantial,” says Wilde, noting that they range from 10% to 30% of the collected penalty amount. For example, in 2012, Bradley Birkenfeld—a former UBS employee who blew the whistle on the Swiss bank’s massive fraud scheme—ended up in prison for enabling a client’s tax evasion, yet the IRS awarded him $104 million for speaking up. The Department of Justice has said they could not have cracked the case without his help. To study outcomes of financial misrepresentation enforcement actions, Wilde and his three co-authors once again are examining firms that made financial misstatements. Wilde says one of his co-authors spent years combing through records to identify the SEC enforcement actions that the research team compares with OSHA’s whistleblower data. “Often, there are penalties and sanctions on the company, high-level employees, and others. They can range from civil monetary penalties imposed on the firm to criminal penalties brought against individuals to penalties assessed against affiliated parties, such as the auditor,” says Wilde. “Some penalties come from the SEC and some from the Department of Justice. Our data covers both, but only for misconduct in financial misstatements—not for other forms of misconduct such as insider trading.” According to their research, whistleblowing creates significant increases in penalties and punishments. “We find that whistleblower involvement in financial fraud cases is associated with higher penalties for employees and companies. The executives receive significantly higher prison sentences. However,
enforcement actions involving whistleblowers are associated with significantly longer regulatory proceedings.” Their findings show that whistleblower involvement: • Is associated with an average of $39.18 million in penalties to the firm, as opposed to $8.72 million when no whistleblower was involved (after controlling for other factors related to the outcome). • Is associated with employee penalties of $69.35 million vs. $22.83 million when no whistleblower came forward. • Is associated with prison sentences for employees that were nearly double (41.87 months vs. 22.5 months) when no one blew the whistle.
Contributing to the Conversation “To me, deterrence is the heart of enforcement in many ways, and whistleblowing is a significant feature of that deterrence,” Wilde says. “We’ve seen many instances where very sophisticated individuals were unable to detect misconduct without help from within the firm.” Wilde is excited to be part of the discussion about this recent development in uncovering financial fraud. “This notion of whistleblowing is becoming increasingly relevant to regulators and groups from Congress,” Wilde says. “There is some debate about the efficacy of whistleblowing programs and criticisms of whistleblowing per se. I hope I can contribute to the conversation and provide useful, relevant information to regulators, boards, and others.” —by Ruth Paarmann
Henry B. Tippie Receives ISCPA Honor It was a proud moment for Henry Tippie when license number 276 from the Iowa Professional Licensing Bureau was awarded to him in 1951. He had earned his CPA. With today’s new licenses numbering 12,253 and above, the growth of CPA licenses in the state of Iowa is impressive. Although Henry’s achievement occurred 65 years ago, Henry maintained a long relationship with the Iowa Society of CPAs. He received the Iowa Society of CPAs Public Service Award last spring. The award honors society members who, through their continuing involvement in charitable, professional, governmental, and other public service organizations, have made an outstanding contribution to the community, and have enhanced the professional image of CPAs. Tippie began his professional career as a junior accountant in the Des Moines area after completing an undergraduate degree in accounting at the University of Iowa in 1949. Today, he is chairman of the board for Dover Motorsports Inc. and Dover Downs Entertainment Inc. Tippie was an original member of the college’s Board of Visitors (now called the Tippie Advisory Board). In 1999, he made a significant contribution to the College of Business to support its students and faculty. The college was renamed the Tippie College of Business in his honor. Tippie College of Business 25