We have seen a number of substantial whistleblower awards make headlines this year, but a recent article on nytimes.com discusses the potential downsides of government-sponsored bounty programs: rewarding whistleblowers by paying them millions of dollars for information may lead to perverse incentives by allowing wrongdoers to win significant sums of money with little government accountability for the awards.
The Times article discusses how whistleblowing may reward wrongdoers by incentivizing bad behavior. Bounty programs may motivate potential whistleblowers to engage in illegal acts so that they can later call the government and receive a sizable award. Whistleblowers can collect millions of dollars for informing the government of illegal acts that they took part in. In addition, the SEC can keep the identities of whistleblowers secret, leaving the public without any means to assess whether multi-million dollar whistleblower awards are deserved.