The importance of tipping
What do we owe whistleblowers?
The Washington Post ran a lengthy story today about trouble inside the Securities and Exchange Commission with regard to whistleblowers. It’s not that the SEC, which regulates our stock and equities markets, has too few whistleblowers–it has too many.
Rather than rehashing the many instances related in the article of worthwhile tipsters being overlooked because the SEC has no better than an ad hoc approach to private tips, I’ll just pass along this one:
In the case of Bernard L. Madoff, whistleblowers had provided credible information to various SEC units for years. The most prominent of these informants, a Boston financial analyst named Harry Markopolos, contacted the enforcement division on numerous occasions, according to the SEC’s inspector general. In one instance, Markopolos provided a detailed explanation of why Madoff’s business was probably a fraud. Enforcement officials listened, but they dismissed him in their internal discussions. Two former enforcement officials told the inspector general that they discounted Markopolos’s information because he was not an insider in Madoff’s company.
Oops.
So what’s the problem? Here’s what he SEC’s Tip Czar (I made that title up) has to say:
“There was no uniformity to it. Every division and office had its own system of recording, tracking or handling tips and complaints. That system was pretty rudimentary,” said Steve Cohen, the official tasked by Schapiro to overhaul the agency’s tips, complaints and whistleblower program. “We’re already working to acquire and deploy technology that centralizes all of the agency’s tips and complaints so they can be sorted, reviewed, analyzed and tracked.”
The ethics of whistleblowing tend to focus on whether the tipster herself has an obligation to come forward. Sometimes, the whistleblower knowingly participates in illegal activity before coming clean, but other cases can be more complicated. Instances of illegal pollution, for example, often involve a chain of individuals each dutifully doing their jobs, unaware that the end result of their respective decisions will be gallons of toxic waste headed for the river. The person who does discover the malfeasance may be far removed from the person who puts the whole chain into motion, and she may have little internal authority to put a stop to the illegal practice.
In those cases, some of those who study institutional responsibility suggest that the seemingly powerless — but aware — employee must give “voice” to the problem in one of a few ways: she could raise the issue internally; she could exit the organization; or, she could blow the whistle.
Once the whistleblower goes to the feds or the public, the movie versions of these stories take care of themselves. Public pressure may force a change or the law simply intervenes.
But the SEC’s myriad problems absorbing credible tips suggests there’s a big gap between bringing illegal conduct out into the open and smooth intervention by the law. That gap is filled with an enforcement body–the police, the FBI, the IRS, etc.
In this case, the problem seems relatively straightforward. Enforcement bodies have an absolute obligation to provide support to whistleblowers and tipsters. There should be easy to access the enforcement agency, to facilitate tipsters who may be under duress or restricted in communications. And there should be systems that can effectively distinguish between good and bad tips.
Whistleblowing is a moral imperative in instances of institutional wrongdoing precisely because good laws are meant to be enforced. If there were no faith in the rightness of the law, whistleblowers would have few incentives to risk their careers, their livelihoods and, occasionally, their physical lives. Similarly, without good ways to receive tipsters, the law abandons a critical weapon – the cooperation of good citizens – in an effort to maintain the peace.
Anything less than the best effort to attract, listen to, and act upon tips is a gross dereliction of duty.
-Sam
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