New research: US bounty hunting model, cronyism and the revolving door between regulators and bounty hunting law firms

Dr Minh Alexander retired consultant psychiatrist 12 August 2022

Very important new evidence has arisen from hard-won FOI data that the US government bounty hunting programme has been tainted by cronyism and a revolving door between regulators and industry, and all facilitated by secrecy.

Alexander Platt an Associate Professor of Law at the University of Kansas has succeeded, after a two year battle, in uncovering the dominance of a small number of specialist law firms. Under cover of great secrecy, these “repeat players” have been hoovering up the bounty cash. It also seems that there is a revolving door and that law firms with ex-regulatory staff have been more favoured. Eye watering amounts of public cash have been involved, with law firms taking upwards of 30-40% contingency fees from hundreds of millions dollars of bounties.

Platt reported that one former senior Securities and Exchange Commission (SEC) lawyer, now a bounty hunter, was:

“…responsible for 10 awards in my [his] dataset, accounting for $152,575,000 – about 20% of all dollars awarded.”

This is Platt’s highly significant paper:

The Whistleblower Industrial Complex

The terrible mess described by this study is the very system that the lamentable Whistleblowing APPG and its troubling secretariat WhistleblowersUK want to introduce to the UK.

It is hardly surprising that monetising a core public function would lead to such a situation. This is a key reason why so many genuine whistleblowers oppose the appalling proposals.

I have been exchanging correspondence with the government department which currently controls UK whistleblowing law, BEIS, to raise concerns about the Whistleblowing APPG’s proposals.

As per usual, the government’s responses have been deflective and impenetrable. But I have now sent through the Platt paper as further evidence of concern. Given the high risk of misuse of public funds if the US bounty hunting model is replicated in the UK, I have copied my correspondence to the Public Accounts Committee, the Standards Committee and to Lord Evans, Chair of the Committee on Standards in Public Life.

Lastly, thanks go to my sharp-eyed other half who spotted the Platt paper. It was also he who originally spotted that Whistleblowers UK had been knocked back by an Employment Tribunal when they charged a whistleblower £150 an hour for sorting documents into date order,  and the bill was presented to the Tribunal despite WBUK not being a legitimate entity under Tribunal rules. It was neither a charity nor a regulated claims manager.

Recent correspondence with BEIS is copied below:

BY EMAIL

Lord Callanan

Minister for Business, Energy and Corporate Responsibility

12 August 2022

Dear Lord Callanan,

University of Kansas: Evidence that the US bounty hunting model of whistleblowing sets up perverse incentives and wastes public funds on an industry that massively profits lawyers

Thank you for the letter from your department of 30 June 2022, attached, which is a reply to my letter to you of 30 May 2022, copied below.

In my letter I raised serious concerns about the nature of the Whistleblowing APPG, the APPG’s legislative ambitions, the PM’s Anti Corruption Champion John Penrose MP’s support of these ambitions and the conduct of its secretariat the private organisation WhistleblowersUK.

WhistleblowersUK has asked distressed whistleblowers for money for services, and in plain view it has solicited bereaved members of the public, to proffer legal services. There have been other concerns.

My reading of your department’s response to me is that it has not truly engaged with widespread whistleblowers’ concerns about those who would replace very weak existing UK law with something that is no better, and is in fact arguably worse in its exploitativeness.

I write now to pass on an item of academic research from Kansas University which has found cronyism and highly questionable practices at the heart of the US bounty hunting model, that some wish to import to the UK.

This is a link to the substantive report by Alexander Platt, Associate Professor of Law at Kansas:

The Whistleblower Industrial Complex

It concludes that the US Securities and Exchange Commission and the US Commodity Futures Trading Commission have operated their whistleblower reward programmes in such a way that:

“…private whistleblower lawyers operate free from virtually all public accountability, transparency, or regulation”

A press report by Kansas University sums up the findings thus:

“the CFTC has awarded nearly two-thirds of all money to tipsters represented by a single law firm and the SEC had disproportionately favored tipsters represented by former SEC officials”

“About one-quarter of dollars awarded by the SEC have gone to clients of lawyers who formerly worked for the agency. Platt estimates that means as much as $70 million has been paid by the SEC to its own alumni.”

These revelations came only after a two year FOI battle by Professor Platt with the Securities and Exchange Commission and Commodity Futures Trading Commission, with improper secrecy being another criticised aspect of the matter.

STUDY SHOWS WHISTLEBLOWER PROGRAMS MARRED BY CRONYISM, MISMANAGEMENT, SECRECY

The relevant tables from Professor Platt’s paper are copied below. 

 These tables show that a huge proportion of the monies paid out from the public purse go to the lawyers, and that a small number of law firms (“repeat players”) dominate the scene.

Astonishingly, Professor Platt also established from the FOI data that Jordan Thomas the former US official, who established SEC’s whistleblower programme but went into private practice, was:

“…responsible for 10 awards in my [his] dataset, accounting for $152,575,000 – about 20% of all dollars awarded.”

I hope all this illustrates graphically how ill-advised monetisation of whistleblowing will introduce all sorts of perverse incentives practices, that have nothing to do with the public interest whatsoever.

It would serve only to enrich a tiny few, whilst large tranches of socially important but unprofitable whistleblowing will be pushed aside by those who primarily seek to extract money from whistleblowing. The repeated scandals in the health and care sectors will not be improved by adopting this very flawed US model, as it rests only on financial recovery of looted money from scams in the financial sector. 

I really do urge the government not to follow the US down this rabbit hole of injustice and highly questionable use of public money.

I should point out that the much-criticised Whistleblowing APPG and its even more troubling secretariat have received funds from the US bounty hunting law firm Constantine Cannon.

In December 2021, Constantine Cannon was open about its recruitment of a former SEC official:

Former Regional Director of the SEC’s Chicago Office Joins Constantine Cannon’s Whistleblower Practice

I would be grateful to know where the government currently stands on adoption of the Whistleblowing APPG’s proposals for an Office of the Whistleblower as set out in the Robinson/Kramer Bills:

Protection of Whistleblowing Bill

I copy this to Public Accounts Committee, the Standards Committee and Lord Evans of the Committee for Standards in Public Life with reference to the high risk of misuse of public funds if the Whistleblowing APPG’s proposals are adopted.

Yours sincerely,

Dr Minh Alexander

Public Accounts Committee

Standards Committee

Lord Evans, CSPL

From: “BEIS Correspondence” [address redacted]

Subject: A response to your recent enquiry – Ref: TOB2022/13299

Date: 30 June 2022 at 14:44:53 BST

To: Minh Alexander [address redacted]

Reply-To: BEIS Correspondence

Dear minh alexander,

Please find attached our response to your recent enquiry.

Regards,

Kirsty Wallace

BEIS RESPONSE 30 JUNE 2022 WHISTLEBLOWING LAW / ECONOMIC CRIME BILL

—–Original Message—–

From: minh alexander [address redacted]

To: REDACTED

CC: REDACTED

Sent: Mon, 30 May 2022 23:42

Subject: Concerns about lobbying by various parties to add flawed whistleblowing provisions to the Economic Crime Bill

BY EMAIL

Lord Callanan

Minister for Business, Energy and Corporate Responsibility

30 May 2022

Dear Lord Callanan,

Concerns about lobbying by various parties to add flawed whistleblowing provisions to the Economic Crime Bill

I write to raise a concern about the proposals by a number of parties to insert whistleblowing clauses into the Economic Crime Bill (ECB), which will not serve the public interest.

1)    The organisation Protect has petitioned to piggyback the creation of its version of a Whistleblowing Commission onto the ECB.

Protect’s Whistleblowing Commission ultimately does not compel investigation of and follow up on whistleblowers’ concerns, thereby replicating the core weakness of existing UK whistleblowing legislation which has been failing whistleblowers for over twenty years.

Whistleblower colleagues and I have provided a critique of critique of Protect’s whistleblowing Bill and its flawed model of a Whistleblowing Commission. Protect’s offering is not much of an advance on the Public Interest Disclosure Act, which has failed whistleblowers and the public for so long.

2)    The controversial Whistleblowing APPG, established with funding from US bounty hunting lawyers, has lobbied to piggyback the creation of an even worse US style “Office of the Whistleblower” onto the ECB.

The Whistleblowing APPG has an extremely troubling secretariat, the organisation private WhistleblowersUK. This organisation has openly supported financial rewards and financial “recognition” for whistleblowers.

Shockingly, WhistleblowersUK has approached bereaved people on social media to proffer legal services. I see this as part of a campaign to broaden the UK definition of whistleblower, to create the conditions for US style bounty hunting, where any informant can claim a bounty, even criminals.

Some members of the Whistleblowing APPG have also called for whistleblowers to be “rewarded” and “incentivised”.

The majority of genuine whistleblowers do not support such a US bounty model. Apart from conflicting with public sector Nolan principles, conflating genuine whistleblowing with the use of paid informants brings the good name of whistleblowers and whistleblowing into jeopardy. Whistleblowers already struggle to be heard and believed. They do not need to be further stigmatised.

Any Office set up primarily to retrieve money will also neglect whistleblowers from non-financial sectors and those whose disclosures are concerned with protecting people and not property.

If those lobbying in the interests of the bounty hunting industry succeed in massively widening the UK definition of a whistleblower, in order to recoup maximum profit for the industry, this dilutes the availability of finite protection resources for workers who are the real whistleblowers, and who need protection from severe detriment such as job loss.

The recent ten minute Bill put forward by the Whistleblowing APPG on 26 April 2022 has many worrying features. It can be understood as a bounty hunters’ Bill. The Bill proposes a scheme for whistleblower “recognition” which appears to mean financial recognition. The Bill also proposes massive fine of up to £18 million or more, which would cause great harm if levied against a public service. Whistleblower colleagues and I have prepared a formal critique to point out numerous areas of concern in the Whistleblowing APPG’s Bill, and the ways in which it gives comfort to bounty hunters:

A Bounty Hunters’ Bill? A critique of the Whistleblowing APPG’s April 2022 Bill

I ask that if the government makes any whistleblowing provision within the Economic Crime Bill,

1)    That it does not create any Whistleblowing Office or Commission under government control. Independence is key and the majority of whistleblowers see full independence of a whistleblowing agency as a key issue.

2)    That the list of those protected is restricted to workers, close relatives who may be equally affected by detriment and a number of relevant non-workers such as listed by the EU Whistleblowing Directive (contractors etc…)

3)    That it ensures that any whistleblowing body created has a remit and powers to investigate whistleblowers’ concerns if employers and regulators fail to investigate or fail to investigate appropriately

4)    That financial rewards for whistleblowing are explicitly prohibited, and that fair compensation for loss and non-financial redress are the remedies

5)    That any whistleblowing body created has powers to litigate to protect the interests of whistleblowers, for example by making relevant third party interventions

6)    That any whistleblowing body created does NOT have the power to impose fines on public bodies, only against individuals, in recognition that public services should not suffer because of wrongdoing by senior managers.

7)    That any whistleblowing body created is tasked with ensuring maximal early protection, conflict resolution and minimisation of wasteful litigation. The Whistleblowing APPG’s Bill fails to provide these elements, and perhaps unsurprisingly so, as it is not in the bounty hunting industry’s interest for conflict and litigation to be reduced.

8)    That criminal offences are created in line with the full range of dissuasive penalties specified in the EU Whistleblowing Directive, and that any new whistleblowing body has powers of prosecution and to refer for prosecution.

9)    That there are no legal barriers inserted which could be abused in order to persecute whistleblowers. For example, the Whistleblowing APPG Bill proposes, without definitions, that its Office of the Whistleblower may reject “frivolous, malicious or vexatious” whistleblower complaints. Given that the ‘good faith’ test of the Public Interest Disclosure Act was much abused before it was abolished, it would be seriously retrograde to re-introduce a means by which whistleblowers could be smeared as a legal technique for undermining their cases. 

Lastly, please find below a link to an FOI disclosure by the Home Office which reveals email correspondence between the Whistleblowing APPG Chair and the Prime Minister’s Anti Corruption Champion. This confirms that the intention was to use a ten minute rule Bill by the APPG to target the Economic Crime Bill:

“I have just agreed to be a co-signatory to this 10-minute rule Bill next week, as a way of getting it onto the Government agenda in advance of ECB2.”

Yours sincerely,

Dr Minh Alexander

Retired consultant psychiatrist and NHS whistleblower

Cc Matthew Rycroft Permanent Secretary Home Office

     Sarah Munby Permanent Secretary BEIS

One thought on “New research: US bounty hunting model, cronyism and the revolving door between regulators and bounty hunting law firms

  1. Thank you, Dr A.
    What a disturbing report – unfortunately, not in the least surprising in the context of a general moral malaise in Western values.
    I just hope your well-founded critique isn’t read, not as a warning, but as a blueprint for the UK.
    I won’t expand because it is difficult to find something constructive in what has been an obvious cause for concern for a considerable time.
    But, I do thank you. No good deed is ever wasted – in the short, medium or long term.

    Like

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