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Whistleblower Fraud Study Reports Problems and Opportunities

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Fraud Study Says Whistleblowers Are The Most Common Means Of Identifying Fraud, But This Comes At A High Personal Cost When Whistleblower Anonymity Is Not Maintained


A February 2007 study by three professors looks at 230 of the U.S.’s largest public company frauds disclosed between 1996 and 2004. The study, entitled “Who Blows the Whistle on Corporate Fraud?” addresses how each fraud was discovered. Consistent with every other study on the subject, employee whistleblowers are the largest discovery mechanism.

Because these were the largest frauds during this period, multiple employees at each company knew at least a portion of what was happening. Consequently, employee whistle blowing could have been an even more important means of discovery. The study notes that employee reporting was not more widespread because employees have considerable disincentives personally. In 82 percent of the cases with employee whistleblowers identified, the whistleblower “alleged they were fired, quit under duress, or had significantly altered responsibilities as a result of bringing the fraud to light.”

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