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  • Should the Motivations and Personalities of the Internal Whistleblower be Relevant to the Truth of the Allegations?
    03/02/2013 | by Lipman, Frederick D.
    Some people believe that the motivation and personality of an internal whistleblower are relevant to the validity of their allegations. A cogent argument can be made that neither the motivations nor personality of the whistleblower have anything to do with the truth of their charges.

    The SEC made exactly that same mistake in refusing to take seriously the complaint of Harry Markopolos who claimed that he had discovered the Madoff Ponzi scheme, approximately 8 years before it was revealed.[1] Harry Markopolos, a quantitative financial analyst, first blew the whistle on Bernard Madoff's multibillion-dollar Ponzi scheme in 2000, and over the ensuing eight years preceding Madoff's arrest, sent detailed accusations to various Securities and Exchange Commission offices. Each report met with a thundering silence. Harry's investigation started when his bosses at the money management firm he worked for wanted him to design a financial product that was as consistently profitable and low-risk as the one offered by Madoff. It took Harry only a few minutes to study Madoff's supernaturally consistent rate of return and "investment strategy" to realize it was most likely a fraud.

    The SEC likely viewed Harry Markopolos as motivated by a desire to hurt a competitor, namely Madoff, who was allegedly producing better returns for his investors than Harry Markopolos was producing for his company.[2] The following is a passage from Harry Markopolos' book:

    "Certainly one reason that office [the SEC's New York office] paid so little attention to my submission is that they believed my motive for pursuing Madoff was to collect a big reward. Bachenheimer [Doria Bachenheimer, Assistant Director of the SEC's New York branch office] described me to SEC Inspector General David Kotz as 'a competitor of Madoff's who had been criticized for not being able to meet Madoff's returns, and that he was looking for a bounty' – information she probably got from my previous public testimony. She added, 'If the first thing I hear from someone is what's in it for me, then it raises my antenna a little bit.'" [3]

    Academic researchers[4] have long studied the various motivations of whistleblowers. These motivations vary from very honorable and honest motivation, such as altruistic behavior[5] to do the right thing or to resolve an injustice[6], to devious motivations such as taking advantage of statutory protections of whistleblowers.

    In the end, however, the motivations of the whistleblower are arguably not relevant to whether the whistleblower's allegations are true or false.

    [1] Harry Markopolos with Frank Casey, Neil Chelo, Gaytri Kachroo, and Michael Ocrant, “No One Would Listen: A True Financial Thriller” (John Wiley & Sons, Inc.2010) p. 171
    [2] Id.
    [3] Id at p. 156
    [4] Michael J. Gundlach, et al, “The Decision to Blow the Whistle: A Social Information Process Framework”, Academy of Management Review, Vol 28, No. 1 (Jan., 2003), pp. 107-123; Marcia P. Miceli and Janet P. Near, “The Incident of Wrongdoing, Whistle-Blowing, and Retaliation: Results of a Naturally Occurring Field Experiment”, Employee Responsibilities and Rights Journal, Vol. 2, No. 2, 1989; Janet P. Near (Indiana University) and Tamila C. Jensen (Boren, Elperin, Howard, and Sloan Attorneys at Law, “The Whistleblowing Process: Retaliation and Perceived Effectiveness”, Work and Occupations, Vo. 10, No. 1, February 1983 3-28.
    [5] Brief, A.P. & Motowidlo, S. 1986, “Prosocial organizational behaviors”, Academy of Management Review, 11: 710-725.
    [6] Greenberg, J. 1887b. “Reactions to procedural justice in payment distributions: Do the ends justify the means?”, Journal of Applied Psychology, 72: 55-71.