Abstract

http://ssrn.com/abstract=622723
 
 

Citations (2)



 
 

Footnotes (115)



 


 



Whistle Blowing


Ben Depoorter


University of California Hastings College of Law; Ghent University - Center for Advanced Studies in Law & Economics

Jef De Mot


Ghent University-Universiteit Gent - Faculty of Law


Supreme Court Economic Review, Vol. 13, 2005
George Mason Law & Economics Research Paper No. 04-56

Abstract:     
For law enforcement purposes corruption and fraud are hard battles. Because of the highly secretive and premeditated nature of these crimes, prime witnesses are themselves often implicated in the fraudulent transaction. Promises of immunity and whistle blowing rewards are often required to resolve these information asymmetries. These insights have set a trend, both in scholarship and law enforcement practice, towards reward-based approaches (carrots), as an alternative or complement to punishment based deterrence (sticks).

Applying the U.S. False Claims Act (FCA) as an analytical framework, we provide a critical review of the efficiency limitations of whistle blowing. More specifically, the formal model developed in this contribution, reveals a gap between social and private incentives in whistle blowing, both with regard to the decision to pursue litigation and the timing of whistle blowing. First, while an insider will blow the whistle whenever his expected recovery exceeds the expected costs of litigation, enforcement agencies seek to optimize enforcement in the long run. The autonomy of whistle blowers to pursue claims without government involvement, weakens the government's bargaining position and obstructs the government's ability to weigh in wider factors of enforcement (the effect of an individual case on a multiple claim suit, etc.). Second, whenever rewards are tied to recovery, bounty awards create a perverse incentive whereby fraudulent practices are not terminated at a socially optimal point in time. The potential race among whistle blowers cannot mitigate this effect fully because the stigma and loss of opportunities on the job market act as internal constraints on whistle blowing.

Number of Pages in PDF File: 27

Keywords: whistle blowing, False Claims Act, law and economics

JEL Classification: K10, K42

Accepted Paper Series





Download This Paper

Date posted: December 9, 2004  

Suggested Citation

Depoorter, Ben and De Mot, Jef, Whistle Blowing. Supreme Court Economic Review, Vol. 13, 2005; George Mason Law & Economics Research Paper No. 04-56. Available at SSRN: http://ssrn.com/abstract=622723 or http://dx.doi.org/10.2139/ssrn.622723

Contact Information

Ben Depoorter (Contact Author)
University of California Hastings College of Law ( email )
200 McAllister Street
San Francisco, CA 94102
United States

Ghent University - Center for Advanced Studies in Law & Economics ( email )
Ghent Univ. Law School
Universiteitstraat 4
Gent, 9000
Belgium
Jef De Mot
Ghent University-Universiteit Gent - Faculty of Law ( email )
Universiteitstraat 4
Ghent, B-9000
Belgium
Feedback to SSRN


Paper statistics
Abstract Views: 3,900
Downloads: 483
Download Rank: 33,165
Citations:  2
Footnotes:  115

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.282 seconds