The Department of Justice as a Gatekeeper in Whistleblower-Initiated Corporate Fraud Enforcement: Drivers and Consequences

55 Pages Posted: 18 Aug 2018 Last revised: 18 Dec 2020

See all articles by Jonas Heese

Jonas Heese

Harvard University - Business School (HBS)

Ranjani Krishnan

Michigan State University - Department of Accounting & Information Systems

Hari Ramasubramanian

Michigan State University- Department of Accounting & Information Systems

Date Written: August 21, 2020

Abstract

We examine drivers and consequences of U.S. Department of Justice (DOJ) oversight of whistleblower cases of corporate fraud against the government. We find that the DOJ is more likely to intervene in and conduct longer investigations of cases that have a higher chance of victory and yield greater monetary proceeds, indicating that DOJ enforcement is influenced by its performance measures. DOJ intervention also affects the firm- and aggregate-level fraud environment. Firms subject to DOJ intervention improve their employee relations, internal controls, and board independence, and experience lower future whistleblowing risk. Whistleblowers avoid courts and agencies with low DOJ intervention rates. In contrast, we do not find that cases pursued by whistleblowers alone affect firms’ or whistleblowers’ behavior, suggesting that public enforcement through DOJ intervention has a greater deterrent effect on fraud than private enforcement by whistleblowers acting alone.

Keywords: Department of Justice, False Claims Act, Performance Measurement, Fraud Enforcement, Whistleblower

JEL Classification: M41, G18, L51

Suggested Citation

Heese, Jonas and Krishnan, Ranjani and Ramasubramanian, Hariharan, The Department of Justice as a Gatekeeper in Whistleblower-Initiated Corporate Fraud Enforcement: Drivers and Consequences (August 21, 2020). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3233999

Jonas Heese

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan Hall 397
Boston, MA 02163
United States

Ranjani Krishnan

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-353-4687 (Phone)
517-432-1101 (Fax)

Hariharan Ramasubramanian (Contact Author)

Michigan State University- Department of Accounting & Information Systems ( email )

632 Bogue Street
BCC N270
East Lansing, MI 48824
United States

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