Cybersecurity and Chinese whistleblowers Growing

Defense law firms are increasingly warning their corporate clients and prospective clients about whistleblowers – and two areas have stood out in articles they have published in the media recently. The rise of whistleblowers from China and cybersecurity whistleblowers have both been on their radar. We’ve been talking about these two areas for a while now – so let’s look at what they have to say.

China

An article in Global Compliance News details the rise of internal complaints about corporate wrongdoing by Chinese whistleblowers. It notes the long history of tips to China’s anti-corruption campaign and indicates that this willingness to report misconduct is spilling over to impact international corporations operating within China. Accordingly, internal reports by whistleblowers in China have in recent years increased substantially because of greater ease in filing and public awareness of compliance initiatives.

The article also notes the number of options available if a whistleblower is dissatisfied about the way their complaint is handled internally. The employee can report both to authorities in China as well as the United States (in the case of multi-national corporations operating from the U.S. or listed on an exchange in the U.S.).

Indeed, the Communist Party of China’s Central Commission for Discipline Inspection (CCDI) has a mobile phone app that allows individuals to tip the Chinese Government to low-level corruption and disciplinary violations. As governments make it easier to blow the whistle and remain confidential to the public, we expect more citizens will take advantage of them.

The other big option for people in China is the U.S. Security & Exchange Commission. The SEC pays rewards after successful enforcement actions resulting from information provided by whistleblowers. Because MNCs have been growing their China operations and employ large numbers of people in the country, this is increasingly an option for people who have interactions with them.

Although I don’t remember it being mentioned in the article, the specific reports are likely concerning the Foreign Corrupt Practices Act (FCPA). The U.S. anti-bribery law prohibits companies listed on an American stock exchange (U.S. issuers) from providing anything of value to foreign officials to obtain or retain business corruptly. The expense to corporations to investigate and defend these government investigations can be tremendous.

Cybersecurity

There have been a number of articles posted recently concerning cybersecurity whistleblowers as well. An article in The Recorder questioned how long it will be until we see cybersecurity whistleblowers become the next wave of tips to the SEC. The article also said that there is anecdotal evidence suggesting that the SEC is currently evaluating these claims. Furthermore, a National Law Review article from late September (from fellow whistleblower attorneys!) said that whistleblower tips related to cybersecurity may receive additional scrutiny because cyber-attacks are a hot-button issue.

These articles should come as no surprise since news of corporate hacking has increased and high profile incidents against Sony, Target and others have put this on the radar of Government regulators. Lately, the SEC has been pursuing enforcement actions against traders teaming with hackers to get access to material, non-public information about businesses and then taking advantage of it in the public markets.

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