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  • February 2021
  • Article
  • Journal of Accounting & Economics

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

By: Jonas Heese, Ranjani Krishnan and Hari Ramasubramanian
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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

Whistleblowing; Department Of Justice; DOJ Enforcement; Performance Measures; False Claims Act; Crime and Corruption; Governance Compliance; Law Enforcement

Citation

Heese, Jonas, Ranjani Krishnan, and Hari Ramasubramanian. "The Department of Justice as a Gatekeeper in Whistleblower-Initiated Corporate Fraud Enforcement: Drivers and Consequences." Journal of Accounting & Economics 71, no. 1 (February 2021).
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About The Author

Jonas Heese

Accounting and Management
→More Publications

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More from the Authors
  • When Executives Pledge Integrity: The Effect of the Accountant's Oath on Firms' Financial Reporting By: Jonas Heese, Gerardo Pérez Cavazos and Caspar David Peter
  • Accounting for Loan Losses at JPMorgan Chase: Predicting Credit Costs By: Jonas Heese and Jung Koo Kang
  • Ball: EVA Driving the World’s Leading Can Manufacturer (C) By: Jonas Heese and Susan Pinckney
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