Is Washington an especially corrupt state?
The Securities and Exchange Commission has published its report on the first full year of the Dodd-Frank whistleblower law. The law created financial incentives and legal protection for whistleblowers who come forward with evidence of fraud, securities law violations, and other corporate misconduct. And it's been very successful. In total, more than 3,000 whistleblower tips were received.
But an unusual number of these tips came from Washington. No. Not our nation's capital. Washington State, that one up there on the upper left of the map, by Vancouver. What is going on in Washington?
California leads with 435 whistleblower tips, with New York a distant second at 246. Florida and Texas follow with 202 and 199, respectively. That's exactly what you might expect to find because those states have the highest GDP's in the country. More business activity means more opportunity for wrong-doing, creating more potential whistleblowers.
What you wouldn't expect to find is Washington sitting anywhere near the top of the heap. According to the SEC report, Washington is tied with New Jersey as the state producing the fifth highest number of whistleblowers, 102. It's actually ahead of Illinois (99) and Pennsylvania (90), states with much larger economies.
Washington is ranked 14th in terms of its GDP (going by 2010 figures, which were the most recent I could find). So why is it over-producing whistleblowers?
One possibility is that workers in Washington are more eager than workers in other states to turn in their bosses for wrong-doing. Absent something that could explain why Washingtonians are extra-eager to blow whistles, however, we can safely put this aside. The odds are that Washington workers are not much more likely to turn their bosses in to the authorities than workers in other states.
We're on safer ground if we assume that the level of whistle-blowing activity is at least somewhat reflective of the level of corporate misdeeds in a state. But that would be a huge indictment of the corporate culture of Washington. It implies that Washington is undergoing something of a corporate crime or disclosure fraud wave. (For more background on the whistleblower program's first year, see this post on the University of Pennsylvania's RegBlog.)
Washington is home to a number of well known American businesses, including Microsoft, Amazon, Boeing, Starbucks, and Costco Wholesale. So perhaps one or more of these companies are generating an outsized number of whistle-blower claims. The SEC doesn't report on how many cases it is actually bringing as a result of the tips, so we can only speculate at this point.
Of course, the Dodd-Frank program has only been in effect for a year so we don't have very robust data. Perhaps Washington's out-performance in whistle-blowing is just a product of random chance.
—By John Carney; Follow him on Twitter @Carney