When academic studies and hoax hotline claims go ‘off the rails’

Imagine this: An anonymous tip comes through the company’s hotline that a senior executive has engaged in insider trading. The allegations are convincing enough to warrant an investigation, so compliance enlists the help of outside counsel—only to later discover it was all a lie in the name of academic research.

This scenario is not a hypothetical. It happened, effectively leaving hundreds of unwitting corporate subjects to foot the bill for the follow-up they conducted. A PhD student at the National University of Singapore (NUS) earlier this summer had sent numerous fabricated anonymous allegations to multiple companies in order to gauge their hotline response rate for field research.

“On June 4, one of my public company clients received an anonymous email reporting that a senior employee had admitted to improper insider trading,” says Susan Muck, a partner at WilmerHale. “Within three or four hours, a different client in a different industry thousands of miles away received an identical email and also contacted me to investigate.”