Ultimate Resource On Government And Corporate Whistleblowers (#GotBitcoin?)
One of the tipsters received $37 million, the third-largest award in the history of the agency’s whistleblower program. Ultimate Resource On Government And Corporate Whistleblowers (#GotBitcoin?)
Two whistleblowers received a total of $50 million for providing information that helped the Securities and Exchange Commission pursue a case of corporate wrongdoing, the agency said Tuesday.
The case is related to a December 2015 settlement with JPMorgan Chase & Co., according to law firm Labaton Sucharow LLP, which represented one of the whistleblowers. In the case, the New York-based bank agreed to pay $307 million to settle charges it failed to disclose conflicts of interest to its wealth management customers.
The agency granted $37 million to one whistleblower—the third-biggest individual whistleblower award granted by the SEC—and $13 million to the other.
The SEC didn’t disclose details of the case in a news release or provide identifying details about the whistleblowers.
One tipster received $50 million in March, and another received $39 million in September, according to the SEC.
Tips To SEC Surge As Working From Home Emboldens Whistleblowers
Over 4,000 reports of potential wrongdoing poured in from mid-March to mid-May. ‘These people have more time on their hands,’ a lawyer says.
A new side effect of remote working, layoffs and furloughs stemming from the coronavirus pandemic: more whistleblowers.
The U.S. Securities and Exchange Commission received about 4,000 tips, complaints and referrals of possible corporate wrongdoings from mid-March to mid-May, said Steven Peikin, co-director of the SEC’s enforcement division. That number is 35% higher than it was in the same period last year. The tips have led to hundreds of new investigations—“many Covid-19 related, but many in other traditional areas,” Mr. Peikin said in a recent speech.
Lawyers chalk up the increase to the fact that many would-be tipsters are working from the privacy of their home, out of view of snooping colleagues and managers and thus safer from being exposed as whistleblowers. Tipsters might also feel less concerned about retaliation if they are not interacting regularly with their managers, lawyers say; if they have been furloughed or laid off, they might feel even less so.
“These people have more time on their hands,” said Christopher Connors, a managing attorney at the Connors Law Group in Chicago, whose team has taken on at least seven new whistleblower clients since the end of February—a big increase for the firm. “They don’t have to go see their bosses, and they may feel a bit more emboldened to report,” he said.
When employees face pressure to meet goals during difficult financial times, the likelihood of wrongdoing can increase. Anticorruption organizations have warned that the current economic tumble could create an environment ripe for bribery.
In recent months, Mr. Connors’ clients have raised red flags on possible foreign corruption in health care, pharmaceuticals and technology to the SEC, the Justice Department and the Federal Bureau of Investigation.
Stuart Meissner, an attorney at Meissner Associates in New York, said some of the whistleblower cases brought to him are connected to the pandemic, such as small, public companies promoting home-testing kits that were allegedly fictional. Others presented more typical infractions such as money-laundering, insider trading, accounting gambits and bankruptcy fraud, unrelated to the pandemic, he said.
The economic spiral following coronavirus lockdowns is likely a factor in the rise in calls and reports he has received in recent weeks, he said.
“This caused companies to do things—whether they worry about survival or failures—that often lead to people doing wrong,” said Mr. Meissner, who said he has filed five complaints on behalf of clients to the SEC.
A record number of whistleblower awards from the SEC this year may also have incentivized more people to report wrongdoing, said Rebecca Katz, who leads the whistleblower litigation team at Motley Rice LLC in New York.
Under SEC rules, a whistleblower can get between 10% and 30% of the fines levied in SEC civil enforcement actions that result from their tip, assuming the fines total more than $1 million.
Over $64 million was paid to whistleblowers in the seven months of the fiscal year that began in October—more than the SEC has disbursed in any full year except 2018, according to an analysis of agency records. Most of that total was awarded just since March 23.
Publicity of those awards might have tempted tipsters to come forward, Ms. Katz said.
SEC Votes To Amend Whistleblower-Award Rules
Regulator says new rules would bring efficiency and transparency to how awards are given out.
The U.S. Securities and Exchange Commission has approved amendments to the rules governing monetary awards made to whistleblowers who voluntarily report potential wrongdoing.
Commissioners voted 3-2 Wednesday to approve the amendments, with Democratic members Allison Herren Lee and Caroline Crenshaw opposing.
The long-anticipated vote, which clarifies the regulator’s discretion in determining award amounts, could change how the SEC pays out some of its largest whistleblower awards, lawyers representing whistleblowers said.
The regulator said the new rules would add clarity to its decade-old whistleblower program and bring efficiency and transparency to the award determination process, according to a statement published Wednesday.
“These amendments would allow us to devote more time and resources to the processing of meritorious award claims,” Jane Norberg, chief of the SEC’s Office of the Whistleblower, said during a meeting for the vote on Wednesday.
The SEC’s whistleblower program was enacted in 2011 as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the program, a whistleblower can receive an award totaling between 10% and 30% of the fines levied in SEC civil enforcement actions that result from their tip, assuming the fines total more than $1 million. The SEC has awarded about $523 million to 97 individuals since the program began.
The commission analyzes a range of factors in determining an award amount. Some factors—such as whether the whistleblower provided firsthand information and whether a tipster assisted in an investigation—can lead to bigger awards. The SEC also weighs discounting factors, such as whether tipsters themselves are culpable in the alleged violations.
The new rules would allow the SEC to streamline the award evaluation process, particularly for certain awards of $5 million or less. The adopted amendments provide a presumption of a statutory maximum award percentage at 30% for awards that are estimated to be $5 million or less, assuming that there were no negative factors.
The SEC, which has faced complaints that it was slow to issue awards, said the move would help the agency process whistleblower claims faster and issue awards more efficiently, considering that about 75% of the awards given out in the whistleblower program have been $5 million or less.
For awards estimated to be more than $5 million, the SEC would analyze more deeply positive and negative factors in determining a final award amount, the agency said. If there are no negative factors, a tipster can expect to receive an award that is in the top third of the range, according to the final rules published Wednesday.
After considering comments from the public, the SEC said it decided not to adopt a proposed amendment that sought the authority to reduce rewards in cases involving monetary penalties of at least $100 million.
The proposal argued that the whistleblower rules at the time “do not expressly permit the commission to consider whether a relatively small or exceedingly large potential payout is appropriate to advance the program’s goals of rewarding whistleblowers and incentivizing future whistleblowers.”
The proposal might have dissuaded some would-be tipsters from reporting major securities-law violations, attorneys representing whistleblowers said when the rules were proposed in 2018.
The rule that was approved, however, “is even more problematic than the proposal,” Ms. Lee, one of the commissioners who opposed the rule, said in the meeting Wednesday.
The new rule says the SEC already “has the authority to consider the dollar amount when applying the award criteria.”
The two commissioners who opposed the new rules questioned the pre-existence of this discretion. Ms. Lee said this would create different outcomes for tipsters in cases where the only difference is the size of the fine collected by the SEC.
“Importantly, the rule will not require the commission to tell whistleblowers if or when we have exercised this discretion, that there will be no transparency and no accountability,” Ms. Lee said during the meeting.
While acknowledging the efforts by the SEC to improve the speed in issuing payouts to tipsters, lawyers representing whistleblowers are concerned about how the SEC would exercise that discretion.
“I think this is particularly problematic,” Erika Kelton, a partner at Phillips & Cohen LLP, said, noting that the consideration of the size of the payouts wasn’t a factor that Congress adopted when it enacted the law in 2010. She said her clients and potential whistleblowers are concerned about the new rules. “The rules do not bring clarity to the awards process and actually bring more uncertainty.”
“The lack of transparency as to how they would apply that discretion is troubling and could dissuade whistleblowers from coming forward,” said Jason Zuckerman, principal of Zuckerman Law in Washington.
Whistleblower In Orthofix Bribery Case Awarded $1.8 Million
SEC grants award more than three years after Texas-based medical-device company agreed to settle bribery accusations.
The U.S. Securities and Exchange Commission awarded $1.8 million to a whistleblower whose tip helped the regulator conduct an investigation that led to bribery charges against Orthofix International NV.
The regulator, which announced the award Friday, didn’t name the company nor did it identify the tipster, but lawyers representing the whistleblower said the award was connected to a 2017 bribery settlement involving Orthofix, a Lewisville, Texas, medical-device company.
The tipster, a doctor in Brazil, provided information to the SEC about an alleged kickback scheme operated by an Orthofix subsidiary in that country, according to the lawyers, Christopher Connors of Connors Law Group LLC and Andy Rickman of Rickman Law Group LLP.
The company, now called Orthofix Medical Inc., “self-reported to the SEC about these matters and cooperated fully with the government during the course of the investigations,” a spokeswoman said.
Orthofix in 2017 agreed to admit wrongdoing and pay more than $14 million to settle accusations that it improperly booked revenue in some instances and made improper payments to doctors at government-owned hospitals in Brazil from 2011 to 2013, the SEC said at the time.
As part of the total, the company agreed to pay more than $6 million to settle allegations that it violated the Foreign Corrupt Practices Act, a U.S. antibribery law that prohibits the use of bribes to foreign officials to win or keep business. Orthofix also agreed to pay an $8.25 million penalty for allegedly failing to maintain an adequate system of internal accounting controls.
The tipster first reported the potential wrongdoing to Orthofix’s executives, general counsel and auditors before providing the tip to the SEC in 2014, according to the lawyers.
The SEC, which has faced complaints that it has been slow to issue awards, this week approved amendments to whistleblower-award rules that it said would make the process more efficient and transparent.
Under the program, whistleblowers are entitled to between 10% and 30% of monetary penalties when their tips result in a successful enforcement action and when the monetary penalties total more than $1 million.
The rules amended this week were also designed to raise percentages for certain awards of $5 million or less.
The SEC initially set the award percentage in the Orthofix case at 15%, according to the lawyers. But the regulator increased the percentage this week to 30% of the $6 million FCPA settlement payment, consistent with the updated rules, Messrs. Connors and Rickman said.
The award reflected factors the SEC considers in determining award amounts, with an eye toward rewarding whistleblowers with the highest possible amount based on the circumstances of their claims, the agency said.
The amended rules are technically not in effect yet. They will become effective 30 days after they are published in the Federal Register.
The SEC on Friday issued a separate award of $750,000 to a tipster that also reported securities violations abroad. The regulator didn’t identify the whistleblower or the case connected to the award.
The regulator has awarded about $525 million to 99 people since the program began in 2011 as part of the 2010 Dodd-Frank Act.
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