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SEC Whistleblower Lawyer Blog

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An overseas tipster recently helped the SEC take down a large and long-running securities fraud at the whistleblowers former company.

As per policy, the SEC would not identify the individual whistleblower or the specific securities violation they helped to uncover, but they did note the tipster worked for the company where the alleged securities violations took place and they offered to assist the SEC throughout its entire investigation. The SEC also said that the tipster was not a U.S. citizen and worked for the company in an overseas office.

Jane Norberg, chief of the SEC’s Office  spoke about the case saying “Company insiders often have valuable information that can help the SEC halt an ongoing securities law violation and better protect investors,” She also spoke about the SEC whistleblower program in general “The breadth of the SEC’s whistleblower program is demonstrated by this case, where the whistleblower, a foreign national working outside of the United States, affirmatively stepped forward to shine a light on the wrongdoing.”

On November 30, 2017, the Securities and Exchange Commission announced two whistleblower awards in excess of $8 million.  The bounties were awarded to 2 individual whistleblowers whose information was instrumental in the SEC investigations, and who’s continuing assistance and cooperation substantially assisted the SEC in successfully bringing the underlying enforcement actions.

SEC enforcement actions sourcing from whistleblower tips have resulted in more than $1 billion in financial remedies ordered against securities and investment firms since 2012.

One of the whistleblowers in the recent awards alerted the SEC enforcement staff of misconduct that would become the central focus of the staff’s investigation and the centerpiece of the SEC’s subsequent enforcement action.  The second whistleblower at the same firm provided additional significant information and ongoing cooperation to the staff during the investigation resulting in a substantial savings of time and agency resources.  

The Whistleblower business can be very profitable for tipsters, a landmark whistleblower award of nearly $2.5 million was awarded today by the Securities and Exchange Commission. The recipient of this award was the employee of a domestic government agency. Information provided by this whistleblower was instrumental in launching a SEC investigation. The anonymous whistleblower continued to offer assistance and eventually helped expose wide ranging misconduct in an unnamed company.

Jane Norberg, the Chief of the SEC’s Office of the Whistleblower praised whistleblowers and the continued success of the award program.

”Whistleblowers can provide a wealth of information and ongoing assistance that helps our agency bring enforcement actions quicker and more efficiently,” She also noted the speed allowed by the assistance of whistleblowers.’ “This whistleblower not only helped us open the case, but also provided timely ongoing assistance along with critical documents and testimony that accelerated the pace of our enforcement action.”

A key component of the Dodd-Frank Act is headed to the Supreme Court for review. The court will decide if internal whistleblowers who have not yet reported potential violations to the SEC are protected under the anti-retaliation statutes of Dodd-Frank.

The Supreme Court review is necessary to resolve a split in the lower appellate courts stemming from a case brought by a former Digital Realty Trust Inc executive. In the case, Paul Somers a former employee of Digital Realty seeks to sue for alleged retaliation. Digital Realty had protested a decision by the Ninth Circuit that found that internal whistleblowers were protected under the Dodd-Frank Act’s anti-retaliation statutes, even if they had not yet reported potential violations to the SEC.

Somers’s lawyer, Daniel L. Geyser of Stris and Maher was not surprised by the Supreme Courts willingness to hear the case, although he strongly believed that the Ninth circuits interpretation of the law was in line with the scope of Dodd-Frank as written by Congress.

Even with political clouds of uncertainty from the Trump administration, the head of U.S Securities and Exchange Commission is moving the agency full speed ahead, all the while chastising companies that retaliate or discourage their employees from blowing the whistle on possible securities violations.

Last month, Jane Norberg; the current chief of the SEC’s Office of the Whistleblower spoke on a panel at the Practising Law Institute on Corporate Whistleblowing. During the panel, she told attendees that they could expect the same level of enforcement and investigation as in years past.

Open for business

The CFTC Whistleblower program today announced the launch of a news portal, event schedule, and FAQ for its whistleblower program on its website

This new portal will contain industry news, CFTC Events and a FAQ covering the Whistleblower program and information on submitting a whistleblower tip and claiming awards based on accurate tips. The CFTC hopes this newly created section of its site will provide higher quality tips that lead to larger sanctions and more awards being paid out to tipsters.

Some of the tips for Whistleblowers suggested by the CFTC

The SEC recently declined to pay a whistleblower award to a claimant that sought the SEC’s review of its stance on payouts stemming from information provided prior to the Dodd-Frank Act’s enactment in 2010.

In an SEC Order, the claimant provided whistleblower information to the SEC in 2007, three years before the Dodd-Frank Act.  According to Rule 21F-4(b)(1)(iv), all whistleblower payouts must be based on information provided to the SEC after the enactment of the law on July 21, 2010.

The Commission relied upon a 2015 Second Circuit decision that sided with the SEC in its refusal to award a whistleblower bounty for information provided prior to 2010.  The Second Circuit held that the whistleblower was ineligible for an award because the tip was provided prior to the Dodd-Frank Act

New York Attorney General Eric Schneiderman announced a whistleblower-initiated $40 million settlement with Alabama-based investment firm Harbert Management Corp. over unpaid state income taxes claimed instead in lower-tax Alabama.

The dispute arose out of 2015 whistleblower allegations that members of Harbert failed to pay millions of dollars in taxes.  New York law requires businesses that operate both in and out of New York to apportion taxes on income derived in New York.

The settlement alleges that Harbinger Partners Offshore Managers LLC, a $26 billion New York City hedge fund sponsored by Harbert, failed to pay certain required taxes in New York from 2004 through 2009.  Instead, Harbinger paid taxes in Alabama, where rates were much lower.

The SEC announced it was awarding a company insider a whistleblower award of more than $500,000 for reporting information that prompted an SEC investigation into well-hidden misconduct that resulted in an SEC enforcement action.

The whistleblower award is the second award announced by the SEC in as many weeks, bringing the total amount awarded to approximately $154 million to 44 whistleblowers.  Additionally, the whistleblower tips have resulted in almost $1 billion in financial remedies.

According to the SEC Order Determining Whistleblower Claim, the SEC Whistleblower Program’s Claims Review Staff recommended that the whistleblower receive an award because the whistleblower voluntarily provided original information to the SEC that led to the successful enforcement of the action pursuant to Section 21F(b)(1) of the Securities Exchange Act of 1934 (the “Exchange Act”).

The SEC announced an award of almost $4 million to a whistleblower who provided detailed, specific information about serious securities misconduct and provided ongoing assistance throughout the ensuing investigation.

According to the SEC order, the SEC recommended that the whistleblower receive an award because the individual voluntarily provided original information to the SEC that led to a successful enforcement action.  Further, while the order redacted the percentage of the monetary sanctions the whistleblower would collect, the final amount was “almost $4 million.”

According to the SEC press release, the whistleblower had industry-specific knowledge and expertise, which is helpful to the SEC and can help it go through the process more efficiently.

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