SEC Issues 2016 Whistleblower Report, Has Issued $111 Million in Whistleblower Awards to Date

Written December 2, 2016 by Matthew Melamed

On November 15, 2016, the U.S. Securities and Exchange Commission (“SEC”) issued its 2016 Annual Report to Congress on the Dodd-Frank Whistleblower Program.  According to Jane Norberg, Chief of the SEC Office of the Whistleblower, “Fiscal Year (FY) 2016 was historic for the SEC’s whistleblower program,” including surpassing the $100 million mark in awards issued since the program started.  Norberg continued: “Because of the key features of the whistleblower program – protecting the confidentiality of individuals who report through the program, taking action against employers who retaliate against or interfere with their employees’ ability to report wrongdoing to the agency, and awarding whistleblowers whose information leads to successful enforcement actions – we expect that the Commission will continue to receive high-quality tips that can be leveraged to detect and halt fraud earlier and more effectively.”

4,200 Tips, $57 Million Awarded in 2016During FY 2016 alone, the SEC received more than 4,200 tips and awarded more than $57 million to 13 whistleblowers, including 6 of the 10 highest awards ever issued under the program.  Each of the whistleblower awards resulted from information the SEC did not previously know, and which led to the opening of an investigation or significantly contributed to a successful enforcement action.

Enforcement Actions to Protect Whistleblowers.  The SEC also reported “significant and ground-breaking enforcement activity on the whistleblower protection front,” including the first stand-alone case brought against a company that fired a whistleblower after he reported questionable financial statements to senior management and the SEC.  The enforcement action resulted in a $500,000 penalty against the company.  The SEC also brought numerous enforcement actions against companies for entering into separation or severance agreements that sought to impede former employees from communicating voluntarily with the SEC.  These actions demonstrate the SEC’s commitment to protecting whistleblowers.  As Chief Norberg explained: “Assessing confidentiality, severance, and other kinds of agreements that may stifle a would-be whistleblower from reporting his or her information to the agency and that strip away the very incentives Congress intended for the program will continue to be a top priority for the SEC’s Office of the Whistleblower . . . .”

Claims Leading to Awards.  Though the SEC is prohibited from disclosing any information that reasonably could be expected to reveal the identity of a whistleblower, the Report discloses that 65% of award recipients were current or former insiders at the company on which they reported information of wrongdoing.  The remaining award recipients were either investors who had been victimized by the fraud, professionals working in the same or a related industry, or individuals who had a personal relationship with the wrongdoer.  The Report also provides that awards have resulted from complaints about financial services firms (including broker-dealers and investment advisers), Ponzi-schemes, false or misleading offering memoranda or marketing materials, accounting irregularities, and internal controls violations, among others.

Worldwide Whistleblowing.  Whistleblower tips were filed by citizens of every U.S. state and more than 60 foreign countries (including citizens of every continent but Antarctica) during 2016.

For more information about the SEC Whistleblower Program and the Firm’s resources in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

U.S. Senate Approves Motor Vehicle Safety Whistleblower Act

Written April 30, 2015 by Robert Lu

On April 28, 2015, the U.S. Senate approved the first piece of auto safety legislation, a bill to incentivize auto industry whistleblowers, following the widespread recalls by General Motors Co. and Takata Corp. of tens of millions of vehicles and air bags, respectively.

The bill would grant the U.S. transportation secretary discretion to award up to 30% of the total monetary penalties resulting from Department of Transportation or Justice Department enforcement actions that total more than $1 million. The bill covers employees or contractors of motor vehicle manufacturers, parts suppliers and dealerships.

The full text of the bill, and the legislative history and actions taken to date, can be found here.

For additional information about whistleblower laws and the Firm’s resources and services in this area, please visit the Robbins Geller Rudman & Dowd LLP Whistleblower page.

Supreme Court Considers Whistleblower Protections Under Sarbanes-Oxley Act

Written November 12, 2013 by Robert Lu

On Tuesday, November 12, 2013, the U.S. Supreme Court revisited the Enron Corp. collapse as the nine justices debated the scope of whistleblower protections in a key provision of the Sarbanes-Oxley Act, which was passed in 2002 in response to the Enron accounting scandal fraud that led to the company’s failure a year earlier.

The provision at issue at the Supreme Court protects people who expose the kind of corporate misdeeds that arose at Enron. But there is a dispute over whether that protection under the Sarbanes-Oxley Act covers only employees of publicly traded companies or also applies to contractors hired by the companies. The dispute pits business groups against President Barack Obama’s administration, which is seeking a broad interpretation of the whistleblower provision.

At oral argument on Tuesday, Justice Department lawyer, Nicole Saharsky, arguing on behalf of the administration, said that “[t]he statute protects an employee of a contractor from retaliation. That’s what the text says. That’s what Congress intended to cover, these accountants, lawyers and outside auditors who were so central to the fall of Enron.”

A decision by the Supreme Court is expected by spring 2014.

The case is Lawson v FMR, 12-3.  A copy of the transcript can be accessed here.

Senate Passes Leahy-Grassley Bill To Protect Whistleblowers in Criminal Antitrust Cases

Written November 6, 2013 by Robert Lu

On Monday night, November 4, 2013, the Senate unanimously passed bipartisan legislation to extend whistleblower protection for employees who provide information to the Department of Justice related to criminal antitrust violations.

The bill, introduced in January, allows employees who believe they are victims custom writing paper of retaliation to file complaints with the Department of Labor. Specifically, it allows employees who believe they are victims of retaliation to file complaints with the Secretary at the Department of Labor, and provides for those employees to be reinstated to their former status if the Secretary finds in their favor. U.S. Senators Patrick Leahy (D-Vt.) and Chuck Grassley (R-Iowa) authored similar whistleblower statutes as part of the Sarbanes-Oxley Act in 2002.

“Current law encourages self-reporting of criminal antitrust activity, yet it doesn’t provide any protections for innocent third-parties who blow the whistle on such activity.  Our bill strengthens the enforcement of criminal antitrust laws by adding a civil remedy for antitrust whistleblowers who are retaliated against,” Sen. Grassley said.