Posts Tagged ‘SEC’
Friday, September 7th, 2012
With the August 21, 2012 announcement of the first award payment resulting from the whistleblower program created under Dodd-Frank, the Securities and Exchange Commission finally put weeks of speculation to rest. Although, at $50,000, the award was small in comparison to those made under the False Claims Act, the award actually amounts to 30% of the total amount the government has collected, thus far, as a result of the informant’s information—the maximum allowed under the statute. The importance of this first payment is not to be understated given that the SEC program is still in its infancy. Indeed, the fact that the maximum percentage was awarded suggests the value placed on the information brought to the SEC by the informant, and reaffirms the effectiveness of the program. While the informant has elected to remain anonymous, the SEC did state that it denied an award payment to a second informant in the case stating that the information provided did not significantly advance the investigation.
The full extent of the impact that this announcement will have on the SEC Whistleblower Program has yet to be seen, however it is undeniable that it should serve to encourage more individuals with valuable information to step forward. Indeed, in the SEC’s press release, the Director of the SEC’s Division of Enforcement, Robert Khuzami, confirmed the value of both the informant and the information he brought forth stating “This whistleblower provided the exact kind of information and cooperation we were hoping the whistleblower program would attract. Had this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”
Friday, June 8th, 2012
Ever since it was born out of the passage of the Dodd-Frank financial reform bill in 2010, all eyes have been on the success or failure of the SEC’s Whistleblower Program. Since the program officially went into effect in August 2011, the SEC reports that they have been continually receiving high quality tips at an impressive pace of roughly seven per day. As a result, the fact that, according to insiders, the first payment of an award appears to be imminent, there is a veritable spotlight on the Commission and the award determination process.
In responding to the rumors of a pending award, Sean McKessey, Chief of the SEC Whistleblower Office, has continued to express his enthusiasm for the program and the importance of actually making that first payment. In an article published on Huffington Post, McKessey stated “I view [the program] as already having been a very significant success, but I understand that people want to see the deliverable. And the deliverable, in our view, is paying people for good information…[t]he more the better, obviously.” Further,
As we await official confirmation of the first award payment, the SEC is reminding people that the amount of the award to those who come forward remains subjective, and that the sanctions ultimately imposed against a company must exceed $1 million before they are even eligible for an award. Specifically, at a conference earlier this week, Jane Norberg, deputy chief for the SEC’s Whistleblower Office, told attendees that although there is “no hard and fast formula [in making an award determination] at this point…it is in the SEC’s sole discretion as to how much of an award there is – whether it is 10% or 30% or somewhere in between.”
In an era where the importance of corporate accountability is reaching new heights, the first award from the SEC will undoubtedly send a strong signal. “I think it will be an affirmation that this will not just be a paper program, that we’re not just going out and making speeches,” McKessey said.
Source: The Huffington Post
Sunday, May 6th, 2012
In a recent article entitled “Source’s Cover Blown by the SEC,” the Wall Street Journal claimed that the SEC “inadvertently revealed the identity of a whistleblower.” The alleged disclosure occurred during the SEC’s investigation of Pipeline Trading Systems LLC. According to the article, an SEC lawyer “showed an executive who was being questioned a notebook from the whistleblower filled with jottings about trades, calls and meetings.” From that notebook, the executive claims he recognized the handwriting as that of Peter Earle, who happened to be the whistleblower who prompted the SEC’s investigation.
In a scathing response to the Journal’s story, the SEC disputes the allegations against it. In stark contrast to the story told by the Journal, the SEC asserted that it “in no way exposed Peter Earle as a whistleblower.” In fact, the Commission claims that the use of the notebook was neither “inadvertent” nor a “breach.” Instead, it was a “deliberate decision,” discussed by an SEC lawyer and his supervisor prior to the deposition in which the notebook was exhibited.
Going further, the SEC strongly disagrees with the allegation that the use of the notebooks in no way comprised Mr. Earle’s identity. According to the SEC, “it was widely known…that, after the termination of his employment in 2009, Mr. Earle had approached the SEC – a fact volunteered by witnesses and acknowledged by Mr. Earle long before the exhibition of his notebooks in November 2010.” Yet, despite this knowledge, the SEC maintains that, throughout the investigation, the Commission treated his status as a cooperating witness as confidential. There was “nothing about the notes…or about the SEC’s use of them as exhibits…that revealed anything about whether Mr. Earle or others were cooperating in the SEC’s investigation.”
If you have knowledge of Securities Fraud and would like to discuss the possibility of a whistleblower award under the SEC whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, including your ability to remain anonymous in filing for an award, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Wednesday, March 21st, 2012
The SEC’s new whistleblower award program is already making an impact, as many insiders are coming forward with investigative leads, hoping to cash in on the program.
The SEC whistleblower program allows individuals who present original information that leads an enforcement action resulting in monetary sanctions of over $1 million to collect an award. The award may range from 10-30%, depending on factors such as the significance of the information. Whistleblowers range from current insiders, former employees, and outside observers.
The SEC vets the tips through its market intelligence unit, which is comprised of nearly fifty attorneys. Potentially good leads are then funneled to enforcement attorneys.
SEC officials have recently commented that the quality of the tips received is surprisingly high, and some have resulted in “huge cases.”
According to the Financial Times, some insiders are taking on the role of detective. Recently, due to concerns with a deal on which he had worked, a company insider submitted a tip to the SEC. That tip resulted in an internal investigation and an SEC inquiry, which uncovered other problematic deals by the targeted company.
“In the stock market we’ve had good intel simply because of the surveillance by self-regulatory organizations and the firms themselves,” says Thomas Sporkin, head of the SEC’s market intelligence unit. “This program similarly provides a set of eyes and ears on the corporate side,” he said.
To read more about the SEC turning whistleblower tips into cases, see the full Financial Times article at http://www.ft.com/intl/cms/s/0/15e5a89c-6a27-11e1-b54f-00144feabdc0.html?ftcamp=published_links/rss/companies_us/feed//product#axzz1pl9KTUK8.
If you have knowledge of Securities Fraud or Corporate Fraud and would like to discuss the possibility of a whistleblower award under the SEC whistleblower program, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tuesday, July 26th, 2011
The Securities and Exchange Commission (SEC) whistleblower program provides for rewards for individuals who provide the government with information about violations of the Foreign Corrupt Practices Act (FCPA) of 1977.
The FCPA was enacted in 1977 in an effort to end the practice of multinational corporations obtaining business abroad by bribing foreign officials. The Act covers any U.S. company or citizen doing business abroad. It covers foreign companies — and their directors, officers, stockholders, employees and agents — with reporting and registration requirements under the Securities and Exchange Acts as well as any foreign person or company acting within the United States.
The FCPA makes it unlawful to bribe a foreign government official to obtain or retain business. The Act prohibits U.S. companies and individuals from paying money or any other sort of inducement, including an offer or promise to pay money or anything of value, to a foreign official with the intent to influence a decision or action affecting that company’s business.
A foreign official is defined as “any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of such government or department, agency, or instrumentality, or for or on behalf of any such public international organization.”
The Department of Justice (DOJ) is the chief enforcement agency, with a coordinate role played by the SEC. The DOJ is responsible for all criminal enforcement and for civil enforcement of the anti-bribery provisions with respect to domestic concerns and foreign companies and nationals. The SEC, on the other hand, is responsible for civil enforcement of the anti-bribery provisions with respect to issuers.
The FCPA provides for criminal and civil penalties. The criminal penalties include fines on officers, directors, stockholders, employees and agents of up to $250,000 and up to five (5) years in prison. Meanwhile, corporations and other business entities can face criminal fines of up to $2 million, or alternatively twice the amount of ill-gotten profits. The civil fines under the FCPA include $10,000 against any violating company and individual. Moreover, the SEC may also require a disgorgement of profits.
In the past few years, prosecutions under the FCPA have dramatically increased. The SEC has established an enforcement unit, targeting violations of the FCPA by U.S. issuers. The DOJ has similarly assigned prosecutors and FBI agents exclusively to the FCPA. The federal authorities have also instituted more aggressive investigative tactics in their pursuit of FCPA violations.
The DOJ and the SEC recently settled with Johnson & Johnson (J&J) for $71 million. J&J agreed to pay $21.4 million in criminal penalties as part of a deferred prosecution agreement. J&J additionally settled a related matter filed by the SEC agreeing to more than $48.6 million in disgorgement of profits and pre-judgment interest. The $71 million aggregate settlement by J&J registers as just the 10th largest FCPA-related settlement since 2008.
The top nine FCPA related settlements are as follows: (1) Siemens for $800 million in 2008; (2) KBR/ Halliburton for $579 million in 2009; (3) BAE for $400 million in 2010; (4) Snamprogetti Netherlands B.V. for $365 million in 2010; (5) Technip S.A. for $338 million in 2010; (6) JGC Corp. for $218.8 million in 2011; (7) Daimler AG for $185 million in 2010; (8) Alcatel-Lucent for $137 million in 2010; and (9) Panalpina for $81.8 million in 2010.
If you have knowledge of an FCPA violation or other securities law violations and would like to discuss the possibility of a whistleblower award under the SEC or CFTC whistleblower programs, please contact our whistleblower attorneys today. Kenney & McCafferty will consult with you about your case, without obligation. All communications with Kenney & McCafferty attorneys regarding your case are confidential and protected by attorney-client privilege.
Tags: Department of Justice, DOJ, FCPA, FCPA violation, Foreign Corrupt Practices Act, SEC, Securities and Exchange Commission whistleblower program, Securities law violations, whistleblower, whistleblower award, whistleblower reward
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Friday, February 18th, 2011
As the April 2011 date approaches for finalizing the rules to implement the SEC whistleblower program outlined by the Dodd-Frank Act, major U.S. corporations and whistleblower lawyers alike have been meeting with SEC staff and officials in an effort to address concerns relating to the proposed rules in general and, more specifically, a proposal to mandate to first report alleged wrongdoing to internal compliance officers in order to be eligible for any reward.
Among the corporations lobbying the SEC for mandated internal reporting are pharmaceutical giants Johnson & Johnson and Pfizer, both of which sustained substantial monetary damages as a result of cases brought by whistleblowers under the False Claims Act. In addition, now Google, Best Buy and General Electric Co., among others, have submitted letters to the SEC suggesting that not requiring mandatory internal reporting could undercut companies’ efforts to fix potential violations by leaving corporate officials in the dark.
Such arguments proffered by these corporations would, in reality, serve only to discourage individuals to come forward with evidence of fraud. In fact, if potential whistleblowers were forced to first report misconduct to internal compliance programs, many would remain silent, especially if they work for a company that has a history of failing to protect the identities of those who complain internally. Frankly, precedent suggests that it is far too common that whistleblowers who try to utilize company compliance programs are penalized, rather than rewarded, for doing so, and they are consequently forced to pursue remedies under whistleblower protection provisions. See, e.g., U.S. ex rel. Blair Collins v. Pfizer, Inc., Civ. No. 04-11780 (D. Mass); U.S. ex rel. Eckard v. GlaxoSmithKline, Civ. No. 4-10375 (D. Mass); U.S. ex rel. DeKort v. Integrated Coast Guard Systems, Civ. No. 6-1792 (N.D. Tex).
Given our concern about the potential effect the proposed rules will have on SEC whistleblowers, Kenney & McCafferty, along with two other firms, participated in a meeting with SEC senior counsel and staff on December 10, 2010 to advocate on behalf of whistleblowers and against the imposition of internal reporting. A formal comment letter outlining our position was subsequently submitted to the SEC for consideration.