Blog Posts Tagged With Whistleblowers

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SEC Notes Company’s Helpful Voluntary Actions in Whistleblower Case

The SEC recently alleged that yet another company violated the whistleblower rules with its standard separation agreement, but the order in the case also noted several positive actions taken by the company which helped determine the SEC’s acceptance of the company’s settlement offer.

For nearly five years, over a thousand BlackRock employees signed separation agreements that the SEC alleged wrongfully included language requiring a departing employee to waive recovery of incentives for reporting misconduct available under federal statues, in exchange for receiving separation payments from the company. The SEC noted that the agreement did not prohibit those former employees from communicating directly with the Commission or any other governmental agency regarding potential violations of law. Continue Reading

Chair White on the SEC as Advocate of Whistleblowers and Confidentiality Agreements

SEC Chair White urged companies that “it is past time to stop wringing our hands about whistleblowers,” announcing that whistleblowers “provide an invaluable public service” and the SEC views itself “as the whistleblower’s advocate.”

The SEC’s whistleblower program started four years ago, with the volume of tips increasing by more than 20%. The SEC received over 3,600 tips (about 10 a day) in fiscal 2014, from all states and 60 foreign countries. Most of the tips related to corporate disclosures and financial statements, offering fraud and market manipulation. Whistleblowers have not only provided the SEC with information to open new investigations, but they have also provided the staff with “insider” views on how companies approaches public disclosure, highly technical analyses of fraud schemes and testimony at proceedings, and identified and encouraged additional witnesses to come forward. Continue Reading

SEC Whistleblower Award Demonstrates International Scope of Program

The most interesting element of the SEC’s latest whistleblower award, the largest so far at $30 million, may be the lengthy footnote that explains why the Commission believes an award payment is appropriate even though the claimant resides in a foreign country.

The SEC order explains that under the Supreme Court Morrison case, a sufficient U.S. territorial nexus may warrant domestic application of a statutory provision even when certain extraterritorial aspects are involved.  In the SEC’s view, this test is met for purposes of the determining whistleblower claims whenever a claimant’s information leads to the successful enforcement by the Commission of a covered action brought in the U.S. Continue Reading

SEC Awards Over $14 Million to a Whistleblower

Crediting a whistleblower with providing information that led to recovery of substantial investor funds, the SEC announced that it has awarded a whistleblower more than $14 million. This amount significantly dwarfs prior payments of approximately $50,000 to $125,000.

Awards can range from 10 to 30 percent of the money collected in a case. The SEC release indicates that the whistleblower provided original information and assistance that allowed the SEC to investigate and bring an enforcement action less than six months after receiving tips from the whistleblower.

No other information was available as to the nature of the tips or the type of enforcement action, as the SEC is required to protect the confidentiality of whistleblowers and cannot disclose information that might reveal their identities. Continue Reading

Tenth Circuit Ruling May Broaden Reach of SOX Anti-Retaliation Whistleblower Provisions

The Administrative Review Board of the Department of Labor concluded that Lockheed Martin had violated Section 806 of the Sarbanes-Oxley Act after an employee alleged that the company retaliated against her for reporting suspicions that a supervisor was improperly using corporate assets. The company then appealed to the Court of Appeals for the Tenth Circuit.

The whistleblower protection provision of Section 806 provides that employees of public companies must not suffer retaliation for reporting conduct that they believe constitute mail fraud, wire fraud, bank fraud, securities fraud, any violation of SEC rules or any provision of federal law relating to fraud against shareholders. Continue Reading

Survey Shows Employees Use Internal Channels for Reporting Misconduct

Amidst concerns that the SEC whistleblower rules will encourage employees to bypass internal protocols and take allegations of misconduct directly to the Commission, a survey by the nonprofit organization, the Ethics Resource Center, found that only one out of six employees ever reported misconduct to regulators or other outside channels, and 84% of those individuals said that they took this step only after trying to work through their companies’ own procedures. Just 2% of employees surveyed initiated reporting outside of their companies and never informed their employers. 

“Inside the Mind of a Whistleblower” is a recent supplement to a 2011 survey that received over 4,000 responses. Continue Reading