On August 30, 2016, the Securities and Exchange Commission (“SEC”) announced the award of more than $22 million to a company insider whistleblower.
According to the SEC order, the SEC determined the whistleblower’s tip and extensive assistance helped the agency stop a well-hidden fraud at the whistleblower’s employing company.
The $22 million-plus award is the second-largest total the SEC has awarded a whistleblower. The largest award was $30 million, and it was awarded in 2014.
California-based Health Net Inc. has agreed to pay a penalty for illegally using its severance agreements to require outgoing employees to waive their ability to obtain monetary awards from the Securities and Exchange Commission (the “SEC”) whistleblower program.
Health Net has agreed to pay a $340,000 penalty per the SEC’s order.
According to the SEC’s order, Health Net included a provision that enumerating various potential claims against it that a departing employee waived as a condition of being paid monetary severance payments – essentially an agreement stipulating to keep quiet or risk losing your money.
Atlanta-based building products distributor BlueLinx Inc. is settling charges that it violated an important whistleblower protection rule by using severance agreements that required departing employees to waive their rights to monetary recovery should they file a charge or complaint with the Securities and Exchange Commission (the “SEC”) or other federal agencies.
BlueLinx has agreed to pay a $265,000 penalty per the SEC’s order.
According to the SEC’s order, BlueLinx’s restrictive provisions were an attempt to bar employees from filing charges against the company and to keep their mouths shut if the company ever committed any securities law violations. The restrictive language in the agreements essentially forced employees leaving the company to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits.
The Securities and Exchange Commission has awarded at least $8.95 million to four whistleblowers in May 2016.
The first award was on May 13, 2016, when the SEC awarded a whistleblower $3.5 million for providing a tip that strengthened the SEC’s case in an ongoing investigation. According to the order determining the whistleblower award claim, the tip helped give the SEC leverage in settlement negotiations with the bad-acting party.
A few days later on May 17, 2016, the SEC announced it would award between $5 million and $6 million to a former company insider whose tip led the SEC to uncover securities violations that would have been nearly impossible for it to discover without the whistleblower’s information. That award, according to the press release, is the SEC’s third highest to a whistleblower.
The Securities and Exchange Commission (“SEC”) has taken the side of the whistleblower in a dispute against mutual fund giant Vanguard Group.
The SEC filed a brief on March 28, 2016 in support of David Danon, a former lawyer at the Pennsylvania-based money manager who said Vanguard terminated him because he raised concerns about some of the firm’s tax practices. Danon filed a wrongful termination lawsuit against Vanguard in late 2015.
The Dodd-Frank Act entices “whistleblowers” to come forth and help the SEC identify possible fraud and other violations much earlier than might have been possible, consequently reducing harm to investors, preserving the integrity of U.S. capital markets, and swiftly holding perpetrators of unlawful conduct accountable, according to the SEC Office of the Whistleblower website.
The U.S. Commodity Futures Trading Commission (“CFTC”) announced on April 4, 2016 an award of more than $10 million to a whistleblower who provided important, original information that led to a successful CFTC enforcement action.
The award is the largest made by the CFTC’s whistleblower program, according to a CFTC press release.
The CFTC whistleblower program, like the SEC’s program, was created by the 2010 Dodd-Frank Act. It allows for payment of monetary awards to whistleblowers who voluntarily provide the CFTC with original information about violations of the Commodity Exchange Act (“CEA”) that lead the CFTC to bring an enforcement action that results in more than $1 million in sanctions. The total amount of the whistleblower award, according to the CFTC’s program website, is between 10 and 30 percent of the monetary sanctions collected in the CFTC action.
The Second Circuit of Appeals contributed to the ongoing battle over the definition of a whistleblower September 10 by remanding a workplace retaliation case dismissed by a lower court in 2014.
Daniel Berman reported an alleged violation within his corporation before reporting it to the SEC, allegedly resulting in his termination, according to Law 360. Berman, a former financial director at Neo@Oglivy, sued the marketing firm and its parent company, WPP Group USA, Inc., in January 2014.
The U.S. Commodity Future Trading Commission (CFTC) is seeking important information on infringements against the Commodity Exchange Act (CEA). In a recent announcement, the commission reported that it intended to award a credible whistleblower up to $290,000.
The CFTC’s Whistleblower Program provides monetary awards to persons who report violations of the CEA if the information leads to an enforcement action that results in more than $1 million in monetary sanctions. In addition, whistleblowers are eligible for 10 to 30 percent of monies collected.
Since the 2010 passage of the Dodd-Frank Act, the definition of “whistleblower” has been a subject of contention among courts, businesses and would-be whistleblowers. Its supposed ambiguity stems in part from the fact that the SEC offers two potentially contradictory definitions in two separate provisions.
In the first, the bounty provision, the SEC defines a whistleblower as “any individual who provides … information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.”
The Securities and Exchange Commission paid $3 million to a whistleblower on July 17, 2015 under the Dodd-Frank Act, which became law in July 2010. The act protects whistleblowers from retaliation from their employers and guarantees them an award from the SEC and/or the U.S. Commodity Futures Trading Commission (CFTC) for providing information about a potential violation that leads to “the successful enforcement of a covered judicial or administrative action, or a related action,” according to the Federal Register.
According to Andrew Ceresney, director of the SEC’s Enforcement Division, the whistleblower protections outlined in the act are effective in helping to uncover fraudulent schemes that may have otherwise flown under the radar and potentially affected more people and caused greater damages.
SEC Whistleblower Lawyer Blog