2014 was a record year for the SEC whistleblower award program, agency says

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by Jay Pate

In September, the Securities and Exchange Commission authorized an award of more than $30 million to a whistleblower who had provided information that led to a successful SEC enforcement action. According to the SEC, the information provided by the whistleblower allowed the SEC to discover a substantial and ongoing fraud that otherwise would have been very difficult to detect.

The purpose of the whistleblower award program is to further the enforcement of the U.S. securities laws by encouraging individuals with knowledge of violations of those laws to voluntarily provide information to the SEC. The recent $30 million award was the fourth award the SEC has authorized to a whistleblower living in a foreign country. In issuing the award, the SEC specifically noted that allowing foreign nationals to receive awards under the program best effectuates the Congressional purpose behind the award program.

According to a recently-released report by the SEC’s Office of the Whistleblower, this has been a historic year in terms of both the number and dollar amount of whistleblower awards. The SEC issued these awards to more individuals in fiscal year 2014 than in all previous years combined. The magnitude of the award payments was also record-breaking. The $30 million award mentioned above is the largest made by the SEC’s whistleblower program to date.

According to the SEC, two other whistleblower awards made this year drive home another important message: companies not only need to have internal reporting mechanisms in place, but they must act upon credible allegations of potential wrongdoing when voiced by their employees. In these two cases, the whistleblowers brought information to the SEC only after unsuccessfully trying to have the securities law violations addressed internally.

The whistleblower protection program allows the commission to pay for leads that result in successful enforcement actions that bring in at least $1 million. The awards range between 10 percent and 30 percent of the funds collected through a case, with the SEC basing the amounts on the significance of information and the level of assistance from each individual.

In addition to rewarding whistleblowers, the SEC has been actively working to identify retaliation by publicly traded companies against whistleblowers. For example, in June, the SEC ordered Paradigm Capital Management to pay $2.2 million for engaging in a “series of retaliatory actions” against a whistleblower. The SEC wanted to send “a strong message to employers that retaliation against whistleblowers in any form is unacceptable,” according to the SEC’s recent report.

Get Help With Your Whistleblower Lawsuit

The SEC’S whistleblower award program is just one of many federal and state programs designed to encourage, reward and protect people who come forward with information about illegal behavior. The federal False Claims Act, for example, provides significant financial incentives to encourage private citizens to come forward with information regarding fraud against the government. Billions of dollars have been recovered as a result of False Claims Act lawsuits, and hundreds of millions have been paid to the private citizens who helped make those recoveries possible.

The lawyers at Heygood, Orr & Pearson represent clients who have witnessed fraud first-hand and wish to file a “qui tam” or whistleblower lawsuit against the corporations or individuals who were responsible. For example, our lawyers successfully negotiated a $1.75 million award for a whistleblower in a large tax fraud case.

The “whistleblower” does not have to have been personally harmed at all. He just needs to be aware of the false or fraudulent conduct. Anyone who has information that a business or person has knowingly submitted a fraudulent claim to any branch of the government can potentially help file and pursue a lawsuit under the False Claims Act. If money is recovered from a settlement or from a court judgment, the whistleblower who helped initiate the lawsuit can potentially recover 10% to 30% of the total amount recovered.

The attorneys at Heygood, Orr & Pearson have the experience, expertise, and resources to handle even the most complex claims under the False Claims Act. Our firm is AV-rated, the highest legal and ethical rating available from the leading law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization. Mr. Heygood and Mr. Orr are additionally Board Certified in Civil Trial Advocacy Law by the National Board of Trial Advocacy. Our partners been voted by their peers as “Super Lawyers” in the state of Texas for several years in a row.*

If you have questions about how to pursue a claim under the False Claims Act, please let us know. You can reach us by calling our toll-free hotline at 1-877-446-9001, or by filling out our free legal consultation form on this website.

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* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.