Whistleblower Action under the Dodd-Frank Act

Handling Whistleblower Cases Nationwide from Newport News, Virginia

On August 21, 2012, the Securities and Exchange Commission (SEC) announced its first whistleblower reward of nearly $50,000 under the provisions of the Dodd-Frank Act.

The recipient, choosing to remain anonymous, provided the SEC with documents and other sources of information that helped to expedite the investigation of a multi-million dollar fraud scheme. The court ordered just over $1 million in sanctions, of which roughly $150,000 has been collected thus far. The whistleblower’s share of 30 percent is the maximum payout allowed by law. As the court considers whether to issue a final judgment against other defendants, payments to the whistleblower could increase in the near future.

“The whistleblower program is already becoming a success,” remarked SEC Chairman Mary L. Shapiro. “We’re seeing high-quality tips that are saving our investigators substantial time and resources.”

Sean McKessy, director of the whistleblower program, said that since the system was established just over a year ago, the office has received roughly 2,870 tips, or about eight per day.  “The fact that we made the first payment after just one year of operation shows that we are open for business and ready to pay people who bring us good, timely information.”

Division of Enforcement Director Robert Khuzami also commented on the case, stating that the whistleblower “provided the exact kind of information and cooperation” the program has hoped to attract. “Had this whistleblower not helped to uncover the full dimensions of the scheme,” Khuzami added, “it is very likely that many more investors would have been victimized.”

The Dodd-Frank Act of 2010, part of the False Claims Act, brought significant changes to the U.S. financial regulatory environment. The SEC whistleblower program created under the Act rewards individuals who offer “high quality” information leading to enforcement. When more than $1 million in penalties are ordered, the whistleblower can receive between 10 percent and 30 percent of the total amount collected. The Act also established anti-retaliation employment protection for whistleblowers, and created provisions to protect informants’ identities.

If you have any questions about the False Claims Act, feed free to contact us for a free confidential consultation.

For more on this decision, see the SEC’s press release. (link: http://www.sec.gov/news/press/2012/2012-162.htm)