Congress is at a crossroads in deciding whether there will be a meaningful SEC Whistleblower Program–for the first time.
At this morning’s Offshore Alert conference in Miami, we heard from the SEC Chair’s Senior Advisor Stephen Cohen on this subject, as well as insight from IRS Whistleblower Office Director Steve Whitlock on how the IRS Whistleblower Program is now designed to encourage whistleblower claims.
As we have observed previously about the bills that would create an SEC Whistleblower program, past experience shows that an enforceable right to a meaningful reward is essential to cause whistleblowers to come forward.
The SEC apparently resists guaranteeing whistleblowers a minimum percentage of dollars recovered, as evidenced by the House version of the bill that lacks this feature. The SEC’s Steve Cohen explained that the SEC does not wish to commit funds that might otherwise go to harmed investors. He nonetheless contended that the SEC’s proposal may be better for whistleblowers because it pays from a special fund designated for this purpose, based on sanctions imposed, not collected.
Compare the experiences of the Justice Department and the IRS, however. When each had whistleblower statutes that provided no meaningful right to a reward, whistleblower claims were small and few. We have written extensively about the dramatic successes of the False Claims Act since its rewards increased to meaningful levels in 1986.
Likewise, IRS Whistleblower Office Director Steve Whitlock described again today how large whistleblower claims have exploded since December 2006, when Congress doubled rewards to whistleblowers to 15-30%, and created an enforceable right to those rewards.
History proves that most whistleblowers simply will remain silent, without a right to meaningful rewards. The SEC will be dividing a small pie unless Congress again embraces this principle.
To protect investors, those with information about fraud must have every incentive to speak up–as early as possible–and to be heard. The Madoff debacle proved that point.
In our experience in representing whistleblowers in the financial industry, the Senate’s version of the SEC whistleblower changes is highly preferable. It creates a right to awards of 10-30%.
There are still glaring deficiencies, such as the provisions excluding auditors who have tried unsuccessfully to call attention to fraud within the organizations and auditing firms involved. It will be an interesting next few weeks as Congress debates the final result.
Ever since the start of the new IRS Whistleblower Program, our whistleblower lawyers at Finch McCranie, LLP have represented whistleblowers in the new program. We have represented clients with IRS Whistleblower claims in the hedge fund industry, other financial services industries, real estate, manufacturing, and many other businesses, as tax fraud, tax evasion, and other tax noncompliance are not limited to one field.
Since the late 1980s, our attorneys also have worked with the nation’s other major whistleblower law, the False Claims Act. We have represented whistleblowers who reported fraud and false claims in many government programs, including contractor fraud in Iraq reconstruction, other military contracts, NASA programs, Hurricane Katrina and other disaster relief, and of course Medicare/Medicaid fraud.
For a free consultation about a possible whistleblower claim, please call us at 800-228-9159, or email us HERE.