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Whistleblower Awaits Award in JPMorgan’s $614 Million Mortgage Fraud Settlement

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The U.S. District Court for the Southern District of New York (Manhattan) unsealed a whistleblower lawsuit against financial services firm JPMorgan this week. The qui tam lawsuit, originally filed in January 2013 by Keith Edwards of Louisiana, accused JPMorgan of violations of the False Claim Act for mortgage fraud. In the settlement, JPMorgan acknowledged its wrongdoing and agreed to pay $614 million to the federal government.

Since 2002, JPMorgan originated thousands of residential home loans insured and guaranteed by the Federal Housing Administration and Department of Veterans Affairs that were not actually eligible based on the underwriting requirements of the relevant agency. JPMorgan falsely certified to the agencies that the loans met the required underwriting standard. When the loans defaulted, the government lost millions. An internal audit by JPMorgan revealed more than 500 loans improperly submitted to the FHA and VA for insurance, but JPMorgan did not notify the government about its discovery.

The percentage of money the government will pay to Edwards as a whistleblower reward has not yet been set. The False Claims Act provides for an award to the whistleblower of between 15 and 30 percent of the amount recovered by the government. Because the Justice Department intervened in the case, the relator is entitled to 15 to 25 percent. Edwards was employed by JPMorgan in Louisiana at the banks government insuring unit when he discovered the fraud.

The lawsuit is one of eight civil fraud cases brought by the Office of the U.S. Attorney for the Southern District of New York regarding improper residential mortgage lending by the nation’s banks. Citigroup, Deutsche Bank and Flagstar Bancorp have already agreed to pay settlements for their misconduct.

2014 has already been a busy year for fraud settlements by our nation’s banks. JPMorgan agreed to pay $2 billion to settle charges related to its failure to report the Ponzi scheme conducted by Bernard L. Madoff to the government. Bank of America recently settled with a group of mortgage securities investors for $8.5 billion. And Morgan Stanley agreed to pay $1.25 billion to the Federal Housing Finance Agency for its sale of mortgage securities to Fannie Mae and Freddie Mac.

McEldrew Young Purtell Merritt is a nationwide leader in the False Claims Act and has successfully represented clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.

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SEC Whistleblower Gets Reward for Flash Crash Discovery

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Bloomberg has reported the enforcement action and recipient of the first case of a reward for independent analysis by a SEC whistleblower (announced January 2016). The financial professional discovered a stock exchange data feed operating in violation of Regulation NMS on the day of the Flash Crash (May 6, 2010). The Securities and Exchange Commission, per its policy, did not identify the individual’s name or the specific enforcement action when it announced the whistleblower award.

SEC Whistleblower Office Awards $17 Million

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The SEC whistleblower program seems to be hitting its stride recently, with five whistleblowers awarded more than $26 million over the past month. The latest reward was $17 million, the second largest to date, for a detailed tip by a former company employee that substantially advanced a government investigation.

IRS TAX FRAUD WHISTLEBLOWER AWARDED $104 MILLION

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Philadelphia, PA September 12, 2012 – Whistleblower Attorneys for Bradley Birkenfeld, a jailed former Swiss banker, announced that the Internal Revenue Service (IRS) will award him a $104 Million as a tax whistleblower reward for detailed information he turned over to the U.S. government concerning the detailed inner workings of Swiss bank UBS’s secretive private wealth management division and illegal offshore banking scheme.

It is believed that this reward – the largest ever single reward paid to an IRS tax whistleblower – is the 4th reward paid to date since the IRS Whistleblower Program went into effect in 2006.The first IRS whistleblower award of $4.5 million was issued to an anonymous accountant in April 2011 after he exposed that his employer, a Fortune 500 financial services firm, was skimping on taxes.Since that time, the IRS has been under intense scrutiny due to the apparent lack of progress with respect to its handling of IRS whistleblower claims including scathing reports by the Government Accountability Office and the Treasury Inspector General for Tax Administration.

Senator Charles Grassley, the Iowa Republican who spearheaded the legislation that led to the creation of the IRS Whistleblower Office and who also has been vocal about his unhappiness with regard to the IRS’s slow approach to whistleblower tips, declared today, “This case provides evidence about how the whistle-blower program can be effective because the IRS is saying its work against this kind of tax fraud would not have been possible without the whistle-blower.”

The Birkenfeld case is an indication by the IRS that it takes whistleblower claims seriously while encouraging others to report fraudulent activity.Attorney Eric L. Young, of the nationally renowned Whistleblower Attorney Firm, Young Law Group, who represented the accountant who received the first ever IRS tax whistleblower award, congratulates Mr. Birkenfeld and his attorneys, “I know first-hand the challenges faced by people like Mr. Birkenfeld when stepping forward to report serious fraudulent activity.In this extreme case, Mr. Birkenfeld arguably paid the ultimate price – time in jail – after deciding to come forward.Blowing the whistle on corporate fraud and misconduct is not for the faint of heart and that is why the government pays rewards.It also underscores the importance of hiring experienced IRS whistleblower attorneys.My hat goes off to Mr. Birkenfeld and his attorneys who did a tremendous job in not only ensuring that UBS AG was held accountable for helping tax cheats, but in bringing attention to scope of efforts by wealthy U.S. citizens to evade taxes by way of off-shore bank accounts.”

Young Law Group (“YLG”) is a nationally renowned law firm specializing in the representation of whistleblowers and individuals in fraud and class action litigation. Our attorneys have litigated cases resulting in recoveries exceeding $2 Billion against corporate giants including Anheuser-Busch, Pfizer, Ikon, Cephalon, Johnson & Johnson, Fresenius, Merck, Aramark, and others.

To learn more about whistleblowing and how we can help protect your rights please complete our online form to the right or call us at 800-590-4116.

Update: Young Law Group is now operating as McEldrew Young Purtell Merritt. Links in the press release have been updated with our new website address.

Second SEC Whistleblower Denied Award in Latest $3 Million Payout

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The Securities and Exchange Commission today announced its third highest award under the Dodd-Frank whistleblower program, as $3 million reward to a corporate insider who helped the agency crack a complex fraudulent scheme.

The announcement is a fitting way to celebrate the 5th Anniversary of the creation of the SEC program on Tuesday. Over the past five years, it has helped the U.S. Government collect more than $100 million in enforcement actions against companies and individuals engaged in misconduct that violates the federal securities laws. The program has paid out more than $50 million in financial incentives since the Whistleblower Office was opened in 2011.

Although we may never know more about this case due to the confidentiality provisions involved, the award determination does include a footnote that a second claimant was denied an award for not providing original information as it is defined by the SEC Rules and the Dodd-Frank Act. I’ll have to go back and check, but this may be the first instance of a securities whistleblower denied an award while another received one.

Footnote 2 indicated that the second claimant did not provide information that led to successful enforcement. Based on the laws cited, I suspect that the tip (a) happened during the investigation and didn’t significantly contribute to its success and (b) didn’t lead the investigation to inquire about different conduct than it was already investigating.

Of course, there are a few other options but this is probably the most likely one. Since the award determination release notes the delay before the individual reported the fraud to the U.S. Government, it is also possible that the tip came first but wasn’t sufficiently specific or credible enough to move the SEC to action. Additionally, it could be that the tip involved a second area not covered by the investigation and the government simply decided not to pursue an action against the company for it.

Nevertheless, this award denial re-emphasizes the importance of being the first one to provide a tip to the SEC or CFTC.

If you have questions about the importance of being the first to file, contact one of our whistleblower attorneys. An attorney can be reached by our contact form or calling 1-800-590-4116.

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Tax Whistleblower Award of $11.6 Million Announced

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It has been some time since we have seen whistleblower attorneys make an announcement concerning an award by the Internal Revenue Service. However, we saw one today as a tax whistleblower received an award of $11.6 million dollars under the program.

The press release stated that the whistleblower wished to remain anonymous and that the individual was able to help the IRS recover tens of millions of dollars for the U.S. Treasury. The release identified the IRS as being interested in hearing information about corporate tax shelters and illegal offshore accounts.

The announcement is the first that has come since the new Director of the IRS Whistleblower Office, Lee Martin, took over. His predecessor, Stephen Whitlock, was the first director of the office and only recently moved to head the Office of Professional Responsibility.

The IRS whistleblower program, pursuant to section 7623(b), pays a mandatory reward of between 15 and 30 percent of the total proceeds collected by the IRS as a result of the information from an eligible person. Eric Young in our office represented the first individual to receive a reward under section 7623(b), which was put in place by Congress in 2006.

The IRS program has been criticized in the past few years by Senator Chuck Grassley and others for the limited number of awards that have been paid out based on information about tax evasion or noncompliance. However, the IRS has insisted over the past few years that there are more awards coming – it simply takes five to seven years to analyze, investigate, enforce and for appeal deadlines to pass.

If you have questions about this or another aspect of the IRS whistleblower program, feel free to contact one of our tax whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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SEC Whistleblower Gets $3.5 Million for Tip During Ongoing Case

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The Securities and Exchange Commission on Friday announced an award of $3.5 million to a whistleblower that bolstered an existing investigation. The government has now paid $62 million to 28 whistleblowers since the SEC whistleblower program was opened in 2011.

Government Receives $300 Million in Three Health Care Fraud Settlements

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There have been a few notable settlements under the False Claims Act in the last month for those tracking fraud in the health care industry. Through the three lawsuits, the government has recovered more than $300 million.

Teva Pharmaceuticals and a subsidiary agreed to pay $27.6 million to resolve allegations it paid a Chicago doctor to switch to its generic clozapine, an anti-psychotic drug, rather than continue to prescribe Novartis’ Clozaril. The doctor became the largest prescriber in the country after signing a consulting agreement with Teva. The Anti-Kickback Statute prohibits payments to induce or reward the referral of business under Medicare and Medicaid.

Halifax Hospital will pay $85 million to settle claims it violated the False Claims Act and the Stark law when it billed Medicare for patients referred by nine doctors. The Stark law prohibits inappropriate financial arrangements between doctors and hospitals, including compensation for referrals. The Justice Department contended Halifax paid three neurosurgeons more than their fair market value. Halifax also provided an improper incentive bonus to six oncologists based on the value of work performed.

The settlement does not conclude the case against Halifax. The whistleblower lawsuit also alleges that the hospital unnecessarily admitted patients instead of treating them as outpatients. These allegations are set for trial in July.

At the end of February, Endo Pharmaceuticals agreed to pay $192.7 million to resolve allegations it engaged in off-label marketing of the prescription drug Liboderm. Liboderm was approved by the FDA only for the treatment of pain associated with a complication of shingles. Endo sales representatives were encouraged to suggest off-label uses of the product for other forms of pain and marketed the drug to physicians who were unlikely to see patients suffering from its approved indication, post-herpetic neuralgia pain.

Young Law Group represents health care whistleblowers reporting fraud through the False Claims Act. If you would like a free, confidential consultation with an attorney at the Young Law Group regarding reporting fraud, please call 1-800-590-4116 or complete our contact form.

More IRS Whistleblower Awards Announced

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After years of facing criticism for its handling of the IRS program and a dearth of rewards, two law firms have now announced payouts in the last month by the IRS whistleblower program. Both have expressed optimism that the Internal Revenue Service is starting to get on track with the investigation and payment of rewards based on tax whistleblower tips.

Unlike the SEC, the IRS does not typically announce payouts due to privacy issues. Instead, it issues an annual report to Congress which details the number of tips received and the number of payouts annually. The one exception was the $104 million award to Brad Birkenfeld, which the IRS confirmed pursuant to a waiver signed by Birkenfeld.

The most recent announcement involves the payout of rewards to three clients of a local Philadelphia law firm in cases of corporate tax fraud. The rewards were paid out under section 7623(b), which is the mandatory whistleblower reward program developed in 2006-2007 at the direction of Congress. The rules were finalized last year.

The latest announcement indicated that their three clients helped the IRS acquire more than $48 million for the U.S. Treasury because of the information provided about the tax noncompliance. The IRS program pays between 15 and 30 percent to eligible whistleblowers as a reward.

In a letter this summer to Senator Chuck Grassley concerning the IRS program sent from IRS Commissioner John Koskinen, former Director Stephen Whitlock estimated that 6 to 12 awards would be paid out in FY2015. Prior to this year, there had only been 12 payouts under the mandatory program. However, the office has repeatedly emphasized that process can take 5 to 7 years to reach a successful enforcement action and whistleblower reward.

If you have questions about this or another aspect of the IRS whistleblower program rewards, feel free to contact one of our tax whistleblower attorneys via our contact form or by calling 1-800-590-41

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CFTC Issues Second Whistleblower Award

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The U.S. Commodity Futures Trading Commission (CFTC) announced it will make its second whistleblower award yesterday in a press release. The amount will be approximately $290,000. As expected, no details about the nature of the case resulting in the award were released.

The CFTC whistleblower program was created under Dodd-Frank, so it is only about five years old. Dodd-Frank recently celebrated its fifth birthday and it is nice to see another win under the belt of the commodities regulator.

The CFTC has trailed the SEC program in both the number of tips and awards. The first and only prior reward was issued to a CFTC whistleblower last year in May (2014) for the amount of $240,000. This summer, the Director of the Whistleblower Office at the CFTC told Law360 in an interview that the number and size of awards was expected to increase as the CFTC would soon be handing out big payouts for big enforcement actions.

The SEC program has issued awards to nearly 20 whistleblowers so far with payouts ranging from several hundred thousand dollars to a high of $30 million. There have been four international whistleblowers who have received awards and I believe two compliance officers.

The CFTC has received approximately 10% of the tips that have been received by the SEC but they have been praised as high quality. The CFTC only regulates pursuant to the Commodity Exchange Act whereas the SEC has more roles, including the Securities Act, the “Exchange Act”, the ’40 Act and the Investment Advisers Act.

In part because of the success of the Dodd-Frank program, Congress is considering adding whistleblower incentives to other areas, such as auto safety. A House Subcommittee solicited testimony last week on the bill which passed the Senate unanimously and is now under consideration in the House. Partner Eric Young, a whistleblower attorney here at McEldrew Young Purtell Merritt, recently authored a piece on the legislation as it relates to Volkswagen which was published in TheHill.

Our CFTC whistleblower attorneys can assist you with answers to questions about this information as well as assistance reporting violations of the Commodity Exchange Act to the U.S. Government. To speak to an attorney, fill out our contact form or call 1-800-590-4116.

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