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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Whistleblower Awards at SEC Backlogged

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The SEC whistleblower program is having trouble keeping up with the number of people applying for awards, according to a Wall Street Journal article yesterday. More than 80% of the whistleblowers filing claims for awards since 2011 have not yet received a decision.

According to the numbers obtained for the article, there have been 297 individuals applying for awards. 247 have yet to get a decision from the Commission. Andrew Ceresney, the Director of the Enforcement Division at the SEC, explained to the WSJ that the awards raise complex issues which are being addressed for the first time.

Hopefully, they will be able to work out these issues soon. Because it will be very concerning if the problem grows with the program. The number of tips provided in the first quarter of this year was up more than 20% over last year. If this growth continues, the logjam at the award stage may grow to become a much bigger issue.

The latest whistleblower award can at least provide some insight into the length of the process for awards at the SEC. The settlement of the enforcement action against Paradigm Capital Management was made in mid-June last year. The award for $600,000 was just handed down at the end of April. That’s ten months from start to finish in an application that probably had little controversy, including the three or four months for the deadline of the Notice of Covered Action to pass.

However, some of the awards have been pending for nearly two years now. There have been less than 200 claims made in Fiscal Years 2014 and 2015, so at least some of the tipsters made their claims in FY 2013, which ended September 2013.

At least the percentage of awards out of the claims that have been decided is encouraging. Of the 50 award claims, there have been 17 awards so far. At least several of the denied claims, if memory serves, dealt with tips made prior to the passage of the Dodd-Frank Act. The percentage of awards to denials is also much better than the CFTC. The CFTC has denied 30 claims and paid out on one tip.

According to the Award Determinations posted on their website, the CFTC only made six decisions in all of 2014. Of course, the commodities regulator receives a smaller amount of tips than the SEC every year, about 10% of the number. However, it is the CFTC program right now where a whistleblower could have a decent shot at an award over $100 million. The due date for four of the five Notices of Covered Action in the November Forex fines has just passed. Award claims related to the Citibank action are due next week. Across the three regulators in the United States participating in the settlement and the UK FCA, the banks paid more than $4 billion. This opens up the possibility for a new record Dodd-Frank award. The largest award currently is $30 million.

The Dodd-Frank programs, to this point, have generally been considered a success. They still have a long way to go before they achieve the success of the False Claims Act, which paid out more than $400 million to whistleblowers last year.

Hopefully, the SEC program won’t follow the path of the Internal Revenue Service. Their program has been routinely criticized in the media over the past three years for the absence of awards given the large number of individuals that provide tips to the agency. They have also been criticized by Senator Chuck Grassley, and others, about their lack of communication with the people that are providing them tips.

Have questions? Our SEC whistleblower attorneys can assist you. For a free consultation, please contact us or call 1-800-590-4116 to speak to a lawyer at McEldrew Young Purtell Merritt.

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SEC Awards Whistleblower Top Payout After Retaliation

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The SEC has rewarded the whistleblower in the first anti-retaliation enforcement action with a payout of thirty percent of the monetary sanction against the company. The reward by the securities regulator totaled $600,000.

The enforcement action against Paradigm Capital Management received widespread publicity last summer because it was the Commission’s first use of SEC Rule 21F-2(b)(2) which provides for enforcement of the whistleblower program’s retaliation protections by the SEC. The CFTC regulations do not similarly provide for agency enforcement action of its protections.

The securities whistleblower reported the investment adviser for failing to disclose or obtain consent concerning a conflict of interest in their management of the funds in trading accounts for clients. Paradigm was making trades between client accounts and accounts controlled or affiliated with the company or its employees.

Several months after his report, the whistleblower disclosed his tip to the company. The company suspended him from his role as a head trader, asked him to work from home on compliance duties unrelated to his position as a trader, and accused him of violating his confidentiality agreement. He eventually resigned.

The decision to reward the individual with the highest percentage of monetary sanctions received by the SEC is a welcome act. Dodd-Frank specified that the whistleblower program award incentives between ten and thirty percent of the amount collected as a result of the information provided.

For additional information, please consult with Eric Young or one of our SEC whistleblower attorneys.

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SEC Pays Whistleblower Reward to Another Compliance Officer

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The SEC whistleblower program has announced an award to a compliance officer of approximately $1.5 million resulting from an issue raising imminent risk of financial harm to investors or the company.

Compliance professionals face some special rules when reporting to the SEC. In order to become eligible for an award, they must wait 120 days after informing one of a list of employees of the company or if he or she is told about the issue where circumstances indicate that the company is already aware of the noncompliance. For example, the employee does not have to tell anyone if informed by one of the individuals about the issue or made aware in a meeting where one or more of the individuals are present. The 120 day waiting period simply begins at that point.

The waiting period provides a check against compliance professionals circumventing the internal investigation process and going straight to the SEC. It also encourages companies to act promptly on tips raised through the internal reporting process of the company.

However, this case involved an exception to the 120 day waiting period. The SEC found the compliance officer had a reasonable basis to believe disclosure was necessary to prevent imminent misconduct from leading to financial harm to investors or the company. So even though he or she did not wait, they were nevertheless eligible for the reward.

Another exception that permits compliance and internal audit personnel to become eligible for an award without the waiting period is when the entity is impeding an investigation by the securities regulator.

In August 2014, another compliance whistleblower received $300,000 for reporting an issue internally and later filing a tip with the SEC when the company did nothing to correct the problem or report it. This individual waited for the 120 days to elapse prior to reporting the wrongdoing.

For additional information about the SEC program and eligibility for awards, please contact Eric Young or one of our other whistleblower attorneys.

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First Whistleblower Award Issued by CFTC



The Commodity Futures Trading Commission announced today that they are making a payment of approximately $240,000 to a whistleblower for information under the authority granted to it by the Dodd-Frank Act. It is the first award by the CFTC Whistleblower Program.

Additional details about the case and the individual paid were not released. They are committed to protecting the identity of people submitting tips and treat information as non-public and confidential, so we don’t expect to hear more about the specific case from them. Sometimes, based on the timing of announcements, it is possible to speculate about the underlying enforcement action. The CFTC probably collected between $800,000 and $2.4 million because of the tip.

The CFTC program receives tips about violations of its regulations and the Commodity Exchange Act. It had rejected approximately 25 applications for awards through the end of 2013.

The CFTC receives fewer tips than the other programs. It received 138 submissions of Form TCR in Fiscal Year 2013 compared to the approximately 3,000 tips received by the Securities and Exchange Commission.

The SEC paid its first award to a whistleblower in August 2012. The initial payment was for $50,000. In April, they announced payment of an additional $150,000 to the individual after collecting additional funds from one of the defendants in the case. The follow up award represented 30 percent of the $500,000 collected, the maximum the agency is allowed to pay.

The first mandatory award under 26 U.S.C. § 7623(b) by the Internal Revenue Service program went to a Young Law Group (predecessor to McEldrew Young Purtell Merritt) client of Eric Young in 2012. The client was awarded $4.5 million by the IRS.

Government Receives $300 Million in Three Health Care Fraud Settlements


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.

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


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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$14 Million Award Signals SEC Is Embracing Its Whistleblower Program


Young law Group, Philadelphia. On October 1, 2013, the Securities and Exchange Commission (“SEC”) announced the payment of a $14,000,000 award to an, as yet, anonymous whistleblower, whose information led to the recovery of significant funds.  The award, the largest to date issued by the SEC, is a significant victory in the fight against securities fraud.  While the details of the case are sparse, given the mandatory award structure, described below, the SEC likely recovered up to $140,000,000 in sanctions and penalties against an individual or organization that violated the nation’s securities laws.

Frustrated by a culture of risky and irresponsible behavior of Wall Street, Congress passed The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) in 2010.  This sweeping legislative reform included substantial incentives and protections designed to encourage individuals, with knowledge of securities violations, to bring tips to the SEC.  To help facilitate this goal, Dodd-Frank also created the SEC’s Office of the Whistleblower, which processes information from whistleblowers and pays rewards in the event of a successful SEC recovery.  Whistleblowers, whose original information leads to sanctions over $1,000,000, receive a mandatory award of ten to thirty percent of the SEC’s entire recovery.  A key component of the SEC Whistleblower program is that whistleblowers can remain anonymous, if they so choose, so long as they are represented by counsel.

“Our whistle-blower program already has had a big impact on our investigations by providing us with high quality, meaningful tips” SEC Chairman Mary Jo White said in a statement. “We hope an award like this encourages more individuals with information to come forward.”

The SEC’s whistleblower program is still in its infancy and prior to this recent announcement, award payments have been relatively small.  In fact, before the SEC’s October 1st announcement, the largest award payment to date was $125,000.  However, this recent award is extremely promising to whistleblower advocates, as it indicates the SEC’s intent to fully utilize this invaluable tool in its enforcement arsenal.  No doubt, further announcements of even larger whistleblower awards are to come.

Young Law Group, P.C., represents whistleblowers in the United States and abroad, in a variety of cases, including IRS Whistleblowers, False Claims Act (Qui Tam), and SEC related fraud.  For a free confidential consultation with one of our SEC whistleblower attorneys, please call Eric L. Young, Esquire at (215) 367-5151 or email to


First SEC Whistleblower Paid $50,000 For Exposing Securities Fraud


On August 12, 2012, the Securities and Exchange Commission reported that it had recovered $150,000 thousand so far out of a Court order $1 million in sanctions against the perpetrators of securities fraud scheme.  The Securities and Exchange Commission awarded the whistleblower, who wishes to remain anonymous, $50,000 for his/her contribution in providing the U.S. Government with provided documents and other significant information that allowed the SEC to investigate, move quickly, and prevent the fraud from ensnaring other victims.  Any additional amount collected will increase the payments to the whistleblower.

SEC Chairman Mary L. Schapiro, stated that “[w]e’re seeing high-quality tips that are saving our investigators substantial time and resources” and that “[t]he whistleblower program is already becoming a success.”  Robert Khuzami, Director of the SEC’s Division of Enforcement stated that “[h]ad this whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”  He also said that “[t]his whistleblower provided the exact kind of information and cooperation we were hoping the whistleblower program would attract.”  The SEC stated they get about 8 tips per day.

The Dodd-Frank Act allows the SEC to reward individuals who offer high-quality original information that leads to an SEC enforcement action in which more than $1 million in sanctions is ordered.  The whistleblower in this case was paid approximately 30% of the amount the government recovered.  The SEC issues rewards between 10% and 30% of the money collected.  “The law specifies that the SEC cannot disclose any information, including information the whistleblower provided to the SEC, which could reasonably be expected to directly or indirectly reveal a whistleblower’s identity.”


For additional information about the SEC whistleblower program, please contact one of our SEC whistleblower lawyers.



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.

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