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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Record Award Predicted for SEC Whistleblowers from JPMorgan Fine

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A media outlet, Financial Planning, is predicting that a pair of SEC whistleblowers will share an award of approximately $70.6 million out of the $307 million in regulatory fines against JPMorgan in 2015. Another outlet, Advisor Hub, put the number at $61 million instead. Either award amount would be the largest in the history of the SEC whistleblower program to date.

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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$14 Million Award Signals SEC Is Embracing Its Whistleblower Program

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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 eyoung@young-lawgroup.com.

 

Tax Court Says IRS Whistleblowers Get Rewards on Criminal Fines

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Criminal fines and civil forfeitures are collected proceeds under Internal Revenue Code section 7623(b), the mandatory tax whistleblower program, according to a recent decision by the U.S. Tax Court. The opinion paved the way for an award of $17.8 million to a pair of whistleblowers.

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

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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.”

SOURCE: http://www.sec.gov/news/press/2012/2012-162.htm

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

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.

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.

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