SEC Whistleblower Immunity Deals

High-level corporate employees considering becoming a SEC whistleblower may have concerns that their participation in the company’s violation of the law will lead to civil or criminal charges against them by the U.S. Government. In light of this concern, they may entertain the idea of approaching a government employee about providing information as a whistleblower if they can receive an immunity deal.

Individuals with this concern should review the Yates Memo, titled Individual Accountability for Corporate Wrongdoing, which was dated September 9, 2015. This Department of Justice document advised all U.S. Attorneys to evaluate their cases for possible charges against the responsible individuals and to require corporations to identify culpable individuals in order to receive cooperation credit. Although this memorandum governs only the operation of the Justice Department, several online publications have noted an increased commitment to individual prosecutions in the SEC in the months following the distribution of the memo.

The most discussed example of a whistleblower reward seeker getting prison time was the UBS whistleblower that received $104 million from the IRS whistleblower program. He was sentenced to 40 months and served two and a half years in federal prison. As this case proves, negotiating an immunity deal with the U.S. Government can be a tricky endeavor.

The whistleblower laws do not set forth their own procedure for gaining immunity. Instead, they only spell out the terms by which a person will not receive an award. For the SEC whistleblower program, these include (1) a criminal conviction for conduct related to the tip; (2) a determination by a court that the information was obtained in violation of federal or state criminal law; or (3) that the monetary sanctions exceeding $1 million were imposed on a corporation based on acts substantially directed, planned or initiated by the whistleblower.

Each year under the False Claims Act, employees who were instructed to engage in a violation of the law by their company report the behavior to the Justice Department without prosecution. So, in many cases, an immunity deal may not actually be needed for low-level participants. However, there is nevertheless still some risk as it is impossible to rely on the fact that the government in every circumstance.

An individual that would like an immunity deal with the SEC generally proceeds by having their attorney make a proffer to aid government investigators in evaluating whether to enter into a cooperation, deferred prosecution or non-prosecution agreement. Proffers are tricky because they may be used as a source to discover additional evidence or rebut inconsistent statements later. The SEC set forth its initiative to encourage cooperation in 2010 as part of SEC Release No. 2010-6.

There are many factors that go into the SEC’s decision to enter into a cooperation agreement. In evaluating cooperation offers, the SEC generally looks at (1) the value to be provided by the individual; (2) the importance of the underlying matter; (3) the interest in holding the individual accountable; and (4) whether it is in the public interest to award credit for cooperation to the individual.

In cases where an individual expresses concern that they may need an immunity deal, we typically refer them to a criminal defense attorney to evaluate their prospects. After receiving this consultation, it may make sense to proceed with a whistleblower tip without attempting to negotiate immunity up front.

For additional information about the operation of the program, please visit our page concerning the SEC whistleblower program.

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