Recently an independent study found that more than one-third of hedge fund professionals have personally been pressured to break the law. Nearly half of those polled believe their competitors commit illegal acts and almost one-third have personally observed misconduct at their current place of employment. Fortunately, the SEC Whistleblower Program provides an incentive for those who witness financial corruption to do the right thing and inform the Securities and Exchange Commission (SEC). Almost nine out of 10 of those surveyed agreed they would report wrongdoing due to the protections afforded whistleblowers through the SEC’s program.
The incoming SEC Chairwoman, Mary Jo White, is expected to keep a focus on enforcing SEC rules through the tips and information provided by corporate whistleblowers. Approximately 143 enforcement actions from last year may be eligible for payouts to whistleblowers. The message to corporate wrongdoers is clear: breaking the law is not as easy as it was before the 2008 recession. When whistleblowers are incentivized to report corporate wrongdoing it also incentivizes corporate executives to abide by the law and not risk an SEC enforcement action.
The SEC Whistleblower Program requires a person with knowledge about securities fraud to report their knowledge and evidence to the SEC. Whistleblowers are eligible to receive between 10-30 percent of any monetary relief the SEC or related government agencies recover. Additionally, whistleblowers are statutorily protected from retaliation by their employers for informing the SEC.
Eligibility requires original information of an SEC violation that has occurred, is ongoing, or is about to occur. Original information is defined as deriving one’s information from sources that are not public, such as the news, court cases, government reports, government audits, etc. The quality and amount of information provided will influence what percentage of the monetary award the whistleblower will receive. The whistleblower does not need to be a corporate insider or employee, but he or she does have to be a United States citizen. Finally, the whistleblower’s information must result in an SEC action that results in more than $1 million in monetary sanctions.
Additionally, if a whistleblower knows of fraudulent activity that is resulting in the federal or state government making payments, they may have a claim under the False Claims Act. Essentially, the False Claims Act forbids corporations and persons from making a false claim for government payment. Many states have state versions of the False Claims Act. Currently, our firm is investigating cases of fraud against the federal and state government related to Medicare/Medicaid fraud, Title IV/federal student aid fraud, and government contracting fraud.
The False Claims Act protects whistleblowers from discrimination, harassment, threatening acts, demotion and termination. In the event an employer retaliates against a whistleblower for standing up for the truth, the False Claims Act requires that a whistleblower be reinstated to his or her previous job grade and receive double back pay. Additionally, if a whistleblower files a suit on behalf of the federal government, he is entitled to receive at least 15 percent and potentially 30 percent of the government funds recovered. This is a hefty incentive for employees everywhere to stand up for the truth and tell their employers to stop defrauding the American taxpayer.
Lawyers in our firm have prosecuted this type of corporate fraud for more than 30 years and would welcome the opportunity to assist any person who is aware of any such fraud. We will be glad to help and look at any potential cases. If you need more information on this subject, contact Andrew Brashier, Chad Stewart or Archie Grubb, lawyers in our Consumer Fraud Section. You can call 800-898-2034 or email Andrew.Brashier@beasleyallen.com, Chad.Stewart@beasleyallen.com or Archie.Grubb@beasleyallen.com.
Sources: Taxpayers Against Fraud Education Fund, HedgeCo.net, Main Justice
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