The U.S. Securities and Exchange Commission’s record $30 million whistleblower award announced this week may prompt more firms to develop practices in this area.
The SEC program, enacted as part of the Dodd-Frank legislation, is intended to encourage people to come forward with evidence of securities fraud.
Awards range from 10 percent to 30 percent of the money collected in a case, meaning this award reflects a settlement or judgment of from $100 million to $300 million, Christopher Robertson of Seyfarth Shaw LLP, who advises companies on whistleblower complaints, said by telephone.
Because attorneys typically take such cases on a contingency basis, the payout for lawyers can be large as well. Erika Kelton, the lawyer at Phillips & Cohen LLP who represented the whistleblower, declined to disclose her fee.
A whistleblower can endure a protracted process, Robertson said, and still “the SEC can decide not to bring a case and recovery could be small.” The awards come from an SEC fund rather than from the companies.
Kelton said an employee who blows the whistle “does so at great personal and professional risk.” While federal law prohibits retaliation, people sometimes still lose their jobs, both attorneys said.
Robertson said he expects three types of firms to try to expand into this area: “traditional qui tam lawyers,” who bring government fraud cases; plaintiff-side employment firms; and securities law firms that more typically file investor actions. “Qui tam” is a legal term applied to whistleblower cases.
Congress authorized the SEC’s whistle-blower program in 2010 as the agency was trying to bolster its enforcement program after having failed to act on a detailed tip that Bernard Madoff was operating a multibillion-dollar fraud. The SEC has made payouts to more than a dozen whistle-blowers, including a $14 million reward in 2013.
No details were provided about the whistleblower who got the record award, except that the person lives outside of the U.S., according to the SEC’s statement.
Was this article valuable?
Here are more articles you may enjoy.