08/02/2012 // San Francisco, CA, USA // Whistleblower Law Firm // Jeffrey Keller // (press release)
The Securities and Exchange Commission’s new whistleblower program, part of the Dodd Frank Act, promises to root out fraud — and handsomely reward those who help it do so. In July, the SEC whistleblower program marked its first anniversary — a year in which it amassed a cash fund of $452 million to pay those whose reports of illegal securities activity lead to successful enforcement actions. In these cases, which can range from insider trading to accounting improprieties to bribery, whistleblowers will receive between 10 and 30 percent of the recovery.
While the SEC’s program is still relatively new, the idea of incentivizing and rewarding whistleblowers has long proven to be a powerful means for rooting out fraud — at both the state and federal levels. Indeed, the federal False Claims Act — legislation that dates back to the Civil War but was substantially amended during the mid-1980s — has been a stunningly successful tool in helping the government recover billions of dollars in taxpayer money improperly paid because of fraud in the financial services, pharmaceutical, defense, and other industries.
“Whistleblowers often risk their livelihood, and even their professional future, blowing the lid on wrongdoing, and it is vital that we do everything we can to support them as they fight to see justice prevail,” says Jeffrey F. Keller, a founding partner at Keller Grover, a nationally recognized labor and employment law firm, and a veteran whistleblower lawyer. “The Department of Justice using the False Claims Act — and now the SEC with its program know from experience that it would be almost impossible for them to uncover these kinds of fraud on such a regular basis without whistleblowers willing to come forward to tell the government how these frauds are being perpetrated. In exchange for this invaluable information, which the whistleblowers often give at their own risk, the whistleblowers are entitled to a significant reward. The only party who doesn’t have an interest in seeing these programs work effectively is the individual or company committing fraud.”
The SEC’s program, operated by the regulator’s Office of the Whistleblower, saw an average of nine tips a day after its July 2011 launch. California led the nation in tips, followed by New York. Whistleblower lawyers say those stats aren’t surprising, since both states are key centers of finance and industry. “Wherever there is a lot of commercial activity there is temptation to cut corners and commit fraud, as well,” says Keller, whose firm is based in Los Angeles and San Francisco. “The good news is that whistleblower laws are laying an effective foundation for rooting out the wrongdoing, and correcting it.”
Keller says that the SEC’s recoveries for the fiscal year ending June 30, 2011 — some $2.8 billion in penalties and disgorgements — could be dwarfed by recoveries going forward.
“Whistleblowers will be able to collect on SEC cases filed after July 1, 2011, and with hundreds of millions of dollars ready to be paid out, I’d expect to see a lot of credible tips leading to a lot of successful enforcements,” says the veteran whistleblower lawyer. “The SEC’s mission has always been to stamp out fraud, but this program is going to turbo charge its fight on securities crimes. It’s overdue — and very welcome.”
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