March 19, 2015

Whistleblowers: Former Company Officer Permitted to Claim Award

Here’s news from Davis Polk’s Ning Chiu:

The SEC announced a whistleblower award of nearly half a million dollars to a former company officer whose report of misconduct resulted in an SEC enforcement action. In order for a whistleblower submission to be considered original information, it must be derived from a claimant’s independent knowledge or analysis, which is generally not applicable if the whistleblower obtained the information as an officer, director, trustee or partner.

The whistleblower in this case was an officer of the company. However, the Claims Review Staff decided that the information provided by the individual was not disqualified from being treated as original information since the officer reported the information internally at least 120 days prior to reporting it to the Commission, and the matter failed to be addressed at the company. We explain the exception in our memo on the rules.

This is the first whistleblower award to an officer. As is their usual practice, the SEC provided no details about the background of the misconduct or the report made by the whistleblower. The SEC has awarded 15 whistleblowers in the last three years, for an eye-popping total of nearly $50 million, which is financed from the sanctions.

Also see the blog by Keith Bishop entitled “Does Former Officer Have An Obligation To Turn Over Whistleblower Award?.”

More on “SEC Probing How Companies Treat Whistleblowers”

Last month, I blogged how the SEC has sent letters to several companies asking for years of nondisclosure agreements, employment contracts and other documents to investigate whether companies are muzzling corporate whistleblowers. Here’s more from this blog by David Smyth entitled “The SEC Will Be Your Employment Law Agency, Too.” Here’s an excerpt from that blog:

Now the Commission is wading deeper and deeper into the employment law business. We’ve known for some time that the SEC was looking for cases in which to enforce the Dodd-Frank anti-retaliation provisions of the whistleblower rules. It brought such a case against Paradigm Capital Management just last June. Also last year, SEC whistleblower chief Sean McKessy warned against companies writing severance agreements to buy their former employees’ silence with post-employment benefits. “And if we find that kind of language, not only are we going to go to the companies, we are going to go after the lawyers who drafted it,” he said.

But thanks to the Wall Street Journal’s Rachel Louise Ensign, that’s not all. Oh, no; that’s not all. In an article from last week, she reports that the Commission is actively looking for that kind of language. It has sent a request letter asking a number of companies “to turn over every nondisclosure agreement, confidentiality agreement, severance agreement and settlement agreement they entered into with employees since Dodd-Frank went into effect, as well as documents related to corporate training on confidentiality.” The letter also asks for “all documents that refer or relate to whistleblowing” and lists of terminated employees.

Also check out this blog by Keith Bishop entitled “Is Anything Fishy With The SEC’s Whistleblower Inquiries?.” And this Kevin LaCroix blog entitled “Whistleblowing: What Difference Does it Make?“…

Here’s a blog from Mintz Levin on this topic. And also see this blog by Steve Quinlivan entitled “Three Dodd-Frank Whistleblower Anti-Retaliation Claims Fail.” And this blog from Steve about how the 2nd Circuit has upheld the SEC’s denial of a whistleblower award…

Whistleblowers: DOL Adopts Final Rules

The Department of Labor finally has gotten around to adopting final rules for whistleblower procedures as required by Section 806 of Sarbanes-Oxley, which reflects Dodd-Frank-imposed amendments and clarifies OSHA’s procedures for handling whistleblower claims. The DOL & OSHA have been operating under interim final rules since 2011 – and the new rules are similar to those. As reflected in this memo, the new rules provide employees with 180 days to file complaints and now allow allegations to be made orally…

Whistleblowers: NY May Propose Dodd-Frank-Like Law

Recently, the NY Attorney General announced that he intends propose a whistleblower bill – the “Financial Frauds Whistleblower Act” – that would cover securities and financial frauds in New York financial services companies that would be similar to Dodd-Frank’s whistleblower laws…

Whistleblowers: SEC Files Amicus Brief Supporting Internal Reporting

A few weeks ago, the SEC filed this amicus brief with the Second Circuit in Berman v. Neo@Ogilvy LLC, to defend its position that Dodd-Frank’s whistleblower protections include whistleblowers who internally report their concerns.

In this blog entitled “Revealed! The Numbers The Attorney General Didn’t Want You To See,” Keith Bishop describes his journey to obtain whistleblower reporting numbers from the California Attorney General…

– Broc Romanek