Working for Justice

Promises and Protections of Whistleblower Actions

Posted July 10th, 2019 by in Whistleblower Law.

It has never been better to be a whistleblower. First, agencies within the United States are prioritizing tips from whistleblowers to determine their enforcement actions. Second, under certain whistleblower statutes, a whistleblower is entitled up to 30% of the proceeds from those enforcement actions. And third, there are strong protections in place to protect whistleblowers from retaliation by their employer. Therefore, whistleblowers can confidently share information with agencies, knowing that they will receive a share of the recovery and that there are statutory protections from retaliation.

The Government Prioritizes Whistleblower Tips

The Department of Justice (“DOJ”), the U.S. Securities and Exchange Commission (“SEC”), and the U.S. Commodities Futures Trading Commission (“CFTC”) all use whistleblower complaints to guide their enforcement activities.[1] Since each agency enforces a different type of fraud—the DOJ prosecutes fraud against the United States Government, the SEC enforce fraud against investors, and the CFTC enforces fraud on the derivative markets—not only can a whistleblower find an agency to report fraudulent conduct, but that agency will investigate the conduct. In fact, former-chair of the SEC, Mary Jo White, said in 2015 that the SEC whistleblower program was a “game changer” as whistleblowers “increase [their] efficiency and conserve [their] scarce judicial resources.”[2]

In response to the agencies’ receptiveness to whistleblowers, the number of whistleblower tips has continuously increased. In 2018, the SEC and the CFTC received record number of tips, with 5,200 tips going to the SEC and 760 tips going to the CFTC.[3] These tips, in turn, have led to monumental recoveries by the Government and to substantial whistleblower awards.[4]

Whistleblowers Are Rewarded For Informing the Government of Fraudulent Conduct

The DOJ, SEC, and CFTC are obligated to share in their recovery with whistleblowers. The False Claims Act (“FCA”), 31 U.S.C. §§ 3729 et seq., Dodd–Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. § 78u–6, and the Commodity Exchange Act, 7 U.S.C. § 26 all provide for monetary recovery for the whistleblower for a successful action. See e.g., 31 U.S.C. § 3730 (awarding the whistleblower 15 to 25 percent of the proceeds of a successful FCA action); 15 U.S.C. § 78u-6(b) (awarding whistleblowers 10 to 30 percent of a successful SEC action); 7 U.S.C. § 26 (awarding whistleblowers 10 to 30 percent of successful CFTC actions).

As a result, whistleblowers have been rewarded with substantial awards from the Government. For example, this past spring, the SEC announced a $37 million and a $13 million-dollar award[5] and on July 1, 2019 two whistleblowers received approximately $2 million from the CFTC.[6] The Government has recognized that the monetary incentive is necessary as there can be a long time between the complaint and a resolution.

Whistleblowers Are Afforded Strong Protections From Retaliation

Another way the Government protects whistleblowers is by making it illegal for an employer to retaliate against a whistleblower. As retaliation complaints have increased over the last few years,[7]  companies may be more hesitant to retaliate against a whistleblower for fear of substantial monetary penalties.

More importantly, Plaintiff’s counsel understands how best to protect whistleblowers against retaliation. For example, last winter the U.S. Supreme Court stated that only by reporting information directly to the SEC is a whistleblower entitled to anti-retaliation protections under Dodd-Frank. See Digital Realty Tr., Inc. v. Somers, 138 S. Ct. 767, 778 (2018) Conversely, Sarbanes-Oxley and the FCA protect whistleblowers who report suspected violations of securities laws to other federal agencies, a member of congress, or their supervisor. See, e.g., 18 U.S.C. § 1514A(a)(1). Therefore, it is important for a whistleblower to consult with counsel prior to filing a whistleblower complaint to ensure that they are as protected as possible from retaliation.

Further, the legislature understands the importance of retaliation protections for whistleblowers and have introduced legislation where the Supreme Court has limited retaliation protection. For example, Representative Green recently sponsored H.R. 2515 to amend the SEC Act to protect whistleblowers who report potential violations to their employers and not requiring them to report directly to the SEC.

How Can You Be A Whistleblower?

Each whistleblower statute has different requirements for who a whistleblower can be and what constitutes original information. The SEC will only share awards with whistleblowers who submits a tip voluntarily, or before a request, inquiry or demand from the Government. Further, the information the whistleblower gives must be “[d]erived from [the whistleblower’s] independent knowledge or independent analysis” and “[n]ot already known to the SEC.”[8] Having a knowledge of the various statutes is instrumental before filing a whistleblower complaint.

If you are considering becoming a whistleblower and share in the protections and promises provided to you by the Government, it is recommended that you speak to Plaintiffs’ counsel to fully understand your options.

Footnotes

[1] Kathleen McArthur et. al., Whistleblowers Increasingly Shape SEC, CFTC Enforcement, Law360 (July 1, 2019), https://www.law360.com/articles/1172830/whistleblowers-increasingly-shape-sec-cftc-enforcement.
[2] Mary Jo White, Chair, U.S. Securities and Exchange Commission, The SEC as the Whistleblower’s Advocate at the Ray Garrett, Jr. Corporate and Securities Law Institute-Northwestern University School of Law (Apr. 30, 2015).
[3] U.S. Securities and Exchange Commission, 2018 Annual Report to Congress: Whistleblower Program (Nov. 15, 2018); U.S. Commodity Futures Trading Commission, Annual Report on the Whistleblower Program and Customer Education Initiative (October 2018).
[4] See e.g., DOJ, Fraud Statistics Overview (last visited July 3, 2019), https://www.justice.gov/civil/page/file/1080696/download?utm_medium=email&utm_source=govdelivery (stating that since 2010, the DOJ has recovered at least $2 billion dollars in FCA enforcement actions a year); CFTC, The Whistleblower Program (last visited July 3, 2019), https://www.whistleblower.gov/ (noting that since the program began in 2014, the CFTC has awarded over $90 million to whistleblowers).
[5] Press Release, SEC Awards $50 Million to Two Whistleblowers (March 26, 2019), https://www.sec.gov/news/press-release/2019-42.
[6] Press Release, CFTC Announces $2 Million to Joint Whistleblowers (July 1, 2019), https://cftc.gov/PressRoom/PressReleases/7953-19.
[7] According to the U.S. Equal Employment Opportunity Commission (“EEOC”), retaliation claims have doubled in the last 15 years and were the most common charge in 2018.
[8] 17 C.F.R. §§ 240.21F-3, F-4(b).

Shaun Rosenthal

Shaun Rosenthal

Shaun Rosenthal is a Litigation Fellow in the Washington, DC office of Sanford Heisler Sharp, LLP. He received his Honors Business Administration degree from the Ivey Business School of the University of Western Ontario in 2015 and his J.D. from the University of Pennsylvania Law School in 2018. Learn More

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