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US agency pays record $ 114 million to whistleblower


A person just won $ 114 million in one day, without playing the lottery or going into a casino. The check, instead, was paid by the SEC.

The SEC fiercely protects the identities of whistleblowers, which means that we may never know who received the $ 114 million or what misconduct he or she helped uncover.

(CNN Business) -

A person just won $ 114 million in one day, without playing the lottery or entering a casino.

The check he received, instead, was signed by Uncle Sam.

The Securities and Exchange Commission (SEC) awarded a staggering $ 114 million to an insider who alerted the government to misconduct and provided "extraordinary" assistance in an investigation, the agency announced Thursday. .

That is more than double the previous SEC whistleblower record, which was reached just four months ago.

"I hope this record award will encourage others with information about possible violations of securities laws to step forward," Jane Norberg, head of the SEC's whistleblowing office, told CNN Business in an exclusive interview.

The huge prize should also serve as a strong warning to America's large corporations.

In this case, the informant initially denounced the infraction internally, but without success.

At that time, he or she reported to the SEC.


"A great lesson from this award is that companies should take whistleblower reports seriously," Norberg said.

“Because the SEC probably already has the information, or will have it soon after.

And we will follow up, "he explained.

In other words: bad guys, watch out.

Wrapped in a blanket of silence

The path this informant took - first reporting him internally without success before going to authorities - is common, Norberg said.

"People just get frustrated," he added.

“They get quite disenchanted and that's when they come to the SEC.

Whistleblowers are often employees who can't live with seeing business wrongdoing, ”he explained.

The types of shady behavior whistleblowers have helped the SEC uncover include everything from Ponzi schemes and insider trading to market manipulation and bribery.

“These tips from whistleblowers have a huge impact on our law enforcement program.

They change things in a significant way, ”Norberg said.

The SEC fiercely protects the identities of whistleblowers, which means that we may never know who received the $ 114 million or what misconduct he or she helped uncover.

"It's incredibly serious," Norberg said of confidentiality.

"People have to feel comfortable to come to us," he explained.

The SEC did say that the pay included about $ 52 million tied to his case, plus $ 62 million for related actions by another unidentified agency.

And, according to the SEC, the informant endured "personal and professional difficulties."

A record year for SEC whistleblowers

Stephen Kohn, president of the National Whistleblower Center, applauded the $ 114 million award Thursday.

"This is the kind of award that changes cultures," said Kohn, a whistleblower attorney for Kohn, Kohn & Colapinto.

“It encourages people to come forward and also discourages wrongdoing.

It makes it very real for people who are thinking of participating in a fraud.

They realize that there is a high probability that they will deliver, ”he explained.

Lately, it's been a particularly lucrative time to be a whistleblower.

The SEC awarded 39 awards to individual informants totaling approximately $ 175 million during the fiscal year that ended in September.

That's more than in any year since the agency's whistleblower office opened in 2011. And the SEC received a record number of leads last year about possible wrongdoing.

(The Internal Revenue Service has its own whistleblowing office, created in 2007, as well as its own awards.)

“When we started, we were a really small office.

At the beginning of the program we wondered if it would be successful, ”said Norberg, who served as the first deputy chief of the whistleblowing office.

Then the clues started to come in.

It just grew and grew and grew.

Since its first payment in 2012, the SEC has awarded a total of $ 676 million to 108 individuals.

The awards are paid out of a fund that is fully funded from SEC penalties, not taxpayer money.

Norberg said the record year was made possible by efforts to simplify the way the agency distributes rewards.

Money and revenge can also be motivating factors

The whistleblower program helps uncover suspicious activity by offering a lucrative financial incentive for employees and investors who might otherwise remain silent.

Awards range from 10% to 30% of the fines imposed on SEC actions resulting from whistleblower complaints.

And under the new rules, rewards of $ 5 million or less - which are the majority - are presumed to get the maximum 30%.

The SEC passes whistleblower leads to investigators for investigation.

If that information helps to carry out a successful law enforcement action, the informant is eligible for a portion of the fines paid.

“Money is also a motivating factor.

It can push someone who would otherwise be hesitant to report their concerns, ”Norberg said.

“There is a real difficulty, both personal and professional, that people endure.

Money, I hope, helps, ”he explained.

And sometimes revenge can also be a motivating factor.

"I've seen informants who have personal relationships with the offender and report back on them when the relationship deteriorates," Norberg said.

An SEC program that emerged unscathed

In an era when even the most routine government agencies are politicized, the whistleblower program has survived countless efforts to gut it.

And he has emerged with bipartisan support for his success in catching scammers.

That's a big change considering that the program was born out of Dodd-Frank, the controversial Wall Street reform bill that was enacted in 2010 despite strong opposition from Republicans and the banking industry.

Critics were concerned that the whistleblowing bureau discouraged employees from reporting wrongdoing internally.

For nearly a decade, complaints by SEC whistleblowers have resulted in more than $ 2 billion in fines and the return of $ 500 million to injured investors.

Whistleblower advocates breathed a sigh of relief last month when the SEC backtracked from a proposed rule that would have capped higher rewards.

After a two-year battle, the proposal, which would have allowed the agency to reduce rewards for fines of $ 100 million or more, was unanimously withdrawn after opposition from advocates for the whistleblowers.

"It was a great victory for oversight and accountability," said Kohn, who met with SEC Chairman Jay Clayton and other officials to persuade them to withdraw the proposal.

“All successful whistleblowing programs become bipartisan.

The reason?

They work, ”he said.

Last month, the SEC imposed a new rule that allows the agency to permanently prohibit an applicant from abusing the process by submitting up to three non-serious reward applications.

"We've had people treat this show a bit like the lottery," Norberg said.

"It's frustrating for me, especially when I know the real sacrifices that the real whistleblowers have made," he explained.

But there is one point at which it is like winning the lottery: Informant rewards are subject to federal and state taxes.

The largest prizes are taxed up to 50%.

And attorneys representing any informant must also pay taxes on their fees.

Securities and Exchange Commission

Source: cnnespanol

All news articles on 2020-10-23

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