On July 17, 2015, the SEC announced a whistleblower award of over $3 million to a company insider who provided information that “helped the SEC crack a complex fraud.” This payout represents the third highest award under the SEC’s whistleblower program to date. The SEC has made two of the three highest payments to clients of the same law firm – Phillips & Cohen LLP. (The SEC paid roughly $14 million to a whistleblower in October 2013, and nearly $30 million to a foreign whistleblower represented by Phillips & Cohen in September 2014.). This latest multi-million dollar payout suggests that the SEC’s whistleblower program is in full swing, and that legal representation of whistleblowers may be on the rise.
The agency’s press release states that the whistleblower had provided “specific and detailed information” that “comprehensively laid out the fraudulent scheme which otherwise would have been very difficult for investigators to detect.” The amount of the award had been increased to reflect that the whistleblower’s initial tip had “led to related actions,” but decreased because the whistleblower had delayed in reporting the conduct. Specifically, the SEC stated that “due consideration was given to Claimant’s unreasonable delay in reporting the illegal conduct to the Commission, although [the SEC had] not applied this factor as severely here as [it] otherwise might have done had the delay occurred entirely after the whistleblower award program was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Chief of the SEC’s Office of the Whistleblower, Sean McKessy, commented that the award represented “another testament to the agency’s commitment to reward those who provide high-quality information that leads to successful enforcement actions and related actions.”
Public sources indicate that the whistleblower was represented by Phillips & Cohen, which also represented the whistleblower who received the $30 million payment last September. In both cases, the whistleblowers chose to remain anonymous. According to an attorney for Phillips & Cohen, “The SEC acted quickly as a result of the information and assistance our client provided,” and “[t]he fraud was such that it’s unlikely that it ever would have been detected if our client hadn’t come forward.” Id.
Since the inception of the whistleblower program in 2011, more than $50 million has been paid to 18 different individuals. As of the end of fiscal 2014, the SEC had roughly $437.8 million available for funding the Commission’s whistleblower program, including the payment of whistleblower bounty awards. Director of the SEC’s Division of Enforcement, Andrew Ceresney, remarked that the program “continues to be profoundly effective in helping [the SEC] protect investors and hold wrongdoers accountable.”