​Choosing to Act: Paths for Potential Whistleblowers

Jordan Thomas - Tuesday, November 24, 2015

Among the many exciting trends examined in the recent annual report of the SEC Office of the Whistleblower, I was particularly impressed by the substantial growth in the number of tips received by the Commission. The nearly 4,000 tips—a record—not only illustrates growing public awareness of the program, but also demonstrates public action. Simply, a startling and increasing number of individuals are coming forward to stop corruption in the workplace. We are living in the age of the whistleblower, because so many courageous individuals take on this responsibility as law enforcement’s first line of defense against wrongdoing.

Thinking about this topic, I was reminded of an interview I gave to Chief Investment Officer for an informative article, If You See Something, Say Something: A Whistleblowing Choose Your Own Adventure. In addition to referencing our recent landmark study of the financial services industry, the article cleverly lays out various options available to whistleblowers. As the article makes clear, fraud persists, and the question of how and when to blow the whistle is an extraordinarily complex one. If you are interested in reading more about key considerations for potential whistleblowers, click here.

Five Tips for Potential Corporate Whistleblowers

Jordan Thomas - Monday, November 23, 2015

In a recent piece in The New York Times, I discuss some of the key considerations for SEC whistleblowers including when, how and what to report, and how to navigate the high pressure environment of the whistleblower’s workplace. To read the full article, see here.

SEC Whistleblower Office Annual Report: Two of Eight Awards to Labaton Sucharow Clients

Jordan Thomas - Tuesday, November 17, 2015

Late yesterday, the SEC Office of the Whistleblower issued its annual report to Congress chronicling the program’s activities during the prior fiscal year. We summarized the results in a piece for the FCPA Blog here. Looking at the eight whistleblower awards issued this past year, there are two notable firsts: the first whistleblower award to a company officer and the first time the Commission flexed its muscle by issuing an award to a whistleblower who suffered retaliation. We are so gratified to note that both of these landmark actions involve Labaton Sucharow clients. For more information on the whistleblower program results, see the full report here.

Recent Whistleblower Award: Timing Matters

Jordan Thomas - Monday, November 09, 2015

The SEC just announced another whistleblower award, granting more than $325,000 to a former investment firm employee whose tips led to a successful enforcement action. This award, like the $30 million award granted to a whistleblower last year, came with a caveat: the whistleblower could have received a larger award, if not for a delay in reporting. While the whistleblower waited to report the misconduct until after leaving the firm, whistleblowers are provided significant employment protections to encourage the timely reporting of misconduct. Speaking to this, Enforcement Division chief Andrew Ceresney noted that the program encourages tipsters to come forward in order to "prevent misconduct from continuing unabated while investors suffer more harm.”

While deciding to blow the whistle is a complex decision, timing matters. Sometimes, a cursory submission, followed by a more lengthy and detailed submission, may be in a whistleblower’s best interest. And, whistleblowers who fear retaliation may wish to consult an attorney to explore the anonymity protections afforded by Dodd-Frank’s program when individuals work with a whistleblower advocate.

A Bold Step Forward: New UK Rules Empower Whistleblowers

Jordan Thomas - Tuesday, November 03, 2015
Just last month, the UK’s Financial Conduct Authority (FCA), together with the Bank of England’s Prudential Regulatory Authority, published strident new rules to encourage and support whistleblowers at financial institutions. By September 2016, banks and credit unions with more than £250 million in assets must standardize internal whistleblowing programs. They must also assign a senior manager to act as a whistleblower “champion.” Other requirements include an annual report on whistleblowing and notifying employees of whistleblowing services. Though currently applicable to UK institutions, these requirements could eventually apply to all regulated financial institutions in the country, including overseas banks with branches in the UK.

This landmark move addresses ongoing concerns about systemic ethical issues within the industry. Earlier this year, in an expansive survey we conducted together with the University of Notre Dame, The Street, The Bull and the Crisis, we uncovered some troubling findings on the topic of ethics in the US and UK financial services industry:

  • When asked if they ever felt pressure at work to compromise ethical standards or violate the law—approximately 14% of the survey’s UK respondents admitted feeling such pressure. This was a full 6% higher than respondents in the US.
  • 24% of UK respondents said it was likely that their employer would retaliate if they were to report wrongdoing in the workplace.
  • And perhaps most troubling, more than 1 in 5 respondents said they believed their company’s confidentiality policies and procedures barred the reporting of potential illegal or unethical activities directly to law enforcement or regulatory authorities.

While there is clearly much work to be done on both Wall Street and Fleet Street, we are making real progress. Indeed, in 2012, I was privileged to give an address at the House of Commons about the ethical crisis that led to the development of the SEC Whistleblower Program and the program’s powerful and ground-breaking effect on law enforcement. I continue to have great faith in our combined abilities to bring forth and empower truthtellers wherever they reside. I note that in fiscal 2014, the SEC reported that it received 70 tips from whistleblowers in the UKthe highest number from any country outside of the US.

These latest rules promulgated by the FCA are a promising sign. Like the SEC’s Whistleblower Program, these rules recognize the crucial role of each individual employee in the fight against wrongdoing and offer the best hope for industry-wide reform.

SEC Announces Fiscal Year 2015 Enforcement Results: Innovative Actions to Fight Corruption

Jordan Thomas - Friday, October 23, 2015
The SEC just released its fiscal year 2015 results, which highlight the Commission’s stalwart determination to protect investors, hold companies and executives responsible for misconduct, and demand integrity in our financial markets. The SEC’s enforcement approach brought an amazing breadth and depth of cases spanning the entire securities industry. The Commission filed 807 enforcement actions, a nearly 7% increase from fiscal 2014, and obtained orders totaling approximately $4.2 billion in disgorgement and penalties.  

The SEC’s Whistleblower Program continued to grow in fiscal 2015, awarding approximately $38 million to whistleblowers. The program’s many accomplishments included a case where Labaton Sucharow represented the whistleblower, in which the agency issued the maximum award in the SEC’s first retaliation case as well as a landmark action against a company for the use of confidentiality agreements to impede whistleblowers from communicating with the SEC. The evidence is clear: even as corporations seek to block its progress, this revolutionary program continues to gain momentum and make a huge impact on the industry.

The year also witnessed numerous other first-of-their kind cases as well as innovative leveraging of data and quantitative analytics by the SEC. The fiscal summary offers an extremely encouraging look at the SEC’s hard-driving quest to hold the securities industry accountable and ferret out corruption in all sectors, at all levels. And this year’s results make a powerful statement about the strength of the SEC’s enforcement efforts today and in the future.

The Truth About Corporate Whistleblowers

Jordan Thomas - Tuesday, October 20, 2015
Disgruntled employees out for revenge. Rats. Opportunists. We’ve all heard the derogatory terms aimed at whistleblowers. And there’s a cruel irony at the core of the name-calling: since whistleblowers often operate quietly or anonymously, they are unable to correct the many common misconceptions about their character and motives.

In the aftermath of the financial crisis, however, interest in the ability of whistleblowers to deter misconduct has created a surge of studies and surveys that shed light on the average whistleblower. A whitepaper published this year by compliance organization The Network utilizes data from various sources, including the Ethics and Compliance Initiative’s National Business Ethics Survey, to provide a compelling snapshot of the average whistleblower. Here are just a few interesting details from The Network’s whitepaper:

  • 92% of whistleblowers report internally first. Furthermore, only 20% ever tell anyone outside their company and only 9% report to the government. Whistleblowers aren’t looking to punish companies. In fact, they most often speak out precisely because they care deeply about their workplaces.
  • Money is not the motivator. Research reveals that the primary reason whistleblowers go outside the company is a fear of retaliation – not a desire to collect a reward. According to the NBES survey, for instance, more than 1 in 5 respondents said they experienced retaliation after reporting internally and more than one-third of those who did not report internally said that fear of retaliation was the reason they chose not to do so.
  • Whistleblowers are good employees. Contrary to the stereotype of a resentful worker, in reality the average whistleblower is likely to be a well-regarded employee. Also, the whistleblower is likely to hold a high-level managerial or supervisor position within the company.

It has become increasingly clear that we must do all we can to protect and encourage truth-tellers. Standing at the crossroads of a pivotal time for corporate ethics, we have the opportunity to finally make progress against years of systemic corruption.

Whistleblowers Coming Forward in Huge Numbers: Boston SEC Reports Flood of Tips

Jordan Thomas - Tuesday, September 22, 2015
In highly encouraging news for investors and market integrity, the SEC’s Boston regional director, Paul Levinson, recently told Law360 that the agency’s Whistleblower Program is yielding a “steady fire hose” of fraud tips and having a remarkable effect on the culture of the financial services industry in New England.

The Boston area’s success is just the latest evidence of the Whistleblower Program’s tremendous and growing power. The most recent annual report from the Office of the Whistleblower revealed record numbers in both the number and dollar value of awards granted to individuals.

Whistleblowers are bravely coming forward – and are doing so in droves.

In just over four years, the program has gained traction against deep and systemic corruption.  While the decision to come forward is never taken lightly, we are heartened to see that so many truth- tellers feel empowered to do so. To learn more about the specific protections and benefits offered by the SEC Whistleblower Program, please see here.

New Justice Department Policy Targets Wall Street Fraudsters

Jordan Thomas - Monday, September 21, 2015
Following criticism and public concern over the lack of prosecutions against individuals involved in the financial crisis, the Department of Justice recently released guidance that underscores a renewed effort to charge individuals in corporate wrongdoing. The memo, which sets forth best practices for federal prosecutors, makes clear that a company should be considered cooperative in an investigation only if it offers information about the individual employees involved in wrongdoing.

The policy memo arrives amidst recent public dispute among SEC directors regarding investigating and prosecuting individuals involved in financial fraud. Given the slew of multibillion dollar settlements involving nearly all of Wall Street’s major firms in the last few years, concern has grown that financial penalties are viewed as a tax write-off, not a powerful deterrent to misconduct. As SEC Chairman White stated in a speech last year, “A company, after all, can only act through its employees and if an enforcement program is to have a strong deterrent effect, it is critical that responsible individuals be charged, as high up as the evidence takes us.”

The reality is, finding and building cases against individuals is incredibly difficult. These cases are hampered by corporations utilizing massive financial resources to defend executives, the difficulties of gathering evidence from multiple, sometimes foreign, jurisdictions, and corporate structures themselves which are often designed to protect senior officials. Indeed, just last year, while French banking giant BNP Paribas was fined nearly $9 billion for processing financial transactions through countries subject to U.S. sanctions, the Justice Department maintained that the bank withheld records that might have implicated individual employees until after the deadline to file individual charges had passed. The odds are seemingly stacked in favor of corporations.

Whistleblowers fundamentally alter these odds.

As federal law enforcement renews its efforts to bring down the bad actors behind these devastating frauds, we must keep in mind that whistleblowers may be the sharpest tool in the enforcement arsenal. By exposing high-level insiders with detailed accounts of wrongdoing, whistleblowers can provide authorities with early and actionable intelligence. Dodd-Frank has deputized us all to act as the government’s eyes and ears. Empowered with an army of courageous witnesses, federal prosecutors and enforcement lawyers will build formidable cases that ferret out wrongdoing and promote a corporate marketplace where integrity is the price of admission.

Another Victory for Whistleblowers: Federal Appeals Court Rules that Internal Reporting Triggers Protections

Jordan Thomas - Friday, September 11, 2015
In another significant victory for the SEC and for whistleblowers, the U.S. Court of Appeals for the Second Circuit reversed a lower court and ruled that whistleblowers who report potential wrongdoing to their company prior to reporting to the SEC are entitled to the robust employment protections established under Dodd-Frank. As we discussed in an earlier post, the SEC issued guidance in August to clarify that Dodd-Frank anti-retaliation provisions apply equally to those whistleblowers who report potential violations internally. Given that at least one other court has ruled in an opposing way, the issue might be on its way to the Supreme Court for review.

In the meantime, this more expansive view of whistleblower protections not only empowers corporate whistleblowers, it also serves as an important reminder that companies must develop and encourage internal policies and procedures for the reporting of misconduct. For several years, we have examined the growing ethical crisis in corporate America and the crucial role truthtellers must play if we wish to reverse the prevalence of win-at-any-cost corporate cultures. With enhanced protections for whistleblowers, companies must shift their focus from silencing and retaliating against whistleblowers to establishing compliance programs that more effectively detect, deter and mitigate wrongdoing.

Deciding when, if and how to blow the whistle is an extraordinarily complex decision. Please see this short video for some of the key issues to consider. And, for more information on the specific employment protections offered by the SEC Whistleblower Program, please see here.

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Website Editor &
SEC Whistleblower Advocate

Jordan A. Thomas jthomas@labaton.com


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