SEC Pays Record Whistleblower Award
The government may be shut down for a few days but one lucky whistleblower will soon be receiving a check for $14,000,000.00 according to the SEC. Although the whistleblower chose to remain anonymous, we do know that his or her information helped the government recover tens of millions of dollars on behalf of defrauded investors.
It’s a bit frustrating not knowing many details but under federal law, the SEC’s and IRS’ whistleblower programs protect the identity of tipsters. For whistleblowers worried about retaliation, the protection is important.
There are several whistleblower programs that pay hefty cash awards for those providing original source information.
Key Whistleblower Programs
SEC Program. Under the Dodd – Frank law, the SEC is authorized to pay whistleblowers an award of 10% to 30% of the money collected. The awards are for those who report securities law violations. Congress passed the law hoping to provide financial incentives to help whistleblowers quickly report violations. Prompt reporting helps to minimize the harm to investors, better preserve the integrity of the United States’ capital markets, and more swiftly hold accountable those responsible for unlawful conduct.
IRS Whistleblower Program. Like the SEC program, a whistleblower can receive up to 30% of what the government collects. The program is available to those who report taxpayers failing to pay or report what they owe in taxes.
False Claims Act. Stretching all the way back to the Civil War, the False Claims Act pays cash awards to those with original source information about those defrauding the government. Common examples include Medicare fraud and mortgage scams. (Most home mortgages are directly or indirectly insured by the government.)
FIRREA. Short for the Financial Institutions Reform, Recovery and Enforcement Act, this law pays whistleblowers up to $1.6 million for information about fraud targeting federally insured banks.
Besides the size of reward announced today by the SEC, the story is also remarkable for the speed in which the investigation was conducted. IRS Whistleblower investigations can drag on for years. The average wait for an award is over 5 years. Although the SEC’s press release offered no details (probably to protect the whistleblower’s identity), we do know that the whistleblower reported the conduct just 6 months ago. Given the SEC’s huge case backload, that represents extraordinary speed.
In announcing the award, SEC’s chairwoman Mary Jo White said, “Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips. We hope an award like this encourages more individuals with information to come forward.”
About the author. Brian Mahany is a lawyer representing whistleblowers. His firm has the largest pending false claims act case anywhere in the U.S. against a lender – HUD’s $2.4 billion case against Allied Home Mortgage. Brian and his team of whistleblower lawyers help concerned citizens stop fraud and collect the largest awards possible. Brian can be reached at or by telephone at (direct). He also publishes a daily blog, Due Diligence, that has hundreds of text searchable posts about tax law, fraud and whistleblower stories.
Posted by Brian Mahany, Esq.