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Remedies for SEC Whistleblower Retaliation

whistleblower punitive damagesWhen whistleblowers approach us for assistance in making disclosures to the SEC through the SEC Whistleblower Program, they are often concerned about potential retaliation.  Fortunately, whistleblowers have the option to make disclosures anonymously through an attorney, and the SEC takes steps to protect the confidentiality of whistleblower submissions.

As recent SEC orders announcing whistleblower awards reveal, retaliation against SEC whistleblowers is prevalent. When a whistleblower suffers retaliation, we can help them remedy retaliation under federal and state whistleblower protection laws, including the anti-retaliation provisions of the Dodd-Frank Act and Sarbanes-Oxley Act.

In addition, the SEC has prioritized protecting whistleblowers against retaliation and has taken enforcement action against companies for violating the whistleblower protection provision of the Dodd-Frank Act. For example, the SEC ordered IGT to pay $500,000 for retaliating against a whistleblower.

Click here to learn more about anti-retaliation protections for SEC whistleblowers under the Dodd-Frank Act and Sarbanes-Oxley Act.

We have represented whistleblowers at the SEC for more than a decade.  Our team of seasoned whistleblower attorneys understands the risks that our courageous clients take to do the right thing. We are committed to obtaining the maximum damages for corporate whistleblowers that have suffered retaliation.

If you are seeking representation in a whistleblower matter, click here, or call us at 202-262-8959 to schedule a free, confidential consultation.

Washingtonian magazine named two of our attorneys top whistleblower lawyers, and U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area.

 

 

Click here to read reviews from clients that we have represented in whistleblower rewards and whistleblower retaliation matters.

See our tips to get the maximum damages in your whistleblower retaliation case.

Dodd-Frank SEC Whistleblower Protection Provision

The whistleblower protection provision of the Dodd-Frank Act prohibits retaliation against a whistleblower for lawful actions taken by a whistleblower:

  1. in providing information to the Commission in accordance with this section;
  2. in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or
  3. in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. [§§] 7201 et seq.), this chapter, including section 78j-1(m) of this title, section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

15 U.S.C. § 78u-6(h)(1)(A).  A prevailing whistleblower can secure reinstatement and recover double back pay and compensation for litigation costs, expert witness fees, and reasonable attorneys’ fees.

In February 2018, the Supreme Court held in Somers that the anti-retaliation provision of the Dodd-Frank Act protects a whistleblower only where the whistleblower has disclosed a potential securities law violation to the SEC.  Somers also clarified that once an employee has provided information to the SEC, subsequent internal disclosures are protected absent proof that the employer had knowledge of the disclosure to the SEC.

Post Somers, the SEC has indicated that it will continue to prioritize whistleblower protection as a key tool to encourage whistleblowers to come forward.  In a June 28, 2018 public statement at the open meeting announcing the Proposed Rulemaking, Chair Clayton stated: “Many have asked whether the SEC will continue to enforce the anti-retaliation provisions of Dodd-Frank. Let me be clear: retaliation protections are a key component of the whistleblower program, and we will bring charges against companies or individuals who violate the anti-retaliation protections when appropriate.” Statement at Open Meeting on Amendments to the Commission’s Whistleblower Program Rules.

Protections for SEC Whistleblowers Post-Digital Realty (11-6-2020)

SEC Enforcement of Dodd-Frank SEC Whistleblower Retaliation Provision

SEC whistleblower attorneyThe SEC has taken enforcement action for retaliation against a whistleblower. On September 29, 2016, the SEC ordered International Game Technology (“IGT”) to pay a $500,000 penalty for terminating the employment of a whistleblower because he reported to senior management and to the SEC that the company’s financial statements might be distorted. See Exchange Act Release No. 78991 (Sept. 29, 2016). During an internal investigation into the whistleblower’s allegations, IGT removed him from opportunities that were integral to his ability to perform his job successfully. IGT then fired the whistleblower the same day as the internal investigation concluded that IGT’s cost-accounting model was appropriate and did not cause its financial statements to be distorted. The whistleblower was protected under the SEC whistleblower program, despite being mistaken, because he reasonably believed that IGT’s cost-accounting model constituted a violation of federal securities laws.

The action against IGT was the SEC’s first standalone retaliation case.  However, it is consistent with a 2014 enforcement action that indicated, for the first time, that retaliating against a whistleblower can result not only in a private suit brought by the whistleblower but also in a unilateral SEC enforcement action. On June 16, 2014, the SEC announced that it was taking enforcement action against Paradigm Capital Management, Inc. (“Paradigm”), a hedge fund advisory firm, for engaging in prohibited principal transactions and for retaliating against the whistleblower who disclosed the unlawful trading activity to the SEC. See Exchange Act Release No. 72393 (June 16, 2014). This was the first case in which the SEC exercised its authority under Dodd-Frank to bring enforcement actions based on retaliation against whistleblowers.

According to the order, Paradigm retaliated against its head trader for disclosing, internally and to the SEC, prohibited principal transactions with an affiliated broker-dealer while trading on behalf of a hedge fund client. The transactions were a tax-avoidance strategy under which realized losses were used to offset the hedge fund’s realized gains.

When Paradigm learned that the head trader had disclosed the unlawful principal transactions to the SEC, it retaliated against him by removing him from his position as head trader, changing his job duties, placing him on administrative leave, and permitting him to return from administrative leave only in a compliance capacity, not as head trader. The whistleblower ultimately resigned his position.

Paradigm settled the SEC charges by consenting to the entry of an order finding that it violated the anti-retaliation provision of Dodd-Frank and committed other securities law violations; agreeing to pay more than $1 million to shareholders and to hire a compliance consultant to overhaul their internal procedures; and entering into a cease-and-desist order.

The SEC’s press release accompanying the order includes the following statement by Enforcement Director Andrew Ceresney: “Those who might consider punishing whistleblowers should realize that such retaliation, in any form, is unacceptable.” The Paradigm enforcement action suggests that whistleblower retaliation can result in liability far beyond the damages that a whistleblower can obtain in a retaliation action and that retaliation can invite or heighten SEC scrutiny.

Sarbanes-Oxley Protection for SEC Whistleblowers

To succeed in a Sarbanes-Oxley retaliation claim, the whistleblower must show by a preponderance of the evidence that

  1. she had engaged in protected whistleblowing activity;
  2. the company was aware of her protected activity;
  3. she suffered an unfavorable personnel action; and
  4. her protected activity was a “contributing factor” in the unfavorable action.

“Contributing factor” causation is a light burden that can be met by showing that protected activities tended to affect in any way the decision to take the adverse action.

Once the whistleblower makes that showing, the company can avoid liability only by proving by clear and convincing evidence that it would have taken the same adverse action even in the absence of the protected activity.

Zuckerman Law has represented CEOs, CFOs, in-house counsel, partners at audit firms and other senior professionals in high-stakes whistleblower retaliation matters.  Drawing on our substantial experience representing corporate whistleblowers, we have published a free guide to SOX titled Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers:

Protected Whistleblowing Under the Sarbanes-Oxley Act

Prohibited Whistleblower Retaliation Under Sarbanes-Oxley

Proving Sarbanes-Oxley Whistleblower Retaliation

Relief or Damages for SOX Whistleblowers

Litigating Sarbanes-Oxley Whistleblower Cases

Section 1985 Haddle Remedy for Conspiracy to Interfere with Civil Rights of SEC Whistleblowers

At-will employees that suffer retaliation for participating in a federal court proceeding can bring claims under 42 U.S.C. § 1985(2).  This civil rights statute prohibits conspiracies to intimidate or retaliate against parties, witnesses or jurors testifying or participating in federal court proceedings.  Under 42 U.S.C. § 1985(2), a victim of intimidation or retaliation who suffers injury to “his person or property” can recover damages against the perpetrators of the conspiracy.  The Supreme Court held in Haddle v. Garrison, 525 U.S. 121 (1998) that a conspiracy to terminate an employee’s at-will employment constitutes injury to person or property and is therefore actionable under 42 U.S.C. § 1985(2).

RICO Prohibition Against SEC Whistleblower Retaliation

Section 1107 of SOX, 18 U.S.C. § 1513(e), criminalizes whistleblower retaliation.  It provides:

Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense, shall be fined under this title, imprisoned not more than 10 years, or both.

As Section 1513(e) is a predicate offense under the Racketeer Influenced and Corrupt Organizations Act (RICO), there is a private right of action to remedy a violation of 1513(e).  Protected conduct includes reporting a possible criminal securities law violation to the SEC.  RICO is a potent remedy because it authorizes treble damages.  18 U.S.C. § 1964(c).

In DeGuelle v. Camilli, 664 F.3d 192 (7th Cir. 2011), DeGuelle, a tax employee of S.C. Johnson & Son, Inc. (“SCJ”), was terminated after reporting an alleged tax scheme to his employer and federal agencies.  Over an eight year period beginning in 2001, DeGuelle relayed a series of concerns regarding SCJ tax practices to Daniel Wenzel, Global Tax Counsel of SCJ.  Wenzel directed DeGuelle to alter or destroy documents to avoid detection of a tax issue that DeGuelle brought to Wenzel also instructed DeGuelle and another employee to fabricate a business transaction in order to exploit accounting rules for the company’s benefit.  DeGuelle finally met with Camilli, Director of Human Resources, to discuss that Wenzel was creating a hostile work environment.  DeGuelle also spoke with Gayle Kosterman who informed DeGuelle that the company hired a law firm to investigate his tax fraud allegations and DeGuelle spoke with attorneys from the firm.

Wenzel told DeGuelle to keep his complaints about the tax department within the department, instead of taking them to human resources.  Wenzel made disparaging comments towards DeGuelle in front of other employees and acted aggressively towards him.  DeGuelle received a negative performance review, which was conducted off-cycle and at odds with the award he received earlier that year recognizing his stellar performance.  On September 10, 2008, DeGuelle and Camilli met again to discuss DeGuelle’s safety concerns relating to Wenzel’s behavior.  Later that month, DeGuelle and Wenzel had another verbal altercation and DeGuelle received a negative review from Wenzel.  DeGuelle spoke with Camilli alleging that the negative review was in retaliation for his whistleblowing, which she said she would investigate.  In November, DeGuelle contacted Camilli in writing to inform her that if the company did not take action, he would contact state or federal authorities regarding the retaliation.  On December 18, 2008 DeGuelle was informed that the negative review was retaliatory and would be revoked. DeGuelle was directed to drop his tax fraud complaints, but DeGuelle said he would file a whistleblower complaint with the Department of Labor.  The company offered a salary increase and offered to pay part of his attorney fees if he signed a confidentiality agreement and release of claims.  Instead, on December 18, 2008, DeGuelle filed a complaint under SOX with the Department of Labor, attaching tax documents, financial statements and internal communications to his complaint.  In January 2009, DeGuelle met with Kosterman to withdraw his salary request, fearing that it could be viewed as an attempt to profit from the company’s tax fraud.  On February 17, 2009, the DOL determined that SCJ was not a covered entity under SOX.  Id. at 197.

On March 10, 2009 SCJ sent another fraudulent tax return to the IRS.  On March 19, 2009 DeGuelle sent a memorandum detailing his concerns to SCJ counsel, after which Kosterman offered him a year’s salary if he were to resign and signed a confidentiality agreement and released all claims.  On April 9, 2009, SCJ began investigating DeGuelle for disclosing confidential company documents.  DeGuelle met with Camilli and other investigators and denied disclosing documents, but admitted that he attached them to the DOL complaint, asserting that Camilli was aware of those disclosures.  After that meeting, Kosterman and another employee placed DeGuelle on administrative leave, ultimately terminating him for taking and disclosing confidential business documents.  SCJ filed suit in Racine County Circuit court seeking recovery of SCJ property and confidential information and for breach of contract and conversion.  Following the suit, SCJ made defamatory statements about DeGuelle in the media.  DeGuelle then filed suit in federal court alleging multiple claims, including RICO violations.  Id. at 198.

The district court dismissed the RICO claims, holding that the tax fraud and retaliation are unrelated offenses and thus do not form a pattern of racketeering activity.  The district court also reasoned that since by the time the retaliation occurred, the government was already aware of alleged tax fraud, the predicate offenses were not the proximate cause of DeGuelle’s injuries.  The Seventh Circuit Court of Appeals reversed, holding that “[r]etaliatory acts are inherently connected to the underlying wrongdoing exposed by the whistleblower…   Accordingly, we believe a relationship can exist between § 1513(e) predicate acts and predicate acts involving the underlying cause for such retaliation.”  Id at 201.  The court determined that despite SCJ officials’ attempts to investigate DeGuelle’s concerns and protect him from retaliation, SCJ can still be held liable for retaliatory termination.  The court also noted that a whistleblower does not have to show that the same officials participated in both the crime and the retaliation.

Following DeGuelle, in Simkus v. United Airlines, No. 11 C 2165, 2012 WL 3133603, (N.D. Ill. July 31, 2012), Simkus brought a suit against United Airlines under RICO.  Simkus alleged two predicate acts in his civil RICO suit that occurred within a ten year period, mail and wire fraud related to United providing Simkus with incorrect information regarding his stock allocation in 2006 and retaliation against Simkus in violation of SOX for reporting asbestos violations to the Occupational Health and Safety Administration (OSHA).  The court found that these two acts failed the “continuity plus relationship” test.  Unlike the alleged tax fraud and retaliation committed by SCJ, there was no relationship between the two acts alleged by Simkus. Id. at *3-4.

The Seventh Circuit’s holding in DeGuelle illustrates how a whistleblower who has been retaliated against can bring a RICO action against an employer relying upon Section 1107 as a predicate offense.

[1] This case was ultimately dismissed on remand and again on appeal, due to collateral estoppel relating to the judgement in the state court case filed by SCJ, in which DeGuelle represented himself pro se, failing to include affidavits in his response to SCJ’s motion for summary judgment. See DeGuelle v. Camlli 724 F. 3d 9ss (7th Cir. August 1, 2013).

Whistleblower Retaliation Can Give Rise to Breach of Contract Claim 

An employer’s breach of an anti-retaliation policy in a Code of Ethics can potentially give rise to a breach of contract claim, although the law varies by state.

For example, in 2015, a federal district court held that an employer’s anti-retaliation policy created legally enforceable rights. See Leyden v. Am. Accreditation Healthcare Comm’n, 83 F. Supp. 3d 241, 247–48 (D.D.C. 2015). In Leyden, the trial court held that the plaintiff had a valid claim based on the employer’s alleged violation of its internal anti-retaliation policy. The court relied on law construing whether employee handbooks created implied contractual rights.

In Leyden, the plaintiff was the Chief Accreditation Officer at the American Accreditation Healthcare Commission, a nonprofit offering accreditation and certification programs to healthcare entities. The defendant had an anti-retaliation policy, which stated: “No URAC employee who in good faith reports any Improper Activities in accordance with this policy shall suffer, and shall be protected from threats of harassment, retaliation, discharge, or other types of discrimination.” The plaintiff voiced concerns that new management was mistreating female executives and that two board members were engaged in conduct that she thought jeopardized the organization’s independence. The defendant then terminated the plaintiff’s employment.

The defendant moved to dismiss the complaint, arguing in relevant part that the anti-retaliation policy did not create contractual rights. Even if it did, the defendant contended, it had disclaimed any such rights in its employee handbook.

However, the court held that the anti-retaliation policy created an implied contract. Id. The court began by reviewing Strass v. Kaiser Foundation Health Plan, a case holding that an employee handbook created an implied contract. Id. at 247 (citing Strass v. Kaiser Found. Health Plan, 744 A.2d 1000 (D.C. 2000)). The court discussed how a manual could create rights, and how an employer could effectively disclaim those rights. Id. The court also rejected the defendant’s argument about the disclaimer, noting that a disclaimer that was “rationally at odds” with the other language in the document may not cut off an implied contract. Id.

In finding an implied contract, the court focused on the employer’s invitation to report “Improper Activities” internally and on the language of the anti-retaliation policy. Id. The court also concluded that the employer’s disclaimer, which was found in a different document, was rationally at odds with the anti-retaliation policy. Id. The reasoning in Leyden may be persuasive in other jurisdictions and provide an important remedy to whistleblowers that are not covered under federal or state whistleblower protection statutes.

SEC Whistleblower Protection Lawyers 

The whistleblower attorneys at leading SECnwhistleblower protection law firm Zuckerman Law have extensive experience representing SEC whistleblowers and protecting whistleblowers against retaliation.  For a free initial consultation, call us at 202-262-8959 or click here.

Before hiring a whistleblower lawyer, assess the lawyer’s prior experience representing whistleblowers, knowledge of whistleblower laws and prior results.  And consider the experience of other whistleblowers working with that attorney.  See our client testimonials by clicking here.

SOX Whistleblower Protection for SEC Whistleblowers

How Can our Whistleblower Attorneys Help You Obtain an SEC Whistleblower Award?

SEC Whistleblower Retaliation Lawyers

Tips to Successfully Navigate the SEC Whistleblower Process

 

SEC whistleblower rules

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Rules Governing the SEC Whistleblower Reward Program

The rules governing the SEC Whistleblower Program are voluminous and somewhat complex.  But to maximize the chance of the SEC acting on a whistleblower tip and qualifying for a SEC whistleblower award, it is important to master these rules.  More than 22,000 whistleblower have submitted information to the SEC Whistleblower Office using Form TCR.

In 2011, one of our attorneys helped shape the rules implementing the Dodd-Frank whistleblower provisions, and led a coalition of whistleblower rights organizations in meetings with the SEC Chair, SEC Commissioners and senior enforcement staff.  We have achieved success for SEC whistleblowers by utilizing the SEC whistleblower rules to maximize future potential awards, and routinely counsel whistleblowers worldwide about whistleblower rewards and protections.

To date, the SEC has received approximately 22,000 whistleblower tips, but fewer than 60 whistleblowers received awards.  It is imperative that whistleblowers prepare high-quality submissions that persuade the SEC to devote limited resources to investigating the whistleblower’s disclosure.

Guide to SEC Whistleblower Rules

We work with whistleblowers worldwide to leverage the SEC whistleblower rules to maximize an award.  Download our free guide to the SEC whistleblower rules SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:

SEC Whistleblower Rules: Know Your Rights and Protections

SEC whistleblowers have important rights and protections, including protections against retaliation under both the Dodd-Frank Act and the Sarbanes-Oxley Act.  Download our free guide to Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers

Why Should You Retain an Experienced SEC Whistleblower Lawyer Familiar with the SEC Whistleblower Rules?

The SEC Whistleblower Program permits anonymous submissions when the whistleblower is represented by counsel.  Click here to learn the answers to these questions about anonymous whistleblower tips:

  • Can I still receive an award if I submit a tip anonymously?
  • How will my attorney submit an anonymous tip on my behalf?
  • How could an anonymous tip potentially expose me as the whistleblower?
  • Are there any disadvantages to anonymous whistleblowing?
  • Will the SEC ever know my identity if I submit a tip anonymously?

In addition to helping protect the identify of a whistleblower, an experienced whistleblower lawyer can increase the chances that the SEC will act on a tip and can advocate on behalf of the whistleblower to try to obtain the maximum award percentage. A whistleblower attorney can also represent the whistleblower in all interactions with the SEC and provide advice on mitigating the risks entailed in whistleblowing.

In addition to preparing a whistleblower submission on Form TCR, an SEC whistleblower attorney can determine the appropriate evidence to provide (or not provide) to the SEC as well as advise the whistleblower on any potential exposure as a result of providing the evidence. Finally, and as a practical matter, the SEC will likely view a whistleblower’s tip as more credible if it is submitted by a reputable SEC whistleblower attorney who has prior experience working with the SEC Whistleblower Office.

Click here to learn more about the benefits of experienced whistleblower representation.

Impact of SEC Whistleblower Rules in Recent Whistleblower Award Determination

A recent November 2017 order determining whistleblower award claims highlights the importance of adhering to and leveraging the SEC whistleblower rules to increase the likelihood of obtaining a SEC whistleblower award.  In that order, two claimants each received an award of approximately $8M, and five claimants were denied any award.

  • The successful whistleblowers provided original information and provided such information voluntarily, i.e., “prior to receiving a request, inquiry, or demand from the Commission.”
  • One of the successful whistleblowers provided significant information that became the focus of the investigation and subsequent enforcement action.  And the whistleblower continued to assist the staff performing the investigation, including the identification of potentially relevant documents and witnesses.
  • Two of the claimants that were denied awards failed to provide original information, i.e., the information that they provided was already known to the SEC.
  • Two claimants failed to show that their submission significantly contributed to the success of an enforcement action.  In other words, they were unable to demonstrate that something unique about their submission made an additional significant contribution to the success of a covered action.  In particular, they provided information that was largely duplicative of other information that staff had already received or had learned during the course of its investigation.

SEC Whistleblower Rules Governing SEC Whistleblower Process

How to Qualify for a SEC Whistleblower Award Under the SEC Whistleblower Rules

SEC Whistleblower Lawyers

Resources About SEC Whistleblower Rules

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Top-Rated SEC Whistleblower Law Firm Representing Whistleblowers Nationwide

Leading SEC whistleblower law firm Zuckerman Law is privileged to represent whistleblowers in claims brought under whistleblower reward and whistleblower protection laws.  Though our clients work in a wide variety of industries and locations, they typically have one thing in common — they choose not to look the other way when they see wrongdoing and instead speak up. 

Our clients deserve an experienced and zealous whistleblower advocate to help them effectively navigate the maze of whistleblower laws and fight hard to obtain the maximum recovery.

To schedule a free, confidential preliminary consultation with our whistleblower attorneys, click here or call us at 202-262-8959.

Whistleblower rewards and whistleblower protection laws are complex and while they can offer substantial rewards, there are many pitfalls that must be considered when devising an effective strategy in a whistleblower case.

We have assembled a team of experienced whistleblower lawyers that enable us to achieve exceptional results for our clients, including multi-million dollar SEC whistleblower awards.  Our team includes a licensed CPA and CFE who worked at a big four audit firm and has experience investigating complex fraud schemes.

We have secured awards for seven whistleblowers, and the courageous whistleblowers that we represent have helped stop more than $1 billion in Ponzi schemes and other fraudulent investment schemes.

In matters in which we obtained SEC whistleblower awards for our clients, the public orders announcing the awards note the “significant assistance” provided to SEC staff that enabled the SEC to complete SEC investigations more quickly.

Recently the Association of Certified Fraud Examiners published a profile of Matt Stock’s success working with whistleblowers to fight fraud:

SEC whistleblower lawyers

In 2022, whistleblower lawyer Jason Zuckerman was named to Washingtonian Magazine’s “Top Lawyers Hall of Fame.”

best sec whistleblower lawyer

Award-Winning Whistleblower Attorneys

U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area. In addition, Firm Principal Jason Zuckerman has been:

  • recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2022, 2021, 2020, 2019, 2018, 2017, 2015, 2009, and 2007;
  • rated AV Preeminent® by Martindale-Hubbell based on peer reviews;
  • selected by peers to be included in The Best Lawyers in America® in the category of employment law (2011-2024);
  • rated 10 out of 10 by Avvo, based largely on client reviews; and
  • selected by peers to be listed in SuperLawyers (2012 and 2015-2024) in the category of labor and employment law.

Top-Rated SEC Whistleblower Attorneys

An experienced SEC whistleblower attorney can maximize the likelihood of recovering an SEC whistleblower award. Under the SEC Whistleblower Program, the SEC is authorized to pay awards for original information about any violation of the federal securities laws, including:

See our column in Forbes:  One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective.

To learn more about incentives for whistleblower to disclose fraud to the SEC, download our free guide SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

In our guide to the SEC whistleblower program, the whistleblower lawyers at Zuckerman Law share their experience gained from representing whistleblowers before the SEC.

Feedback from Whistleblower Clients

WHEN REVIEWING INFORMATION ABOUT TESTIMONIALS OR STATEMENTS REGARDING A LAWYER’S QUALITY, CONSIDER THAT 1) THE FACTS AND CIRCUMSTANCES OF YOUR CASE MAY DIFFER FROM THE MATTERS IN WHICH RESULTS AND TESTIMONIALS HAVE BEEN PROVIDED; 2) ALL RESULTS OF CASES HANDLED BY JASON ZUCKERMAN ARE NOT PROVIDED AND NOT ALL CLIENTS HAVE GIVEN TESTIMONIALS; AND 3) THE TESTIMONIALS PROVIDED ARE NOT NECESSARILY REPRESENTATIVE OF RESULTS OBTAINED BY JASON ZUCKERMAN OR OF THE EXPERIENCE OF ALL CLIENTS OR OTHERS WITH JASON ZUCKERMAN. EVERY CASE IS DIFFERENT, AND EACH CLIENT’S CASE MUST BE EVALUATED AND HANDLED ON ITS OWN MERITS.

  • Jason Zuckerman is the most focused, thoughtful and aggressive attorneys I have ever known, let alone had the pleasure to have on my side in a highly complex legal case. He brought well-honed legal insights and a rapid pace to our legal preparations. He forcefully brought those preparations to the opposing side, which gave them little choice but to engage with us until a positive settlement was reached. In addition, we found Jason to be extremely responsive at every step, even if it required working past midnight. His character is beyond reproach and his dedication through the entire process was unwavering. If I ever need someone in my legal court again, I won’t hesitate for even a second, before I seek Jason’s support.
  • Jason is everything you could possibly ask for an an attorney: highly intelligent, thoughtful, and extraordinarily knowledgeable in his specialty of the law.  In a very short period of time Jason was able to assimilate a laundry list of details and offer a compelling strategy on how to effectively proceed.  Moreover, he is extremely responsive.
  • Jason is the consummate professional when it comes to SOX retaliation claims. He is, without question, one of the most deeply knowledgeable, technical, and astute attorneys in this very specialized body of law. During one of the most difficult times in my professional career, Jason not only provided exceptional legal guidance, but equally as important, he provided emotional support that was vital to my family and me.

 Jason ran circles around the “major national law firm” team that was assigned to defend my employer. In fact, Jason made them look silly at times. Jason always advocated my best interests, not his own. 

Jason is not only an exceptional attorney who helped my family to achieve a favorable outcome, but he is a friend. I’ve worked with major law firms throughout my career and when it comes to SOX and employment law matters, there is not a finer, more talented attorney than Jason Zuckerman.
  • Jason did an exceptional job in quickly understanding the intricacies of my case, grasping not only his field of expertise of employment law, but also the violations of law and SEC Regulations that were central to my dispute. The overall strategy he utilized insured that opposing counsel was challenged and made clear that this case would simply not proceed based on a timetable convenient to them. Jason is thorough, accurate and seemingly working at all hours based on phone calls and correspondence. Fortunately Jason has a very down to earth personality, understands issues readily and can convey in understandable language current “legal” circumstances and probable outcomes. I would easily and thoroughly recommend Jason for issues related to a Sarbanes-Oxley or employment related dispute.
  • I selected Jason to handle my case after consulting with three other lawyers because of his extensive SOX experience and negotiation skills. My decision paid off as he easily surpassed all of my expectations. He quickly analyzed the merits of my case and aggressively engaged my former employer to reach a favorable settlement, avoiding years of potential litigation. He was responsive, professional, ethical and a great advocate on my behalf. I truly believe that I could not have found a better lawyer to represent my interests. He would be the first person I would recommend if a colleague or friend were to ever need similar services. Put simply, Jason is a top notch lawyer who works tirelessly to achieve a positive outcome for his clients. It’s easy to see why he is regarded as an expert in the field.
  • Thank the Lord I found Jason Zuckerman. I was in a bad situation; I was put on leave from my company after reporting to the Board of Directors that the CEO asked me to make some questionable accounting entries (I was the CFO). The company took the CEO’s side and I was left out in the cold by trying to do the right thing. I was left hanging on leave and being interviewed by a company hired investigator. I found Jason and he immediately put me at ease and took over. All of a sudden the company was on the defensive and I was on the offensive. It was over in two weeks.
  • I hired Mr Zuckerman to pursue an action against a former employer that was attempting to use deceit in its pursuit of federal contracts, and which fired me for not participating in its schemes. Jason was not just very responsive, he was also engaging, spending a good deal of time and effort with me on the phone and by email learning the ins and outs of the case, discussing strategy, laying out alternatives, anticipating counter-arguments, etc, all with the highest integrity. In the end, Jason was able to negotiate a substantial settlement for me, and I believe the company learned not to fire employees for failing to participate in lying to the government. All in all, a very good outcome.I have had the opportunity in my career to interact with numerous attorneys. Jason truly stands out. I wholeheartedly recommend him to anyone seeking a lawyer for wrongful termination and related employment issues.

Tips for Whistleblowers to Qualify for an SEC Whistleblower Award

SEC Whistleblower Awards Lawyers

SOX Whistleblower Protection Lawyers

 

SEC whistleblower rules

 

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Whistleblower Rewards for Reporting Sanctions Evasion

The Anti-Money Laundering Whistleblower Improvement Act of 2022 amended the Anti-Money Laundering Act (AMLA) to require the Department of the Treasury to pay awards to whistleblowers for voluntary disclosures of original information that results in the collection of penalties above $1 million for a violation of U.S. sanctions.

A whistleblower who reports original information about sanctions evasion can obtain an award of 10% to 30% of the collected monetary sanctions.  Sanctions evasion whistleblowers can report anonymously if represented by an attorney.  The AMLA also provides a remedy for whistleblowers that suffer whistleblower retaliation.

Call us today to find out more about whistleblower incentives and protections and how we can help you report sanctions evasion and qualify for a whistleblower award.  You can contact us by phone or via WhatsApp or Signal at 202-930-5901 or 202-262-8959.

See our guide to the OFAC Whistleblower Reward Program: Strengthened Enforcement of Sanctions Evasion Enhances Incentives for Sanctions Whistleblowers and the Whistleblower Lawyer’s Guide to the Anti-Money Laundering Whistleblower Program.

Guidance on OFAC’s Enforcement and Compliance Policies

Reporting a Violation of U.S. Economic Sanctions Can Qualify for a Whistleblower Award Under AMLA or SEC Whistleblower Reward Programs

sanctions evasions whistleblower attorneysViolating U.S. economic sanctions can implicate violations of disclosure duties under federal securities laws and therefore whistleblowing about sanctions evasion can potentially qualify for an SEC whistleblower award.
For example, Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 requires SEC-registered issuers to disclose all Iran-related activities covered by sanctions restrictions. The SEC’s Office of Global Security Risk (OSGC) monitors issuers’ disclosures related to business activities involving US-sanctioned counties.
And under Section 13(r) of the Exchange Act, issuers required to file Form 10-K, Annual Reports on Form 20-F and Quarterly Reports on Form 10-Q must disclose contracts, transactions and dealings with Iranian entities. Section 219 of the Iran Threat Reduction and Syria Human Rights Act added new Section 13(r) to the Exchange Act.
Recent Office of Foreign Assets Control penalties for sanctions violations have been substantial.  In March 2017, Zhongxing Telecommunications Equipment Corporation paid $100,871,266 in a settlement agreement for 251 apparent violations of the Iranian Transactions and Sanctions Regulations.  ZTE used third-party companies to surreptitiously supply Iran with a substantial volume of U.S.-origin goods, including controlled goods appearing on the Commerce Control List.

OFAC Sanctions Evasion Whistleblower Rewards Law Firm

The sanctions evasion whistleblower lawyers at Zuckerman Law have experience representing sanctions evasion whistleblowers and one of our attorneys is also a Certified Public Accountant and Certified Fraud Examiner.

Experienced and effective sanctions evasion whistleblower attorneys can provide critical guidance and effective advocacy to whistleblowers to increase the likelihood that they get the maximum award from the FinCEN Whistleblower Program.

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For more information about sanctions evasion whistleblower rewards and bounties, contact the whistleblower lawyers at Zuckerman Law at 202-262-8959.

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OFAC Enforcement Process

A CRS report titled Enforcement of Economic Sanctions: An Overview provides the following summary of OFAC’s enforcement process:

“If OFAC suspects that a person or entity may be acting in violation of economic sanctions, it may open enforcement
proceedings. Based on the evidence, OFAC may issue a finding of no violation, a request for further information, a
cautionary letter, a finding of a violation, a finding of a violation with civil monetary penalty, or a criminal referral.
Should OFAC have reason to believe that the sanctions violation may be ongoing or recur, it may also issue a
cease-and-desist order. Where relevant, OFAC may also revoke, suspend, modify, withhold, or deny licenses to
engage in certain transactions.

If OFAC imposes a monetary penalty, the amount varies depending on the relevant statutory authority and an
evaluation of the circumstances. To calculate the penalty, OFAC first determines the “base amount” by considering
whether the violation qualifies as “egregious” and whether the individual voluntarily self-disclosed the violation. The
egregiousness determination is based on a consideration of factors including the violator’s willfulness, harm to the
sanctions program’s objectives, and individual characteristics (e.g., commercial sophistication). Then
OFAC considers aggravating and mitigating factors, including whether the violator took remedial action or
cooperated with OFAC’s investigation to calculate a final penalty. Should OFAC believe that a particular case might
warrant criminal penalties, it may refer the case to DOJ.Violators face civil penalties of up to $250,000 (which, as annually adjusted under the Federal Civil Penalties Inflation Adjustment Act of 1990, now amounts to $368,136) or “an amount that is twice the amount of the transaction that is the basis of the violation.” See Economic Sanctions Enforcement Guidelines. Seventy-five percent of the civil penalties and net proceeds of forfeitures related to violation of sanctions and other criminal provisions involving designated state sponsors of terrorism go into the United States Victims of State Sponsored Terrorism (USVSST) Fund. Otherwise, civil fines are deposited into the General Fund of the U.S. Treasury. Proceeds of the remaining 25% and most other civil forfeitures for sanctions violations are deposited into the DOJ Asset Forfeiture Fund or the
Treasury Forfeiture Fund.”

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Improper Revenue Recognition and the SEC Whistleblower Program

On September 7, 2017, the SEC announced that financial services firm State Street agreed to pay more than $35 million to settle charges that it fraudulently charged secret mark-ups for transition management services. According to the SEC’s order, the scheme generated approximately $20 million in improper revenue for the firm. After a client discovered the overbilling scheme, State Street attempted to cover it up by blaming it on a “fat finger error.” The SEC later determined that this statement was a misrepresentation as the mark-ups were done intentionally.

We have successfully represented whistleblowers at the SEC disclosing revenue recognition fraud.  For more information about revenue recognition schemes, see our article: How to Report Improper Revenue Recognition and Earn an SEC Whistleblower Award.

If you have information that may qualify for an SEC whistleblower award, contact the Director of our SEC whistleblower practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential.

In conjunction with our courageous clients, we have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies and return funds to defrauded investors. Read our tips for SEC whistleblowers and Forbes column about the success of the SEC whistleblower program.

Contact us today to find out the strategies that we have successfully employed to secure SEC whistleblower awards for our whistleblower clients.

SEC Whistleblower Program and Revenue Recognition Fraud

Under the SEC Whistleblower Program, whistleblowers are eligible to receive an award for providing the SEC with original information about a violation of the federal securities laws, including improper revenue recognition. If the SEC uses a whistleblower’s information to bring a successful enforcement action, the whistleblower is eligible to receive 10% to 30% of the monetary sanctions collected as an award. Thus, if a whistleblower had provided original information to the SEC about State Street’s overbilling scheme, he or she could be eligible to receive an award of up to $10.5 million.

The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Moreover, whistleblowers can submit an anonymous tip to the SEC if represented by an attorney. Importantly, even compliance personnel, auditors (external and internal), accountants, officers, and directors may be eligible to receive rewards under the program.

Revenue Recognition Fraud SEC Whistleblower Awards

Since 2012, the SEC Whistleblower Office has awarded nearly $1 billion in awards to whistleblowers.  The largest SEC whistleblower award to date is $114 million. Tips from whistleblowers have enabled the SEC to take enforcement actions resulting in more than $2.7 billion in financial remedies. In fact, one tip about accounting violations that improperly inflated revenue by $80 million has already resulted in a $22 million SEC award.

For more information about the SEC Whistleblower Program, see our eBook Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award. Click below to hear SEC whistleblower lawyer Matt Stock’s tips for SEC whistleblowers:

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SEC Takes Aim at Improper Revenue Recognition

According to a Report Pursuant to Section 704 of the Sarbanes-Oxley Act of 2002, during the five years preceding the enactment of SOX, the “SEC brought the greatest number of actions [involving issuer financial-report violations] in the area of improper revenue recognition: 126 of the 227 enforcement matters involved such conduct, including the fraudulent reporting of fictitious sales, improper timing of revenue recognition, and improper valuation of revenue.” Years later, the SEC continues to focus on issuer reporting and disclosure violations, including improper revenue recognition.

According to the SEC’s 2020 Annual Report to Congress on the SEC Whistleblower Program, a majority of whistleblowers tips submitted to the SEC Whistleblower Program relate to violations with corporate disclosures and financials:

  • In FY 2011, 51 tips related to corporate disclosures and financials.
  • In FY 2012, 547 tips related to corporate disclosures and financials.
  • In FY 2013, 557 tips related to corporate disclosures and financials.
  • In FY 2014, 610 tips related to corporate disclosures and financials.
  • In FY 2015, 687 tips related to corporate disclosures and financials.
  • In FY 2016, 938 tips related to corporate disclosures and financials.
  • In FY 2017, 954 tips related to corporate disclosures and financials.
  • In FY 2018, 983 tips related to corporate disclosures and financials.
  • In FY 2019, 1,107 tips related to corporate disclosures and financials.
  • In FY 2020, 1,710 tips related to corporate disclosures and financials.

A 2016 Harvard article also found that the most common SEC enforcement actions concerning accounting violations are related to “inaccurate representations of revenue.”

As discussed in an article in CFODIVE titled Improper revenue recognition tops SEC fraud cases, the SEC continues to focus on revenue recognition fraud, and whistleblower disclosures about improper revenue recognition schemes may qualify whistleblowers for an SEC whistleblower award.

SEC Enforcement Actions for Improper Revenue Recognition

The following SEC enforcement actions are examples of the types of improper revenue recognition schemes that could qualify for an SEC award:

Fraudulent Overbilling Schemes

  • SEC v. Garthright: The SEC charged SMF Energy Corp. and its officers with accounting fraud for inflating revenues through a fraudulent billing scheme. According to the SEC’s complaint, the billing scheme “increased the amount of gallons of fuel invoiced beyond what was actually delivered to customers,” which resulted in false and misleading disclosures in the company’s SEC filings. The billing scheme circumvented SMF Energy’s internal accounting controls and led to, among other things, materially overstated revenues, profit margins, shareholders’ equity, and net income in its SEC filings. The scheme resulted in several SEC violations, including the failure to maintain a system of internal controls sufficient to ensure that its customers were charged in accordance with their respective contracts, the failure to record revenues and liabilities in accordance with GAAP, and the failure to design (or to cause others to design) disclosure controls and procedures that would have caused the company to disclose and report that it recognized revenue from improper charges to customers. The SEC disgorged all ill-gotten profits and proceeds received as a result of the actions.
  • SEC v. MedQuist, Inc.: The SEC charged MedQuist with accounting fraud when it secretly inflated customer bills by increasing the number of lines of medical test that it purportedly transcribed. According to the SEC’s complaint, the “scheme was able to continue for several years because the unit of measure upon which bills to many customers were based . . . could not be verified by customers. Knowing that its customers were unable to verify line counts on bills, [MedQuist] . . . manipulate[d] line counts on customer bills to reach specific revenue and margin targets.” MedQuist and its Director, President, and Chief Operating Officer were charged with violating securities laws.

Improper Timing of Revenue Recognition

  • SEC v. L3 Technologies, Inc.: The SEC charged L3 for failing to maintain accurate books and records and failing to maintain adequate internal controls when the company improperly recorded $17.9M in revenue from a contract by creating invoices associated with unresolved claims that were not delivered when the revenue was recorded. According to the SEC’s order, employees “immediately reported concerns regarding potential violations of L3’s accounting policies and internal accounting controls to L3’s internal ethics department,” but the subsequent ethics review failed to uncover the misconduct due, in part, to “a failure by ethics investigators to adequately understand the billing process.”
  • SEC v. Dickson: The SEC charged IGI Inc. with fraudulent accounting practices and reporting, inadequate internal controls, and books-and-records violations for engaging in fraudulent sales-cutoff practices and other improper accounting practices. As a result of the improper sales-cutoff practices, “IGI misstated its assets, revenues, and net income” for several years.
  • SEC v. Alere Inc.: On September 28, 2017, medical manufacturer Alere Inc. agreed to pay more than $13 million to settle charges that it committed accounting fraud through its subsidiaries. According to the Order, Alere’s subsidiary in South Korea improperly inflated revenues by recording sales for products that were being stored at warehouses or otherwise not yet delivered to the customers. The SEC uncovered this “bill and hold” scheme along with other improper revenue recognition practices at several other subsidiaries.
  • SEC v. Maxwell Technologies, Inc.: Maxwell Technologies paid $2.8 million as a penalty for a scheme to grow revenue by booking contingent sales of auto parts as revenue.  Evidence of the scheme included falsified purchase orders and secret side arrangements to keep the scheme hidden.

Fictitious Sales

  • SEC v. Putnam: The SEC charged Anicom Inc. and its directors with violating federal securities laws after the company falsely reported millions of dollars of nonexistent sales to inflate net income by more than $20M. According to the SEC’s complaint, Anicom included in its financial statements millions of dollars in sales to a fictitious customer, SCL Integration.

Tips for Qualifying for an Revenue Recognition SEC Whistleblower Bounty

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If you have information that you would like to report to the SEC, contact an SEC whistleblower attorney at leading whistleblower firm Zuckerman Law for a free, confidential consultation about your case by calling 202-262-8959.

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