Creating a circuit split that will likely be headed for resolution by the U.S. Supreme Court, the Second Circuit’s recent decision in Berman v. Neo@Ogilvy LLC expanded the Dodd-Frank Act’s anti-retaliation protections to include employees who were terminated by their companies after internally reporting to their employers concerns about potential violations of the federal securities laws.  The Fifth Circuit reached the opposite conclusion two years ago, in Asadi v. G.E. Energy (USA), L.L.C., holding that Dodd-Frank unambiguously defines “whistleblower” as someone who reports to the SEC.

Continue Reading Second Circuit: Dodd-Frank “Anti-Retaliation” Applies Even When Whistleblower-Employees Have Not Reported to the SEC

[Editor’s Note:  This past Friday, Perkins Coie Partner Lou Mejia, former SEC Chief Litigation Counsel, joined the chair of the SEC Enforcement Division’s Financial Reporting and Audit Group on a panel to discuss the agency’s latest enforcement efforts surrounding financial reporting fraud].

Margaret McGuire, the chair of the SEC Enforcement Division’s Financial Reporting and Audit Group (formerly a “Task Force”), participated in a panel at the American Law Institute’s Accountants’ Liability 2015 Conference in Washington, D.C. on October 2, 2015, during which she outlined the Group’s latest enforcement initiatives.  The Financial Reporting and Audit Group was formed in 2013 with the stated goal to strengthen the agency’s efforts to identify and prosecute securities law violations related to financial reporting and audit failures.  From 2013 to 2014 alone, the percentage of audit firm clients sued by the SEC more than tripled (4% to 14%).
Continue Reading The SEC Turns Up The Heat On Financial Reporting Fraud

Shortly after the July 2010 adoption of the Dodd-Frank Act’s whistleblower program, disputes began arising over whether its anti-retaliation protections apply to employees who report misconduct internally to the company, but not externally to the SEC.  On August 4, 2015, the SEC issued new guidance through an interpretive rule, maintaining that the Act’s whistleblower protections are not limited only to those who choose to report externally to the SEC.

Continue Reading New SEC Guidance: Dodd-Frank Protects Internal Whistleblowers

On April 1, 2015, the Securities and Exchange Commission announced its first enforcement action against a company for using improperly restrictive language in confidentiality agreements allegedly aimed at stifling potential whistleblowers.

The SEC charged KBR Inc. with violating whistleblower protection Rule 21F-17 enacted under the Dodd-Frank Act, which prohibits companies from “imped[ing] an individual

The Securities and Exchange Commission announced this week that it has awarded its first whistleblower payout to a former company officer. The redacted order indicates that the former officer will receive an award between $475,000 and $575,000 for reporting high-quality, original information about a securities fraud that resulted in an SEC enforcement action with sanctions exceeding $1 million. The identity of the officer and the nature of the enforcement action were redacted by the Commission to protect the anonymity of the whistleblower, as required by law.

While the SEC has publicized other significant whistleblower awards over the last two years, this particular announcement serves as an alarm bell of sorts to internal gatekeepers and decision makers responsible for handling allegations of misconduct. The Commission normally will not consider information provided by officers, directors, trustees, or partners who learn about a fraud through another employee reporting the misconduct to be original information derived from independent knowledge or independent analysis. But, an exception exists under Rule 21F-4(b)(4)(v)(C) for reporting information to the Commission more than 120 days after other responsible compliance personnel possessed the information and failed to adequately address the issue.

In the SEC press release accompanying the order, SEC representatives made clear that they will continue to entertain tips from corporate employees at all levels:
Continue Reading SEC Awards First Whistleblower Payout to Former Company Officer

With over 10,000 whistleblower tips since 2011, the Securities and Exchange Commission (“SEC”) recently unveiled its most detailed portrait yet of the whistleblowers who have received awards under the SEC incentive program created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to its 2014 SEC Annual Report to Congress on the Dodd-Frank

Somewhat overlooked in the attention to the SEC’s recent $30 million whistleblower award is a more frightening development for public companies.  Just weeks earlier, the SEC announced an award to an employee who performed internal audit and compliance functions.  The SEC said such employees “are on the front lines against fraud and corruption” and offered

DOJ has announced that it will increase efforts to investigate and prosecute criminal actions under the False Claims Act.  In a recent address to the False Claims Act plaintiffs’ bar, Leslie R. Caldwell, Assistant Attorney General for the Criminal Division, described the Criminal Division’s recent successes in prosecuting healthcare and government procurement fraud and its

On June 27, 2014, the D.C. Circuit vacated the U.S. District Court for the District of Columbia’s hotly-debated opinion in United States ex rel. Barko v. Halliburton Co., making it clear that internal investigation communications are privileged “if one of the significant purposes of the internal investigation was to obtain or provide legal advice.”  The Circuit court noted that the privilege applies even if the internal investigation is conducted pursuant to a company compliance program required by statute or regulation, or is otherwise conducted pursuant to company policy.
Continue Reading D.C. Circuit Vacates Barko Ruling on Scope of Privilege in Internal Investigations

It is no secret that whistleblower complaints are on the rise. According to the SEC Office of the Whistleblower’s (OWB) recently released annual report, during the 2013 fiscal year, OWB received more than 3,200 whistleblower complaints, tips, and referrals—up from 3,001 in 2012 and just 334 in 2011 (the year OWB was created). Similarly, in fiscal year 2013, DOJ saw a record 752 qui tam complaints filed under the False Claims Act (FCA) whistleblower provision. Whistleblower awards are also on the rise. In fiscal year 2013, the DOJ recovered $3.8 billion in settlements and judgments based on the FCA. More than three quarters of the DOJ’s recovery—$2.9 billion—was related to whistleblower lawsuits, with whistleblowers receiving $345 million of the recovery. In September 2013, the SEC OWB paid more than $14 million to a single whistleblower. The SEC OWB also recently announced that it paid an additional $150,000 to the recipient of the first whistleblower award, for a total of more than $200,000. But not all whistleblowers receive large payouts, and many face retaliation for their actions. A recent Fourth Circuit decision makes the relatively light burden of proving retaliation more difficult. And an upcoming decision by the Second Circuit could affirm the lower court’s limitations on who can recover whistleblower awards.
Continue Reading Whistleblowers: Boom or Bust?