Posts Tagged ‘anonymous’

SEC Announces $14 Million Whistleblower Award

Right on the heels of Chief Sean McKessy’s interview promising more resolved cases and whistleblower awards, the U.S. Securities and Exchange Commission (“SEC”) announced an award of more than $14 million to a whistleblower today.  The whistleblower has requested to stay anonymous, which the SEC law permits – a distinct difference from typical False Claims Act cases where the whistleblower’s identity is almost always revealed at the resolution of a case.

The SEC has not yet identified the target company nor the total amount of recovery, but does state that it brought an enforcement action against the company less than six months after the whistleblower tip was filed.  The speed of the SEC’s action – particularly in light of the clearly large value of the settlement – is encouraging and hopefully indicative that other cases may be fast-tracked as well.

As we have previously discussed on this blog, the James Hoyer law firm has significant experience representing clients in filing anonymous tips with the SEC Office of the Whistleblower.  If you have knowledge of a violation of federal securities laws or regulations and are considering filing a complaint with the SEC, please contact James Hoyer for an evaluation of your claims.  Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

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FOR IMMEDIATE RELEASE
2013-209

Washington D.C., Oct. 1, 2013

The Securities and Exchange Commission today announced an award of more than $14 million to a whistleblower whose information led to an SEC enforcement action that recovered substantial investor funds.  Payments to whistleblowers are made from a separate fund previously established by the Dodd-Frank Act and do not come from the agency’s annual appropriations or reduce amounts paid to harmed investors.

The award is the largest made by the SEC’s whistleblower program to date.

The SEC’s Office of the Whistleblower was established in 2011 as authorized by the Dodd-Frank Act.  The whistleblower program rewards high-quality original information that results in an SEC enforcement action with sanctions exceeding $1 million, and awards can range from 10 percent to 30 percent of the money collected in a case.

“Our whistleblower program already has had a big impact on our investigations by providing us with high quality, meaningful tips,” said SEC Chair Mary Jo White.  “We hope an award like this encourages more individuals with information to come forward.”

The whistleblower, who does not wish to be identified, provided original information and assistance that allowed the SEC to investigate an enforcement matter more quickly than otherwise would have been possible.  Less than six months after receiving the whistleblower’s tip, the SEC was able to bring an enforcement action against the perpetrators and secure investor funds.

“While it is certainly gratifying to make this significant award payout, the even better news for investors is that whistleblowers are coming forward to assist us in stopping potential fraud in its tracks so that no future investors are harmed,” said Sean McKessy, chief of the SEC’s Office of the Whistleblower.  “That ultimately is what the whistleblower program is all about.”

The SEC’s first payment to a whistleblower was made in August 2012 and totaled approximately $50,000.  In August and September 2013, more than $25,000 was awarded to three whistleblowers who helped the SEC and the U.S. Department of Justice halt a sham hedge fund, and the ultimate total payout in that case once all sanctions are collected is likely to exceed $125,000.

By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal a whistleblower’s identity.

For more information about the whistleblower program and how to report a tip, visit www.sec.gov/whistleblower.

 

Keeping It Confidential: Can a Relator Remain Anonymous Throughout a Qui Tam Case?

As has been discussed before on this blog, whistleblowers play a critical role in reducing fraud against our government and protecting the American taxpayers, and they should be celebrated for their courage.  But, because of the potential workplace stigma and concerns of retaliation, whistleblowers often ask if they can protect their identity during a case and remain anonymous even after the case is resolved.  While there are some precautions that can be taken, the short answer is, “probably not.”  If a qui tam case is filed, the relator must be prepared that his or her identity will likely be revealed at some point during the process, with very limited exceptions.

Anonymity While Under Seal

The False Claims Act requires that every qui tam case be filed “under seal” which means that the existence of the case and all related information, including the relator’s identity, will be kept confidential during the seal period.  The relator’s identity will be disclosed to the government agents investigating the case, but no one else.  The main purpose of the case being under seal is to allow the government time to investigate the case without tipping off the defendant or the public about the allegations.

After the government completes its initial investigation, the case will be unsealed by the court.  If the government declines to intervene in the case, some relators will decide to dismiss the case rather than pursuing it on their own.  This is the most common time when relators seek anonymity, assuming that if they are not going to go forward with the case then there is no reason the defendant ever needs to know about it.  However, this is much easier said than done.

The decision to leave a case under seal, meaning it would never be put on the public court docket and therefore never discovered by the defendant, comes down to balancing the legal presumption of public access to the courts versus the relator’s needs to remain anonymous.  U.S. ex rel. Wenzel v. Pfizer, 881 F.Supp.2d 217, 221 (D.Mass. 2012).  Theoretically, if a relator has a legitimate and particular concern about personal physical or economic harm, then a court can rule that the complaint should remain under seal or at least redacted to protect the relator’s identity.  Id.  In practice, this burden is almost never met and cases are almost always unsealed.  The reason is that generic or hypothetical concerns are not enough to supersede the public’s right to an open court system.  See U.S. v. King Pharm., 806 F.Supp.2d 833, 841 (D.Md. 2011); U.S. ex rel. Permison v. Superlative Technologies, Inc., 492 F.Supp.2d 561, 564 (E.D. Va. 2007);   Even if the relator’s concerns are realistic but generalized (meaning they do not include specific, valid threats against the relator), the case will be rarely be left sealed or even permanently redacted.

Filing as a John Doe Relator

The most common strategy to avoid identity-disclosure when a case is unsealed is to file the case as a “John Doe relator.”  This means literally using the name “John Doe” or “Jane Doe” instead of the relator’s real name, or creating a corporation or partnership to file the complaint.  While using a pseudonym may alleviate the concerns of the relator’s identity becoming public for some period of time, this strategy can present significant complications and issues if a case is litigated.  Therefore, it should not be employed without great consideration.

If a case is resolved through negotiations and settlement discussions – without the court’s involvement – then the pseudonym strategy may be effective.  For example, James Hoyer was recently involved in an intervened and settled case where a relator was identified only as a corporate partnership with one representative member publicly identified.  The partnership effectively concealed the members’ identities throughout the several-years-long negotiations.  But, when the case was ultimately resolved, each member was required to individually sign the final settlement agreement – thereby revealing their names to the defendant and the public.

If a case is actively litigated, it is unlikely that a relator could maintain anonymity throughout the proceedings even if it is filed under a “John Doe” or anonymous corporate name.  Traditional litigation often involves challenges to a relator’s standing to bring a case, defenses associated with the relator’s knowledge of or involvement in the fraud, depositions of the relator, and extensive discovery requests and production.  A defendant cannot fully defend itself without knowing who brought the allegations and the opportunity to question the individual in person.  Of course, if a case goes trial, the relator is typically the primary witness for the prosecution and would need to reveal him or herself to testify in court.  Accordingly, a relator should expect his or her identity to be disclosed at some point during litigation.

Conclusion

Ultimately, there is simply no way that experienced relator’s counsel can guarantee that a relator’s identity will be kept confidential throughout the life of a qui tam case.  The public disclosure of a relator’s identity is part of the reason why relators are financially incentivized to come forward – to counter-balance the risk that is inherent in being a whistleblower.  A relator’s desire to remain anonymous should be part of a relator’s careful considerations when deciding whether to bring a case and should be discussed in detail with experienced counsel before filing a qui tam case.

If you believe you have information regarding fraud against the government and are considering bring a False Claims Act case, please contact James Hoyer for an evaluation of your claims.  Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

Written by Jillian Estes