Thursday, August 23, 2012

SEC's new whistleblower program gets big response

Since Congress created a strong whistleblower program at the Securities and Exchange Commission under the Dodd-Frank Act in July of 2010, tips have been pouring into the SEC in record numbers, according to an article in yesterday's LA Times.  In the new program's first year of operations, the SEC received around 2,870 tips, or approximately eight per day, which contrasts sharply with the dozen every six months allotted by the previous program.

The tips are not only coming in a much higher volume, but also are of higher quality and are coming from a wide variety of sources.  The array of whistleblowers who have submitted information to the new program ranges from board members and former spouses to senior executives and sources from within financial firms and more.

Whistleblower rewards are an important factor.  Whistleblower attorney, Erika Kelton, a senior partner at Phillips & Cohen LLP, told the LA Times, "They feel they need some financial security in their future.  Many of these people risk never being able to work again in their chosen career."

To ameliorate some of the financial and professional risks implicit in blowing the whistle, the SEC's new program offers whistleblowers a reward of 10 percent to 30 percent of the total amount recovered by the SEC, if more than $1 million is recovered.  The SEC awarded on Tuesday its first whistleblower reward under the Dodd-Frank program for $50,000.

Wednesday, August 22, 2012

Affordable Care Act boosts fight against health care fraud

NPR reported yesterday morning on the ways the Affordable Care Act helps fight health care fraud. The story noted the difficulty government regulators have in keeping up with the various health care scams that crop up continuously, describing efforts as a "an endless game of Whack-a-Mole." A very expensive game of Whack-a-Mole indeed, where the government loses an estimated $65 billion per year to health care fraud.

The Affordable Care Act could give the government a leg up in the fight by diverting an additional $340 million to anti-fraud efforts over the next decade, and calling for the use of anti-fraud computer systems, which filter through the millions of Medicare claims received daily and identify suspicious or irregular submissions. The new computer system also screens health care providers seeking to participate in Medicare based on their potential to commit fraud, thereby mitigating  risk of fraud in the future, by ensuring that the program admits honest providers.

Although the new and more sophisticated technology will undoubtedly benefit anti-fraud efforts, the value of committed individuals, including whistleblowers, cannot be overlooked.  According to Patrick Burns of Taxpayers Against Fraud, "There's only so much detective work investigators can do sitting at computer terminals. The effort also needs some foot soldiers." 

SEC grants maximum award to whistleblower

The Securities and Exchange Commission yesterday granted the first whistleblower award under the new program created by the Dodd-Frank Act.  The reward totaled $50,000, or thirty percent of the SEC's current recoveries from the case, which is the maximum percentage allowed under the program.

The SEC has kept the whistleblower's identity anonymous, as allowed under Dodd-Frank, and the SEC did not release any information about the type of fraud involved in the case.

Under the Dodd-Frank Act of 2010, the SEC's whistleblower program was expanded to encourage individuals to come forward with well-timed and high quality information about large-scale fraud, by incentivizing their work (whistleblowers are awarded 10-30 percent of the total money recovered in each case), and offering job protection.  The information provided to the SEC must be detailed and comprehensive enough to launch investigations, and must result in enforcement and minimum penalties of $1 million.

The Wall Street Journal story included comments made by Erika Kelton, a whistleblower attorney at Phillips & Cohen LLP, noting that she "praised the SEC for moving swiftly to issue its first award and for setting it at the maximum percentage payout."

Phillips & Cohen represents whistleblowers under the SEC program, as well as in qui tam cases and whistleblower claims with the Internal Revenue Service and the Commodity Futures Trading Commission.

Tuesday, August 21, 2012

SEC announces first whistleblower award

The U.S. Securities & Exchange Commission has made its first whistleblower award.  The SEC Whistleblower Office was established in August 2011, pursuant to the Dodd-Frank Act.

According to the SEC the whistleblower, who did not wish to be identified, will receive nearly $50,000, thirty percent of the amount collected from the perpetrators of a multi-million dollar fraud scheme. The information provided by the whistleblower resulted in a court's imposition of over $1 million in sanctions, although only $150,000 has been collected so far.  If additional money is collected from this defendant or other defendants in the matter, the whistleblower's award will increase as well.

According to the chief of the SEC’s Whistleblower Office, Sean McKessy, the office receives about eight tips a day. “The fact that we made the first payment after just one year of operation shows that we are open for business and ready to pay people who bring us good, timely information.”