SEC Pays $30 Million to Whistle-Blower in Largest AwardAlan Katz
The U.S. Securities and Exchange Commission awarded more than $30 million to a whistle-blower in its largest payout from a program started in 2011 to encourage people to come forward with evidence of securities fraud.
The whistle-blower, who lives outside of the U.S., provided key information in an enforcement action that the SEC didn’t identify, the agency said today in a statement. Whistle-blower awards range from 10 percent to 30 percent of the money collected in a case.
“This whistle-blower came to us with information about an ongoing fraud that would have been very difficult to detect,” Andrew Ceresney, director of the SEC’s enforcement division, said in the statement. “This record-breaking award sends a strong message about our commitment to whistle-blowers and the value they bring to law enforcement.”
Congress authorized the SEC’s whistle-blower program in 2010 as the agency was trying to bolster its enforcement program after having failed to act on a detailed tip that Bernard Madoff was operating a multibillion dollar fraud. The agency has made payouts to more than a dozen whistle-blowers, including a $14 million reward in 2013.
“This really is a true sign that the program is working and that the SEC believes it’s working,” said Gordon Schnell, a partner at Constantine Cannon LLP in New York. “This is helping them detect the wrongdoing. How do you find out what’s going on in these places without the help of insiders?”
By law, the SEC doesn’t disclose the identity of the whistle-blower or information that might reveal who it is.
Erika Kelton, an attorney at Phillips & Cohen LLP who represented the whistle-blower, said her client uncovered a fraud that regulators probably wouldn’t have detected otherwise.
“I found the SEC to be remarkably responsive,” Kelton said. “It speaks to the strength of the program.”