SEC Whistleblowers

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The chairman of the Securities and Exchange Commission (SEC) said Friday he does not want to put a “cap” on awards to SEC whistleblowers.

SEC Chairman Jay Clayton said a provision that would give the SEC discretion over awards of more than $30 million has been “mischaracterized” as a “cap.” He made the comments in a letter accompanying the whistleblower office’s annual report to Congress.

The proposed provision was not a “cap,” it could not and was not intended to operate as a “cap,” and I do not support a cap.  Congress vested in the Commission the authority and responsibility to use our good judgment and experience to determine award amounts within the range of 10-30% prescribed by Congress, and we should do just that.

The mischaracterization did have a salutary effect.  The whistleblower bar, members of Congress and other commentators brought to my attention the fact that the mischaracterization raised uncertainty about the agency’s commitment to the program.  They explained that uncertainty, including even uncertainty regarding the award process for very large awards, could deter potential whistleblowers from coming forward.  This reality of human emotion and decision-making under uncertainty is not lost on me. 

 While all cases are different and award processes that incorporate the exercise of discretion have an inherent level of imprecision, it is my aim that, as we gain greater experience with the whistleblower program, the award process will be more transparent.

The National Whistleblower Center has opposed proposed changes, which staff say would damage the program by adding additional reporting requirements and allowing the SEC to cap some awards. The NWC has met with Clayton and has filed numerous comments on the rule. An SEC meeting to consider the rules was cancelled in October; Clayton said the panel will “consider final rules in the near future.”
Continue Reading SEC reconsidering proposed rules on whistleblower awards?

On Wednesday morning, the U.S. Senate Committee on Commerce, Science, and Transportation held a hearing on mass violence, extremism, and digital responsibility. The purpose of the hearing was to examine the proliferation of extremism online and examine the effectiveness of social media companies’ efforts to remove violent content from their platforms. The senators heard from representatives of Facebook, Twitter, Google, and the Anti-Defamation League.

Monika Bickert, Facebook’s head of global policy management, repeatedly assured senators about  Facebook’s commitment to remove terror and hate content from its website. In her opening statement, she said: “We don’t allow any individuals or organizations who proclaim a violent mission, advocate for violence, or are engaged in violence to have any presence on Facebook.”

However, a whistleblower working with the National Whistleblower Center filed a petition in January 2019 with the Securities and Exchange Commission (SEC) contradicting this. The petition shows that Facebook not only hosts terror and hate content, but it has also auto-generated dozens of pages in the names of Middle East extremist and U.S. white supremacist groups, thus facilitating networking and recruitment.Continue Reading Facebook is still auto-generating terror and hate content 

Big companies cooking the books seems to be a theme in the news this week, with the latest accusations coming from a former Disney employee. Sandra Kuba tells MarketWatch she has filed information with the Securities and Exchange Commission alleging the company has been overstating amusement park and resort revenue for years.

The SEC didn’t…

Social media executives testified on Wednesday that they are determined to keep terrorist content off their sites, but the members of Congress who summoned them had doubts.

The House Committee on Homeland Security heard testimony from representatives of Facebook, Twitter, and Google.

“On terrorist content our view is simple: There is no space on Facebook for terrorists,” Monika Bickert of Facebook told the committee.

However, committee chair Bennie Thompson said social media platforms have proven “they were unable to comply” with demands to control content.Continue Reading Social media execs want terrorist content off their sites. Lawmakers see little progress

Whistleblower programs are “an important check on a firm’s compliance,” according to a survey of nearly 200 “financial services executives.”

The survey, conducted annually by the consultants at the firm Duff & Phelps, is designed to provide “a view into how firms are grappling with the constant of regulatory compliance against a backdrop of continual change.” In addition to whistleblower efforts, the study looks at anti-money laundering programs and new technology coming online for compliance and enforcement programs.

A summary reports that nearly three-quarters of respondents confirm that they have whistleblowing programs in place and 86 percent of them “at least somewhat agreeing that such programs should be mandatory.” Between one-quarter and one-third of firms feel the programs are firms are either “very” or “completely” effective.

At the same time, some are less confident in individual elements of the programs. More than one-quarter of the respondents describe their firms’ ability to evaluate the complaint and to “implement an appropriate response” to a whistleblower to be “not-at-all” effective or “somewhat” effective.  
Continue Reading Survey: Whistleblower programs aid financial compliance, but some efforts fall short

Whistleblower protection has changed dramatically in the past 15 years, says Stephen M. Kohn, chair of the National Whistleblower Center. Writing in the international publication “Ethical Boardroom,” Kohn spells out the changes and what they mean to those on governing boards and in the C-suite.

This is all radically different than the whistleblowing depicted in popular culture. It has nothing to do with employee grievances or the stealing of national security secrets. Done correctly, an employer never learns the identity of the whistleblower and thus, traditional employment relations cases become relics of a time when whistleblowers lacked safe, confidential and effective reporting mechanisms.

These changes need to be embraced, not opposed. The issue is no longer the whistleblower, but whether a company will tolerate criminal activity in order to profit. Turning a blind eye to corruption can have disastrous consequences…Trying to silence whistleblowers is the biggest mistake any corporate executive can make.
Continue Reading Memo to C-suite: Don’t silence whistleblowers. Do consider becoming one.

Danske Bank Whistleblower EU testimony
Danske Bank whistleblower Howard Wilkinson testifies during hearing at the EU Parliament Brussels, Belgium November 21, 2018.

The news program 60 Minutes had a piece on the Danske bank scandal and whistleblower Howard Wilkinson on Sunday. He exposed Russian money laundering scheme at the bank’s Estonia branch that 60 Minutes said involves $230 billion.

The piece also features comments from Stephen M. Kohn,Wilkinson’s whistleblower attorney and the chair of the National Whistleblower Center. Both men say that the bank was failing to comply with law designed to prevent money laundering.

From the transcript:

Howard Wilkinson: Being named as a whistleblower in a case involving dirty Russian money. It’s not a good place to be.

Steve Kroft (of 60 Minutes) : You’re still concerned?

 Howard Wilkinson: You’ve gotta be, haven’t you? The very nature of the people who want to launder money probably means that they’re not the sort that you wanna go down the pub and have a pint with.Continue Reading 60 Minutes: Danske whistleblower says bank ignored evidence of money laundering

Wildlife trafficking on Facebook took a hit last week, with  Agence France-Press (AFP) reporting that five men were arrested in Indonesia in connection with selling Komodo dragons and other wild animals through Facebook

According to AFP:

The vast Southeast Asian archipelago nation’s dense tropical rainforests boast some of the highest levels of biodiversity in the world and it has for years been a key source and transit point for animal trafficking.

East Java police said they arrested the suspects on Java island for allegedly trafficking the large lizard, as well as bearcats, cockatoos and cassowary birds. The Komodo dragons can be sold for $1,000 to $1,400 each, they told AFP.  
Continue Reading Facebook isn’t safe for reptiles. Smugglers busted in Java had five big lizards for sale

Two SEC whistleblowers have been awarded a total of $50 million for exposing conflict-of-interest problems with investment advisors at JPMorgan Chase Bank

The Securities and Exchange Commission announced the awards but did not offer any details of the case. However, lawyers for one whistleblower revealed it involved a 2015 $267 million settlement with the bank.

JPMorgan Chase Bank advisors invested clients’ money in JPMorgan hedge funds and mutual funds without properly disclosing the conflicts of interest, According to the 2015 settlement, some of the funds produced less revenue than other investments.

In an announcement of the award, Jane Norberg, head of SEC’s whistleblower program, wrote that insiders can “be the source of ‘smoking gun’ evidence and indispensable assistance that strengthens the agency’s ability to protect investors and the capital markets.”

One whistleblower won $13 million and the other received $37  million. The SEC announcement noted that the latter award was the third-highest award to date after the $50 million March 2018 award and a September 2018  $39 million award.Continue Reading $50 million for two SEC whistleblowers who exposed conflict-of-interest problems at JPMorgan

SEC Whistleblower RewardsOn Wednesday, December 12, 2018, National Whistleblower Center (NWC) Executive Director Stephen M. Kohn made a formal presentation to representatives from the U.S. Securities and Exchange Commission (“SEC”) opposing the proposed SEC rule  limiting awards in major fraud cases.  Kohn was joined by NWC Policy Counsel Maya Efrati and NWC Legal Fellow Sarah Khan. The packed room included SEC leadership from the Office of General Counsel, the SEC Whistleblower Office and the Office of the Chairman of the Commission. The meeting lasted for over one hour.
Continue Reading NWC Meets with SEC to Strongly Oppose “Caps” on SEC Whistleblower Rewards