SEC Denies Three Whistleblower Awards
August 26, 2015
The Securities and Exchange Commission's ("SEC's") Whistleblower program has yielded three Final Orders so far in August. Notwithstanding that flurry during this summer month, BrokeAndBroker.com Blog still notes that the federal securities regulator just doesn't seem to be all that interested in timely moving the docket of whistleblower claims through its ponderous approval process. On top of that, senior SEC officials persist in defending the program as effective and efficient despite evidence to the contrary. You be the judge.
Two Claimants Denied
On August 5, 2015, the SEC entered a Final Order following the Preliminary Determination of its Claims Review Staff ("CRS") recommending the denial of a whistleblower awards in connection with claims submitted by two Claimants in connection with a Notice of Covered Action 2013-9 ("NoCA") SEC v. BP P.L.C., (E.D. LA, 12-CV-2774, November 15, 2012). CRS found that the Claimants' information did not lead to a successful enforcement action in the cited case because the SEC did not commence an examination, open/re-open an investigation, or undertake any inquiry in reliance upon the purported tips. Moreover, one of the Claimants failed to timely claim an award on Form WB-APP within the statutory 90 days provided. The CRS Preliminary Determination was apparently made on June 5, 2015.
READ the full-text Final OrderBill Singer's Comment: Notice that the NoCA was of 2013 vintage -- hence the 2013-9 file number -- yet it took until August 5, 2015 for the SEC to deny the claims. Yes, I know that there's a waiting period before the Final Order takes effect.
25 NoCAs Denied
Also, on August 5, 2015, the SEC announced the
entry of a Final Order denying an award
to a whistleblower who had filed for the prodigious grand sum of 25 covered
actions. The CRS found that the Claimant had "knowingly and willfully made
false, fictitious, or fraudulent statements and representations to the
Commission over a course of several years." Purportedly, those
misrepresentations occurred on the Form TCR, in emails to
the SEC, and on the WB-APPs. As more fully explained in the
Order, the SEC admonishes
that:
Claimant's submission of baseless claims has harmed the rights of legitimate whistleblowers and hindered the Commission's implementation of the whistleblower program by, among other things, delaying the Commission's ability to finalize meritorious awards to other claimants and consuming significant staff resources.
In
an extraordinary step, pursuant to Rule 21F08( c)(7), the Order notes that "Claimant is not eligible
to be considered for whistleblower awards in these matters or in any pending or
future covered or related actions. " The CRS recommendation was made on June 5,
2015.
Bill Singer's Comment: For starters, when the SEC blows its statistical smoke our way about how many whistleblower claims it has to deal with, let's remember that we have Claimants who routinely submit garbage, as typified by the denied Claimant here who filed "baseless claims." Such crap should get relatively short shrift in terms of an SEC in-house review. Further, as noted in the denial under consideration in this section, we have 25 cases that likely get "credited" by the Office of the Whistleblower ("OWB") as part of its purportedly enormous and burdensome docket, but those cases are, by the SEC's own words, merely a hindrance. If, in fact, the consideration of nonsense is "consuming significant staff resources," then that is more likely a function of horrific management than any sincere effort to parse through claims.
READ the full-text Final Order
Conflicts Of Interest Asserted
Finally, on August 24, 2015, the SEC announced another Final Order, ('34 Act Release 75752, File No. 2015-6 / August 24, 2015) in which the CRS issued a Preliminary Determination denying a Claimant's request for an award based upon a finding that the provided information did not lead to a successful enforcement action. In contesting that decision, the Claimant:
argued that the information provided should have led to the opening of an investigation into Redacted Redacted , but did not because of conflicts of interest within the Commission.
The SEC found no evidence to substantiate the conflict allegations and confirmed the CRS's denial. In setting forth its rationale, the SEC asserted that:
[F]irst, the lead investigative attorney assigned to the Redacted confirmed that the investigative team did not receive, review, or use any information from Claimant 2 in connection with the Redacted , nor did the team otherwise have any contact with Claimant 2. Second, each of the Tips, Complaints, and Referrals ("TCRs") that Claimant 2 submitted during this period (including Redacted , which is the only TCR that Claimant 2 identifies in the award application) received a disposition of "no further action" at the initial review stage by the office within the Enforcement Division that is responsible for screening Commission TCRs; this demonstrates that none of the TCRs were routed to the investigative staff handling the Redacted .
READ the full-text Final Order
Bill Singer's Comment
I have not had particularly good experiences dealing with OWB. I have detailed one such horror story in SEC Whistleblower Program Is A Black Hole of Despair (BrokeAndBroker.com Blog, April 9, 2015).
As more fully set forth in the April 9th BrokeAndBroker article, in November 2014, I filed a complaint with the SEC's Office of Inspector General ("OIG") and requested an investigation of what I deemed OWB's dilatory conduct. In submitting my complaint, I was required to participate in a substantial telephone interview by the third-party service provider that the SEC retains for such purposes. During that interview, I provided the sum and substance of my complaint. I then awaited some meaningful follow-up. And I waited. And I still wait.
In my futile attempts to communicate with OIG, I have referenced the April 9th BrokeAndBroker.com Blog article, which details my exasperation with both OWB and OIG. In response, OIG referred me back to OWB! Additionally, OIG persists in asking me to provide information that I had previously submitted -- but OIG will not acknowledge that it has either misplaced or lost that information and I will not cooperate further without such an admission or explanation to the contrary. Ten months have passed since the filing of my complaint with OIG and there has be no effort to contact me to discuss my concerns.
Keep in mind that my client was finally awarded about $1.6 million after the publication of the April 9th BrokeAndBroker.com Blog. It's one thing to write me off as disgruntled because my client's claim was denied but it's quite another thing when you're trying to marginalize the grievances of someone who provided substantial assistance to the SEC and eventually gained a sizable award. The system is broken and needs to be fixed.
Although the SEC and OIG would likely prefer to dismiss my complaints as the cranky musings of a crackpot and gadfly, it turns out that about a month after the BrokeAndBroker.com Blog article, the Wall Street Journal published two articles about the same issues:
"SEC Backlog Delays Whistleblower Awards / Claimants are often kept waiting for a decision, data show" (Wall Street Journal, Reporters Rachel Louise Ensign and Jean Eaglesham, May 4, 2015).
"Whistleblowers Find SEC Rewards Slow and Scarce / The Securities and Exchange Commission offers financial rewards for information on wrongdoing. But many tipsters have found it tough to collect" (Wall Street Journal, Reporters Rachel Louise Ensign and Jean Eaglesham, May 25, 2015).
In attempting to figure out why the SEC's Whistleblower program is bogged down in bureaucratic inefficiency and unable to process tips and claims in a reasonably prompt manner, we have many clues. According to the "Final Orders of the Commission" webpage for Whistleblower matters this is the sum total of activity for 2015 as available on August 26, 2015:
- Denial Order 2/13/2015
- Denial Order 2/13/2015
- Denial Order 2/13/2015
- Denial Order 2/13/2015
- Denial Order 2/13/2015
- Denial Order 2/16/2015
- Award Order 3/2/2015
- Award Order 4/22/2015
- Denial Orders 4/27/2015
- Award Order 4/28/2015
- Denial Orders 5/8/2015
- Denial Order 5/24/2015
- Award Order 7/17/2015
- Denial Orders 8/5/2015
- Denial Orders 8/5/2015