Page 11 - White-Collar Crime

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White-Collar Crime | MONDAY, SEPTEMBER 28, 2015 | S11

Whistleblower
claim and make recommendations to the function, these are all real risks that must to already be in a position to take control of

Commission even when the award claims be addressed.
their own internal whistleblower complaints.
have no basis.”22 Given the public criticism •
« Continued from page S7
the SEC faced in connection with informa- Conclusion
••••••••••••••••••••••••••••
protected by the Dodd-Frank anti-retaliation tion it received regarding Bernard Madoff’s 1. 2014 Annual Report to Congress on the Dodd-Frank
provisions. As such, potential whistleblowers Ponzi scheme and other matters, there are There are, however, a number of things Whistleblower Program (2014 Annual Report), at 1.
are now incentivized to bypass their com- understandable incentives for the SEC’s companies and counsel can do to maintain 2. Id. at 4.
pany’s compliance and legal departments enforcement staff to take harder looks at control over whistleblower tips. Most impor- 3. “The SEC as the Whistleblower’s Advocate,” Re- marks of Chair Mary Jo White (April 30, 2015), http://
and head right to the SEC’s door.
tips that come in no matter how frivolous tantly, a company’s continued support for a www.sec.gov/news/speech/chair-white-remarks-at-gar-
Consequences of the Altered Whistle- they may appear on their face (especially demonstrably robust compliance function rett-institute.html (Whistleblower’s Advocate).
4, Id.
blower Incentives. The consequences of in high trafic tip areas such as corporate remains essential. Just as that function’s abil- 5. 2014 Annual Report, at 4.
increased SEC involvement at the initial disclosures and inancials).23 Add into the ity to credibly process and thoroughly investi- 6. Whistleblower’s Advocate.
7. Id.
stages of whistleblower tips—as opposed mix the fact that the SEC’s widely publicized gate tips it receives is viewed by enforcement 8. 17 C.F.R. §240.21F-4(c)(3).
to the involvement of internal compliance inancial rewards program has created a real agencies as an important factor in resolving 9 17 C.F.R. §240.21F-4(b)(7).
and legal departments—are signiicant. Fore- risk that employees will now be motivated whistleblower allegations, that same internal 10. Whistleblower’s Advocate.
most is the company’s loss of control over the to bring marginal or meritless cases to the compliance credibility can also be leveraged 11. Asadi, 720 F.3d at 623.
12. Id. at 621.
process. In practice, compliance departments staff’s attention with the hope of receiving when the SEC initiates the inquiry. By con- 13. Id. at 625.
are in a position to far more eficiently and a substantial payout, and it is clear that ducting its own investigation and credibly 14. Verfuerth v. Orion Energy Systems, 65 F. Supp. 3d
640, 643-46 (E.D. Wis. 2014); Banko v. Apple, 20 F. Supp.
accurately assess a whistleblower’s allega- companies now face signiicant increases in presenting relevant facts to the SEC as soon 3d 749, 756-57 (N.D. Cal. 2013); Wagner v. Bank of Amer-
tions. If reported to the company, key factual expenses and disruption to their businesses. as possible in the face of a whistleblower- ica, No. 12-cv-0381, 2013 WL 3786643, at *4-*6 (D. Colo. July 19, 2013).
allegations can be quickly veriied (or dis- Moreover, the SEC’s recent and robust pur- instigated SEC investigation, a company can, 15. Prior to Berman, numerous district courts dis-
credited), relevant individuals can be inter- suit of whistleblower protections—includ- in many circumstances, limit the scope of agreed with the holding in Asadi. See, e.g., Yang v. Navi-
viewed and key documentary evidence can ing enforcement actions against perceived the overall inquiry and reduce costs and gators Group, 18 F. Supp. 3d 519, 534 (S.D.N.Y. 2014); Mur-
be reviewed. The SEC’s enforcement staff, retaliation—also creates the potential for time expenditures. In addition, just because ray v. UBS Sec., No. 12 Civ. 5914, 2013 WL 2190084, at *7
by practice necessarily inluenced by past a meritless whistleblower claim being fol- a whistleblower may be incentivized to report (S.D.N.Y. May 21, 2013).
16. Berman, 2015 WL 5254916 at *2.
experience, cannot assess allegations with lowed-up on by the SEC, while the company directly to the SEC under the current legal 17. Id. at *2, *6.
such precision or eficiency.
remains on tenterhooks to avoid any poten- regime, companies should continue to foster 18. Id. at *9.
19. SEC Amicus Curiae Brief in Berman v. Neo@Ogilvy,
This is where the substantial inancial tial retaliation accusations. This is not the their own internal reporting systems. With No. 14-4626 (2d Cir. Feb. 6, 2015), at 12.
incentives available to whistleblowers under ideal environment for any company to be the SEC committed to a balance of fostering 20. 17 C.F.R. Part 241, SEC Release No. 34-75592, “Inter-
pretation of the SEC’s Whistleblower Rules Under §21F
the program amplify the problems for com- in and it is not, as described above, what reporting while supporting internal compli- of the Securities Exchange Act of 1934,” Aug. 4, 2015.
panies presented by early SEC involvement. the SEC has stated it wants. But, given the ance programs, the change in incentives cre- 21. Annual Report, at 2.
As White has stated, the SEC’s enforcement increased incentives for whistleblowers to ated by Asadi and its progeny should eventu- 22. Whistleblower’s Advocate.
“staff is required to thoroughly assess every
bypass their company’s compliance and legal
ally be remedied and companies will want
23. Annual Report, at 27 (comparison of whistleblow-
er tips by allegation type).

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