Speech by Sean McKessy, Director of the SEC Office of the Whistleblower

In some of my recent
whistleblower lawyer blog posts, I have talked about the
Taxpayers Against Fraud conference that I recently attended. Three hundred lawyers from the government
and from private law firms that represent the whistleblower (also known
as the relator) met in Washington, D.C., to discuss whistleblower qui tam law.

The majority of the conference focused on the False Claims Act (FCA), which
is by far the most frequently used whistleblower statute. Although the
False Claims Act is the granddaddy of the whistleblower statutes, the
United States actually has several statutes that protect whistleblowers
and can give them a portion of the recovery that the United States get
because of the whistleblowers’ efforts to warn the United States
and prevent the fraud that is occurring. (Additionally, a number of states
have statutes that protect whistleblowers and allow them to recover a
portion of what the state recovers because they reported fraud. The rules
for all of these statutes are very complicated, and the whistleblower
must file the claim properly in order to recover.)

At the conference, we heard from the people in charge of the whistleblower
statutes in three of those areas outside the False Claims Act. The IRS
(Internal Revenue Service), the SEC (Securities and Exchange Commission)
and the CFTC (Commodity Futures Trading Commission) all have whistleblower
statutes. At the conference, the men in charge of all three offices spoke
about what their offices were doing.

Earlier I blogged about the talk by
Vincent Martinez, Director of the CFTC Whistleblower Office. Today I want to discuss the speech given by Sean McKessy, the Director of the
SEC Office of the Whistleblower.

Like the IRS, the SEC gave out its first award to a whistleblower this
year. At $ 50,000 The award was much smaller than the one given out by
the IRS, but Mr. McKessy pointed out that the award was a very high 30%
of what the government had recovered, even though the Government already
had had an ongoing investigation into the defendant. According to Mr.
McKessy, the SEC had felt the high award was justified because the whistleblower
had opened up an entirely new area of investigation that the SEC had not
know about previously, and had pointed the SEC investigators to the key
documents they should look for.

Mr. McKessy noted that the SEC whistleblower program is different from
the FCA because the SEC decides – entirely on its own – whether
to bring the case. Unlike with the FCA, if the SEC brings litigation,
the whistleblower cannot participate. Mr. McKessy did note that the SEC
encourages collaboration with the relator’s counsel. I commend the
SEC for that decision, because it simply makes sense to expand the Government’s
capacity by using the resources of the private sector.

As a lawyer who represents whistleblowers who know about fraud in publicly-traded
companies, I found this talk particularly interesting, and in my next
entry I will report more about what Mr. McKessy said.