SEC Fights Off Phony Whistleblower Submissions

As might have been expected, some will go to great lengths to claim they are entitled to a whistleblower reward based on suspect evidence.  An example is this Commission order denying a whistleblower award to one person, while making an award to another.

In the example noted, the claimant submitted a form claiming entitlement to a whistleblower reward and asserting he or she provided over 200 files with thousands of accounts, linked associates, mortgage documents, deeds, death certificates, announcements, tax documents, and offshore accounts and business associates around the world, but did not reference any specific tip or complaint.

A search of the SEC’s Tips, Complaint and Referral (“TCR”) system—an electronic database which records and stores information received from whistleblowers and others about potential securities law violations—did not reveal any tips from the claimant  relating to the relevant proceeding.  In addition, the Enforcement staff members who handled the matter confirmed that they received no information from the claimant before, during or after the investigation or enforcement action.

As a result, a preliminary determination was issued denying the claim.

Most would have given up, but this claimant contested the preliminary determination.  The claimant submitted additional documentation such as four annual reports of two organizations in Florida; a report published by a hospital foundation; several public news stories about Israeli agents in Australia, a couple who pled guilty to money laundering in 2000, a merger between two banks, and the presidential pardon of Marc Rich.  The claimant again failed to identify any specific tip or complaint with respect to the relevant action.

The SEC denied the claim for several reasons, including:

  • It could not see how the information could have led to the successful enforcement of the relevant action given the absence of any relevant factual connections between the information and the action.
  • The claimant failed to explain how any of the information that  he or she provided either caused the staff to open the investigation (or a new line of inquiry in the investigation) that resulted in successful prosecution of the action, or significantly contributed to the success of the action.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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