On November 19, 2013, we reported on a record-breaking $14 million whistleblower bounty payout by the SEC. Earlier today, the Wall Street Journal reported that this award arose from an alleged “Chicago-based scheme to defraud foreign investors seeking U.S. residency.” This is significant news because the SEC did not identify the company at issue or granular details underlying the tipster’s report in connection with issuing the bounty award.
According to the article, the award arose from a situation where approximately 250 investors were “duped” by 30-year-old Anshoo R. Sethi and his two Chicago-based companies into paying a total of more than $155 million for a supposed plan to build a hotel and conference center. The investors (most of whom were foreign) were led to believe they were boosting their chances of green cards, because the scheme was designed to qualify for an immigration program that offers U.S. residency for job-creating investments. However, the WSJ article indicated that Mr. Sethi and his companies lacked the necessary building permits, their claims to have the support of major hotel chains were false and the documentation they gave to the immigration authorities was “phony.”
Also according to the article, the SEC brought civil charges against Mr. Sethi in February 2013, and two months later a court ordered the return to the investors of $147 million. The SEC awarded the tipster 10% of the recovery, representing the bottom of the range established by the Dodd-Frank whistleblower bounty program (which affords the SEC discretion to award up to 30% of the recovery).
Employers should note that the SEC’s whistleblower bounty program is still at a fairly nascent stage, and as the article indicates, SEC officials have acknowledged that it typically takes at least two years for the SEC to conclude a probe arising from a whistleblower tip. The article further explains that even if the probe results in sanctions, it is likely to take several more months for the whistleblower award to be approved and paid. Nevertheless, employers can expect the SEC’s whistleblower bounty program to continue to pick up steam in the wake of this massive bounty award.