Larger Rewards For Wall Street Whistleblowers May Be On The Horizon

by Proskauer - Whistleblowing & Retaliation
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As reported by the Wall Street Journal, the Obama administration will seek to remove the $1.6 million cap on rewards to whistleblowers who provide evidence of criminal conduct by financial executives under the 1989 Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).

In a speech at the New York University Law School, Attorney General Eric Holder explained that increasing the size of whistleblower awards under FIRREA “could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress – making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.” Mr. Holder suggested that FIRREA whistleblower bounties should more closely resemble those under the False Claims Act and Dodd Frank, which permit whistleblowers to receive up to 30% of the damages recovered by the government.

Mr. Holder’s remarks come on the heels of statements (as reported by the Wall Street Journal Risk & Compliance Journal) earlier this week by the U.S. Department of Justice and the Securities Exchange Commission touting the importance of the FCA and Dodd Frank whistleblower bounty provisions and warning companies not to discourage whistleblowers from reporting alleged misconduct to governmental agencies. Consistent with his prior remarks on the subject, Sean McKessey (Chief of the SEC’s Office of the Whistleblower) predicted that the SEC is “going to bring a case sooner rather than later” against a company (and potentially its lawyers) for “chilling” employees’ ability to complain to the SEC. Mr. McKessey cautioned lawyers drafting contracts and codes of conduct that the SEC is on the “lookout” for language that would impede whistleblowers from communicating with the SEC and stated that lawyers who draft such language could be subjected to individual liability.

The remarks by governmental officials this week reiterate the importance of creating and disseminating simple and straightforward whistleblower protection policies and procedures aimed at rewarding employees who bring forward good-faith complaints. Employers should also heed Mr. McKessey’s warning and refrain from including language in separation or settlement agreements that prevents current or former employees from reporting concerns to the SEC.

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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