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Whistleblower Blog

Will Your State Have a State False Claims Act?

Finch McCranie, LLP has recently learned that many state government officials, including Governor Perdue of Georgia, have received a proposed State False Claims Act for consideration to be enacted in 2007. Even though the Bill has been drafted and is on his desk, at present, the Bill has not been submitted to the Legislature for consideration. Obviously, this raises a serious question as to why it is that the Governor is delaying action on this important piece of legislation.

Section 1909 of the Deficit Reduction Act of 2005 creates a financial incentive for states to enact legislation that establishes liability to the state for individuals or entities that submit false or fraudulent claims to a state Medicaid program. This incentive takes the form of an increase in the state’s share of any amounts recovered from a state action brought under a “qualifying law.” In order for a state to qualify for this incentive, the state law must meet certain enumerated requirements as determined by the Inspector General of the Department of Health and Human Services in consultation with the Attorney General. The Office of Inspector General has already ruled in several different cases that certain states have not enacted “qualified laws” and therefore do not qualify for the increase share of fraud recoveries which can amount to a ten (10%) percent increase over amounts currently being received by the states. Thus, if the Governor is to act, it is imperative that he submit a “qualified law” to the Legislature for its consideration. In essence, a “qualified law” is one that is as strong and effective in its qui tam whistleblower provisions, and other features, as the Federal False Claims Act.

As we see it, there is no good reason for the Governor not to submit this proposed legislation for consideration. If he is to do so, however, he should first submit the proposed legislation to the Office of Inspector General as the Office of Inspector General will advise the State whether it “qualifies” for the increased share of fraud recoveries. Indeed, the OIG is required to consider whether the state law is, at least, as effective in rewarding and facilitating Qui Tam actions when compared to the provisions of the Federal False Claims Act. In order to request a OIG review of the state law, the Governor should submit a complete copy of the proposed legislation to the Office of Inspector General Department of Health and Human Services, Cohen Building, Mail Stop 5527, 330 Independence Avenue, S. W., Washington, DC 20201, Attn: Roderick Chen, Office of Counsel to the Inspector General.

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Significant 2006 Verdicts and Settlements of Qui Tam Whistleblower Cases Under the False Claims Act

In our multi-part explanation of the federal False Claims Act previously posted, we have summarized the most recent verdicts and settlements of qui tam whistleblower cases (as of December 2006).

We will continue to update you on additional verdicts and settlements of significance.

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The Whistleblower Statute: The Text of the False Claims Act

We have tried to explain what readers may want to know about how the whistleblower statute works, in our article explaining the False Claims Act. Here is the current language of this law that creates rewards for qui tam whistleblowers:

FALSE CLAIMS ACT
TITLE 31. MONEY AND FINANCE
SUBTITLE III. FINANCIAL MANAGEMENT
CHAPTER 37. CLAIMS
SUBCHAPTER III. CLAIMS AGAINST THE UNITED STATES GOVERNMENT

3729. False claims

(a) Liability for certain acts. Any person who–

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government;

(3) conspires to defraud the Government by getting a false or fraudulent claim allowed or paid;

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No More Gifts For Doctors

The International Federation of Pharmaceutical Manufacturers and Associations revised its Code of Ethics on January 1 of this year for the first time in a decade. Under the newly revised Code of Ethics, members of the trade group which represents pharmaceutical companies worldwide may no longer provide “expensive gifts” or paid trips to physicians. While the code allows members to provide physicians with gifts that are related to prescription drugs that are inexpensive such as pens, paperweights, stethoscopes and other de mini’s gifts, the new

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New Compliance and Education Reforms Take Effect

In February, 2006, President Bush signed into law the Deficit Reduction Act of 2005 (DRA). An obscure provision within this Act mandates that entities receiving greater than $5 million per year in Medicaid payments must educate their employees about “whistleblower” claims under the Federal False Claims Act. Under the DRA, effective January 1, 2007, as a requirement of continued eligibility for the receipt of Medicaid payments, any entity receiving annual payments of $5 million or more in Medicaid funds must have mandatory compliance and education programs in place for its employees to provide detailed information about the Federal False Claims Act. This education must include information provided to employees about administrative remedies, state laws pertaining to civil or criminal penalties, whistleblower protections, and the role of such laws in preventing and detecting fraud, waste, and abuse in federally funded healthcare programs.
Congress has clearly recognized that the government has a strong need to contain costs through increased fraud and abuse enforcement. Medicaid spending, like Medicare spending, is exponentially increasing. Medicaid enrollment increased from ten (10) million beneficiaries in 1967 to over 44.7 million beneficiaries in 2006 according to statistics published by the United States Department of Health and Human Services. Along with this increase in beneficiaries, Medicaid expenditures have also dramatically increased. In fiscal year 2005 Medicaid expenditures approximated twenty percent (20%) of total federal outlays.

The Centers for Medicare and Medicaid Services (CMS) in its fiscal year report for 2005 documented that $484.3 billion had been spent in the fiscal year 2005. Given this staggering amount of money, and because the percentage of the total federal outlay was expected to exceed twenty percent (20%) of the total federal budget, Congress enacted the mandatory employee education provisions about false claims recovery to encourage whistleblower lawsuits and, hopefully, thereby decrease fraud and abuse.

In addition to providing written policies for all employees, the mandatory policies and compliance programs must include detailed provisions regarding the employer’s policies and procedures for detecting and preventing fraud, waste and abuse. The written policies must include a specific discussion of federal and applicable state False Claims Acts, and the rights of employees to be protected from retaliation as whistleblowers. Ironically, as of the effective date of this provision, there is no state False Claims Act in Georgia. This is very discouraging. Nonetheless, this too may change depending upon the actions of the Georgia Legislature when it meets in 2007.

Section 6031 of the Deficit Reduction Act encouraged the enactment of state False Claims Acts by providing financial incentives for states to enact laws dealing with false or fraudulent claims (specifically including Medicaid claims) that parallel the federal False Claims Act. All states that enact state False Claims Acts are eligible for a ten percent (10%) increase in their share of Medicaid fraud recoveries. Many states have already availed themselves of this opportunity to participate in an increase share of Medicaid fraud recoveries but Georgia has yet to pass such legislation. Whether it will do so, of course, depends upon Governor Perdue and the Republican controlled State House and Senate.

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Tax Whistleblower Rewards Increase

We are excited that, in December 2006, Congress dramatically increased the “rewards” to whistleblowers under the IRS Whistleblower rewards program. Whistleblowers now can receive up to 30% of the taxes, interest, and penalties that the IRS recovers based on information furnished by a whistleblower in large tax cases.

For years, the Internal Revenue Service has been authorized to pay informants reporting tax fraud a percentage of any back due taxes collected. Usually the maximum percentage was approximately fifteen (15%) percent of the back tax recovered.

The new whistleblower reform provisions passed by Congress have changed this maximum, and now allow the Internal Revenue Service to consider not only the back tax amount, but also interest and penalties. Given the amounts of money involved, and depending on the passage of time, the fines, penalties and interest in addition to the tax could be significant.

Moreover, the law changes the amount that goes to the informant from a fifteen (15%) percent cap to a thirty (30%) percent cap of all collected proceeds which again includes penalties, interest and the back tax. The new provisions also allow an above-the-line deduction for attorney’s fees and cost paid by and on behalf of the individual in connection with any award for providing information regarding violations of the tax laws. The Internal Revenue Service must now create a Whistleblower Office within the IRS to administer the mandatory reward program.

Congress will require a yearly report to the Secretary of Treasury regarding the effectiveness of any reward program implemented by the IRS. Congress estimates that these new provisions will raise $33 million over the next five years which is but a small fraction of the under reported income in the United States each year. Nonetheless, it is an improvement over existing procedures.

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Will Whistleblower Tax Reforms Produce Results?

The Federal False Claims Act has been recognized as the government’s most effective tool for combating fraud and waste in government programs. According to the Justice Department, false claims act recoveries for the fiscal year 2006 exceeded 3 billion dollars. Unfortunately, the whistleblower reward program utilized by the Internal Revenue Service can hardly be characterized as being so successful. Since new IRS reward reform measures were enacted by Congress, we have been giving thought to the crucial question of whether the IRS will be successful in implementing its new informant reward program. Statistics available from the IRS are hardly encouraging. Between fiscal year 2001 and 2005, a paltry $27.3 million was paid by the Internal Revenue Service to informants as rewards. The average individual reward was around $24,000.00. When we compare this to the results achieved under the Federal False Claims Act, obviously, the disparity in results is staggering which is probably why it is that Congress recently acted to encourage the Internal Revenue Service to reform its whistleblower program. The real question is whether the Internal Revenue Service is up to the job and whether it will learn lessons from the success of its other federal agencies in combating taxpayer fraud and abuse.

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Addressing Contractor Fraud and Abuse in Iraq

According to the Congressional Research Service, the United States has spent to date over $437 billion on the Iraq War. An additional $100 billion is estimated to be spent this year. While much of the money, obviously, goes for troops, a great deal of these amounts has gone to civilian contractors involved in reconstruction efforts in Iraq. But where has the money gone and who is accounting for its proper use?

According to Senator Patrick Leahy of Vermont, “Eventually we’re going to have a bill

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The CMS Clarifies the Mandatory Whistleblower Reforms

The salutary intent of the Deficit Reduction Act was to require that employers educate employees about the Federal False Claims Act and, hopefully, address fraud and abuse by employer entities receiving $5 million dollars or more in federal funds under the Medicaid program. When the Deficit Reduction Act was passed in 2005, a debate emerged about whether the DRA education provisions mandating employee education about the Federal False Claims Act applied directly to healthcare providers and/or whether states receiving Medicaid had to pass implementing legislation to make the provision effective. In December of 2006, the Centers for Medicare and Medicaid Services (CMS) set the record straight. An “entity” includes a government agency, organization, unit, corporation, partnership or other business arrangement (including any Medicaid managed care organization, irrespective of the form of business structural or arrangement by which it exists) whether for profit or not for profit, which receives or makes payments under a state plan approved under Title XIX or under any waiver of such plan, totaling at least $5 million annually. In short, states do not have to implement legislation to make the provision effective and any entity receiving $5 million or more annually in Medicaid benefits must implement the mandatory education provision.

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Where Is the Oversight?

Just before Christmas I read an article about a case in Texas where a doctor was sentenced to a lengthy prison term for a scheme to defraud Medicare and Medicaid in excess of $25 million. The doctor had been approached by individuals offering to pay him a kickback for supplying Certificates of Medical Necessity (CMN) approving a beneficiary to receive a motorized wheelchair. I have been watching TV and seeing these adds for sometime about scooters for disabled individuals and I was wondering how so

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Part 6: States’ Experiences With Their Own False Claims Acts

This Part 6 is the final installment of an article explaining why the major qui tam whistleblower statute, the federal False Claims Act, has led to a wave of new state False Claims Acts. It is an updated version of part of a previously published article by whistleblower lawyer blog author Michael A. Sullivan.

V. States’ Experiences With Their Own False Claims Acts

As noted, at least twenty-eight states now have a False Claims statute, and many other states are considering similar laws. The financial incentives of the Deficit Reduction Act of 2005 have not only prompted states that lacked False Claims statutes to enact them, but also have caused many states wishing to qualify for the additional funds to amend their existing False Claims statutes.

In essence, while states may enact “tougher” or more comprehensive laws than the federal False Claims Act, states with “weaker” or less effective laws-as judged by the standards of the Deficit Reduction Act-will not qualify for the additional funds.

Seven of the first ten states whose statutes were scrutinized by the Office of Inspector General (OIG) quickly learned this lesson when OIG disapproved their state statutes. These included California (which lacked a minimum penalty), Florida (which omitted “fraudulent” from its definition of claims), Indiana (which did not make defendants liable for “deliberate ignorance” and “reckless disregard”), Louisiana (which did not permit the state to intervene in cases, set too low a percentage for whistleblowers to recover, and set no minimum penalty), Michigan (which omitted penalties and liability for decreasing or avoiding an obligation to pay the government, i.e., a “reverse false claim”), Nevada (which had a statute of limitations too short and a minimum penalty too low), and Texas (which did not permit the whistleblower to litigate the case if the state did not, and which provided for lower percentage shares to whistleblowers and lower penalties). Most of these states have gone back to the drawing board to correct these deficiencies.

In sum, the Deficit Reduction Act has set minimum standards for state False Claims Acts for states wishing to receive these additional funds. In plain English, the state laws must protect at least Medicaid funds, and they must be at least as effective as the federal False Claims Act, especially in rewarding and facilitating qui tam actions for false or fraudulent claims, with damages and penalties no less than those under the federal Act.
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Insider Trading Probe Reinforces Immediate Need for Strongest SEC Whistleblower Program

Yesterday’s Wall Street Journal reports a “sweeping” insider trading investigation, with civil and criminal charges soon to follow, involving “consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation.”

While the details remain to be seen, the unending series of fraud cases that continue–despite Sarbanes-Oxley–proves why Wall Street must not be allowed to neuter the first potentially meaningful SEC whistleblower program, mandated by the Dodd-Frank financial reform law.

How is it that the hallowed “compliance programs” born from Sarbanes-Oxley have utterly failed to stop the breathtaking frauds of Madoff, Stanford, and other recent post-SOX scandals?

As many honest employees encountering fraud discover, too often “compliance programs” mask efforts to identify employees who object to wrongdoing, so the wrongdoers can then gut their careers.

How well did compliance programs work at the many Madoff-abetting feeder funds that made scores of millions, as Madoff’s scheme spread to snare more victims? Read Harry Markopolis’ book to see how many of those firms’ “compliance” efforts worked, as Madoff’s enablers ignored glaring warning signs that multiplied over the life of the scheme.

SEC Chair Mary Schapiro and Director of Enforcement Robert Khuzami seem dedicated to invigorating the SEC’s enforcement efforts. While the new proposed SEC whistleblower rules show considerable thought, they threaten the program’s effectiveness by bowing too far to industry concerns, and excluding many potential whistleblowers such as accountants, who may be the best position to stop the next Madoff.

Wall Street would have the SEC create a labyrinth of further exceptions to who can participate in the new SEC Whistleblower program. One lethal industry proposal is to require potential whistleblowers first to run the gauntlet of firms’ “compliance” programs–a concept wholly inconsistent with Congress’ intent that whistleblowers must be allowed to report violations anonymously.

The initial screening of SEC whistleblower claims should not be outsourced to the very firms alleged to have violated the law, which is what mandatory internal reporting effectively would do. The SEC–like the Department of Justice and IRS–should be the first to screen SEC whistleblower claims. With any SEC whistleblower claim large enough to pursue, by definition the culpable firm has typically approved the violation, or at least looked the other way.

Otherwise, who in a position to expose significant fraud would come forward, if required first to reveal their objections to the fraud to those who may have approved it? And if the fraud stays concealed–as it too often has despite “compliance” programs–the public loses.

Excerpts from the WSJ article by SUSAN PULLIAM, MICHAEL ROTHFELD,JENNY STRASBURG and GREGORY ZUCKERMAN are below:
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With New SEC Whistleblower Program Proposed Rules Announced, Will the SEC Allow Potential Defendants to Gut Them?

We have been awaiting the SEC’s proposed rules for its new SEC Whistleblower Program, released yesterday. Even before the announcement, however, those who oppose this first potentially meaningful SEC Whistleblower Program have begun efforts to undermine it.

The SEC’s website already includes some firms’ suggestions to impose extreme restrictions on SEC whistleblowers–contrary to how other successful whistleblower programs operate.

Designing any new whistleblower program should begin with studying more than two decades of successes of the nation’s major whistleblower law, the False Claims Act. The False Claims Act has been so effective in uncovering and penalizing fraud against the government since 1986 that it has inspired Congress and the states to enact a wave of new whistleblower statutes–including the Dodd-Frank whistleblower mandate in section 922.

Unless the SEC seeks to create an ineffective program, it makes no sense to impose restrictions on whistleblowers that do not exist in False Claims Act cases.

One such damaging restriction would be requiring whistleblowers first to report within the company violations of the law, before going to the SEC. Past experience with the False Claims Act shows that warning violators of the law (who know their own violations) invites destruction of evidence by those who engineered the lawbreaking, and destroys the whistleblower’s career.

Other deceptive suggestions are that the SEC follow the “approach” of the promising new IRS Whistleblower Program–but with far greater restrictions on whistleblowing.

For example, one representative of future defendants urges what are actually variations on the “one-bite” and “no-bite” rules of the IRS, which historically have restricted the IRS’s receipt of certain information, or information from certain whistleblowers.

In fact, the IRS trend appears to be the opposite. In a March 2010 IRS Notice and in June 2010 changes to the Internal Revenue Manual, the “one-bite” rule appears to be giving way to the more sensible approach of allowing whistleblowers more than “one bite” at submitting information that may be useful to the IRS.

Likewise, a suggestion that the SEC adopt a variation the “no-bite” rule would expand it far beyond the IRS concept of not accepting information from the “taxpayer’s representative” before the IRS. This suggestion would go much further and prohibit submissions to the SEC by anyone who has a “fiduciary” duty to a public company–which arguably could be most or all employees.

We will comment further on the specifics of yesterday’s proposed rules, but the basic principles above should guide the SEC in what it finally decides.

The SEC’s announcement yesterday is reprinted below:
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Links to SEC Whistleblower and CFTC Whistleblower Lawyer Information

Our whistleblower lawyer blog has followed closely the development of the first potentially meaningful SEC Whistleblower and Commodities Whistleblower Programs. That link provides regular updates.

Based on our firm’s long experience in representing whistleblowers, we were asked by the Senate Banking Committee staff for input in how the new SEC and CFTC whistleblower provisions of the July 2010 Dodd-Frank Financial Reform Act should work. We urged that the Senate change the tepid House version, which provided no meaningful rewards to whistleblowers,
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SEC Recovers $39 Million under Foreign Corrupt Practices Act for Bribery and Kickbacks in Mexico and Iraq

One of the most interesting twists to the new SEC Whistleblower Program will be how many commercial bribes and kickbacks paid to foreign government officials will now come to light. As we have written about previously, the SEC shares jurisdiction with the Justice Department over such cases that violate the Foreign Corrupt Practices Act (FCPA).

An example of why whistleblowers will come forward is this afternoon’s announcement of the SEC’s $39 million settlement with ABB Ltd (“ABB”), a Swiss company that provides power and automation products and services.

The SEC alleged that ABB made more than $2.7 million in bribes and kickbacks to obtain more than $100 million in contracts. The payments allegedly were made to “government officials in Mexico to obtain business with government owned power companies,” and to the “former regime in Iraq to obtain contracts under the United Nations Oil for Food Program.”

According to the SEC, some of the kickbacks were made through bank guarantees and cash payments. As is common in disguising unlawful payments, the kickbacks were recorded on the company’s books as legitimate payments–here, for “after sales services,” “consultation costs,” and “commissions.”

ABB, without admitting or denying the allegations in the complaint, agreed not only to pay disgorgement and penalties totalling more than $39 million, but also agreed to pay a criminal fine of $30,420,000, according to the SEC. The company also agreed to be bound by certain “undertakings” concerning its FCPA compliance program.

As to how an FCPA whistleblower might fare who reports similar FCPA violations of bribery of foreign government officials, the new SEC Whistleblower Program pays 10% to 30% of monetary sanctions collected–approximately $4 million to $12 million under similar facts.

The SEC’s announcement is reprinted in full below, and the SEC’s Complaint is linked here:
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Health Care Fraud Cases and 2009-2010 Amendments to False Claims Act Discussed at National Fraud and Compliance Forum

At the annual Fraud and Compliance Forum in Baltimore that runs through Tuesday, the nation’s top health care lawyers will be paying close attention to recent changes to the nation’s primary whistleblower law, the False Claims Act. The “qui tam” provisions of the False Claims Act allow private citizen whistleblowers (“relators”) to share in the government’s recovery of damages.

As a former defense attorney who now represents whistleblowers, I have been asked to present a program at this conference with Rick Shackelford of King & Spalding, to discuss these major amendments to the False Claims Act–the first since 1986. Congress acted decisively in three recent major bills to restore the False Claims Act to its intended strength, in the face of court decisions that created obstacles to its use.

The recent amendments were part of the Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (“FERA”); the Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119 (“PPACA”); and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (the “Dodd-Frank Financial Reform Act”).

This week’s forum is sponsored by the American Health Lawyers Association and Health Care Compliance Association.

An updated discussion of the False Claims Act after these 2009 and 2010 changes will appear soon on this Whistleblower Lawyer Blog. A brief summary of those important changes to the Act is below:
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Indiana Attorney General Invites Qui Tam Whistleblower Cases by Health Care & Pharmaceutical Employees To Stop Health Care Fraud

Smart and effective state Attorneys General have fought fraud against their citizens through encouraging greater use of the country’s major whistleblower law, the False Claims Act, and state versions of that law.

Texas AG Greg Abbott, for example, has a staff that has long distinguished itself for recovering millions of stolen taxpayer funds in health care fraud cases, under the leadership of Pat O’Connell and, more recently, Ray Winter.

Following this tradition, Indiana AG Greg Zoeller is urging employees of pharmaceutical companies and heath care entities to help stop health care fraud, and possibly share in the recovery as qui tam whistleblowers under the state and federal False Claims Acts.

While we have discussed in detail how the False Claims Act operates, AG Zoeller’s announcement gives a succinct summary. We have reprinted it below, and applaud his efforts.
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Shouldn’t the IRS Pay Tax Whistleblowers Who Help Prevent Fraudulent Refunds?

When IRS whistleblowers save U.S taxpayers money, they deserve the rewards that lawmakers such as Sen. Chuck Grassley fought to establish. In 2006 his efforts resulted in the first meaningful IRS Whistleblower program ever, which is attracting many tax whistleblowers with significant evidence.

We have discussed previously the many positive aspects of the long-awaited IRS Whistleblower procedures published in June–and one illogical, self-defeating feature. Some in the IRS–and apparently not the IRS Whistleblower Office–thought whistleblowers should not be rewarded when they report tax
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Merck and Other Pharma Companies Probed by DOJ and SEC in Foreign Corrupt Practices Act (FCPA) Investigation

When Pharma manufacturers are targeted by the Department of Justice, qui tam whistleblower cases under the False Claims Act are often the reason.

Now, whistleblowers may also receive rewards for reporting violations of the Foreign Corrupt Practices Act (FCPA), thanks to the new whistleblower provisions of the Wall Street financial reform law. Announcements like Merck’s recent SEC filing that it is now the subject an FCPA investigation involving other Pharma companies should become common, as corruption will now be increasingly exposed in a new wave of SEC Whistleblower cases.

The recent 10-Q filing of Merck & Co., Inc. stated in part:

The Company has received letters from the DOJ and the SEC that seek information about activities in a number of countries and reference the Foreign Corrupt Practices Act. The Company is cooperating with the agencies in their requests and believes that this inquiry is part of a broader review of pharmaceutical industry practices in foreign countries.

As we have followed through its development, the Dodd-Frank financial reform law created the new SEC Whistleblower and CFTC Whistleblower programs, which will include FCPA cases.

The FCPA, as we have discussed previously, prohibits bribery of foreign government officials in international business transactions, and false entries in books and records of those companies within the statute. Whistleblowers who assist the SEC recover monetary sanctions in FCPA cases now have an enforceable right to a monetary award of 10-30%.

Pharma’s exposure for any bribes and kickbacks abroad are a ripe subject for FCPA enforcement.
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Does SEC Whistleblower Reward of $1 Million Signal A New Attitude Toward Wall Street Whistleblowing?

Only days after the new financial reform law created the first potentially meaningful awards for whistleblowers reporting securities and commodities violations and abuses, the SEC may have signaled a new attitude toward encouraging whistleblowers.

The SEC recently announced its first million dollar award for a whistleblower’s report of information about insider trading involving hedge fund adviser Pequot Capital Management, Inc., its chief executive, Arthur J. Samberg, and David E. Zilkha, a Microsoft employee.

Although $1 million may not sound like much when compared to the losses caused by the Madoffs of the world, it is a dramatic improvement over what the SEC had done before.

In following the development of the new SEC Whistleblower Program, we previously discussed the Inspector General’s summary of how, over the past eleven years, the SEC had paid a total of less than $160,000 to reward whistleblowers under the “old” SEC bounty program for whistleblowers. The IG reported:

The SEC bounty program has made very few payments to whistleblowers since its inception and received a relatively small number of bounty applications. As a result, the program’s success has been minimal and its existence is practically unknown.
Since the inception of the SEC bounty program in 1989, the SEC has paid a total of $159,537 to five claimants as detailed in Table 1 below.

Table 1: Bounty Payments to Whistleblowers Bounty Claimant Year Bounty Amount 1) Claimant 1 1989 $3,500 2) Claimant 2 2001 $18,152 3) Claimant 3 2002 $29,079 4) Claimant 4 2005 $17,500 4) Claimant 4 2006 $29,920 4) Claimant 4 2009 $55,220 5) Claimant 5 2007 $6,166
Total $159,537
Source: OIG Generated

Just as another Inspector General’s report in 2006 set the stage for the successful new IRS Whistleblower Program that is attracting many reports of even billions in tax liability, let’s hope this Inspector General’s report has motivated the SEC to make full use of the opportunity to build a meaningful whistleblower program. We are already getting calls from potential Wall Street whistleblowers wishing to take advantage of it, and it could be a rewarding process–depending on how well the SEC seizes the opportunity.

The SEC’s recent announcement of the $1 million reward is reprinted below:
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