Whistleblower Blog

Will Your State Have a State False Claims Act?

January 23, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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.

The Whistleblower Statute: The Text of the False Claims Act

January 22, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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?

January 22, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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

January 22, 2007
Michael Sullivan

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?

January 22, 2007
Michael Sullivan

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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Health Care Industry and 2009-2010 Changes to False Claims Act

June 6, 2010
Michael Sullivan

The health care industry is adjusting to major changes to the nation’s major “whistleblower” law, the False Claims Act.

Both in 2009 and 2010, Congress has removed obstacles to whistleblowers’ use of this anti-fraud statute to address Medicare and Medicaid fraud, as well as fraud affecting every other federal program. As we have written about previously, the Fraud Enforcement and Recovery Act of 2009 (“FERA”) overruled key judicial decisions that had undermined the the False Claims Act’s effectiveness.

This year, the landmark health
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Offshore Tax Evasion Scheme to Defraud IRS Alleged in Indictment of Miami Beach Developers

May 27, 2010
Michael Sullivan

A high priority for IRS Whistleblower cases is the abuse of offshore “tax havens” or offshore financial centers to conceal income from the IRS that is subject to U.S. taxation. Over drinks in Miami Beach recently with IRS agents who worked the massive UBS matter, I discussed some of the recent announced cases the IRS has made involving offshore abuses.

Using shell corporations and “nominee” entities established in the Cayman Islands, Switzerland, or a host of other countries that market “secrecy,” those looking to conceal income from the IRS, or assets from potential creditors, have made offshore tax havens a booming business.

An interesting example of allegations of offshore tax violations was described in the Justice Department’s announcement yesterday of the indictment of two Miami Beach hotel developers. Mauricio Cohen Assor and his son, Leon Cohen-Levy. They were charged with conspiring to defraud the United States and filing false tax returns. The government alleged as follows:

According to court documents, the two men and their co-conspirators used nominees and shell companies formed in tax haven jurisdictions, including the Bahamas, the British Virgin Islands, Panama, Liechtenstein and Switzerland to conceal their assets and income from the IRS. In order to further conceal their assets and income from the IRS, court documents state the men also provided false and forged documents to banks, opened bank accounts in the name of nominees, titled their personal residences and luxury vehicles in the name of shell companies, filed false and fraudulent tax returns, failed to file other tax returns, suborned perjury in a civil matter pending before the New York Supreme Court by directing individuals to testify falsely under oath, and induced other individuals to make false statements to federal law enforcement agents.

Both defendants are permanent resident aliens who, in 2000, received approximately $33 million from the sale of the New York Flatotel, according to the government. They transferred the proceeds using various Swiss bank accounts in the names of foreign nominee entities, including at least one “bearer share” corporation.

When bearer shares are used, the corporation’s records do not list its owners, as the owners are whoever has physical possession of the stock certificates. As IRS Special Agent Scott Johnson testified by affidavit, “[b]earer share corporations are often used to hide the true ownership of assets because ownership records are not maintained and nominee officers and directors are often used to control the affairs of the corporation.’

Later, the defendants allegedly transferred the funds to accounts of nominee companies at that bank’s New York location, and later to the escrow account of a Florida attorney. The government also alleged that defendants used the money to “fund a luxury lifestyle for themselves and for their family members.”

Offshore tax abuse remains a great priority of the IRS, and thus is a major focus of many IRS Whistleblower claims. The new IRS Whistleblower Program recognizes that whistleblowers have an enforceable right to 15-30% of what the IRS recovers based on information whistleblowers provide.

The government’s full press release is below:
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More Details of UBS Whistleblower Birkenfeld’s Prosecution Explained in Washington Post

May 15, 2010
Michael Sullivan

The Sunday, May 15, 2010 Washington Post will include more details on a perplexing question we have written about: how did UBS whistleblower Bradley Birkenfeld get himself prosecuted for a felony, and earn a prison sentence, while he sought to become an IRS whistleblower?

The story by David S. Hilzenrath explains more of the “dance” between Birkenfeld and prosecutors as he apparently partially told the government what he knew about wrongdoing at UBS.

Birkenfeld blew an opportunity to avoid prosecution for his
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Should SEC Whistleblowers Have Right to Share in Recoveries That They Cause?

May 4, 2010
Michael Sullivan

Congress is at a crossroads in deciding whether there will be a meaningful SEC Whistleblower Program–for the first time.

At this morning’s Offshore Alert conference in Miami, we heard from the SEC Chair’s Senior Advisor Stephen Cohen on this subject, as well as insight from IRS Whistleblower Office Director Steve Whitlock on how the IRS Whistleblower Program is now designed to encourage whistleblower claims.

As we have observed previously about the bills that would create an SEC Whistleblower program, past experience shows that an enforceable right to a meaningful reward is essential to cause whistleblowers to come forward.

The SEC apparently resists guaranteeing whistleblowers a minimum percentage of dollars recovered, as evidenced by the House version of the bill that lacks this feature. The SEC’s Steve Cohen explained that the SEC does not wish to commit funds that might otherwise go to harmed investors. He nonetheless contended that the SEC’s proposal may be better for whistleblowers because it pays from a special fund designated for this purpose, based on sanctions imposed, not collected.

Compare the experiences of the Justice Department and the IRS, however. When each had whistleblower statutes that provided no meaningful right to a reward, whistleblower claims were small and few. We have written extensively about the dramatic successes of the False Claims Act since its rewards increased to meaningful levels in 1986.

Likewise, IRS Whistleblower Office Director Steve Whitlock described again today how large whistleblower claims have exploded since December 2006, when Congress doubled rewards to whistleblowers to 15-30%, and created an enforceable right to those rewards.

History proves that most whistleblowers simply will remain silent, without a right to meaningful rewards. The SEC will be dividing a small pie unless Congress again embraces this principle.

To protect investors, those with information about fraud must have every incentive to speak up–as early as possible–and to be heard. The Madoff debacle proved that point.

In our experience in representing whistleblowers in the financial industry, the Senate’s version of the SEC whistleblower changes is highly preferable. It creates a right to awards of 10-30%.

There are still glaring deficiencies, such as the provisions excluding auditors who have tried unsuccessfully to call attention to fraud within the organizations and auditing firms involved. It will be an interesting next few weeks as Congress debates the final result.
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State False Claims Acts Must Be Updated to Include New False Claims Act Changes, Grassley Warns

April 30, 2010
Michael Sullivan

Senator Chuck Grassley is making sure that the States take advantage of important, recent improvements to the federal False Claims Act–with the help of financial incentives. In doing so, Grassley highlighted a defect in Oklahoma’s False Claims Act that should disqualify any state with a similar defect from these financial incentives.

As we have discussed at length, in the Deficit Reduction Act of 2005, Congress recognized how effective the False Claims has been in recovering money for fraud against the government, by creating financial incentives for states that enact equally effective versions of the federal False Claims Act.

“Weaker” state versions of the False Claims Act do not qualify for the incentives, however. The Inspector General for the Department of Health and Human Services must approve a state’s False Claims Act before the incentives are available. So far, the IG has approved fourteen state FCAs, while disapproving six other state acts.

Since then, Congress has closed loopholes in the False Claims Act exploited by those who steal taxpayer funds. The 2009 Fraud Enforcement Recovery Act made significant improvements to strengthen the nation’s major whistleblower law, as we have summarized before. In March 2010, Congress modified the False Claims Act’s “public disclosure” and “original source” provisions as part of the major health care overhaul, the Patient Protection and Affordable Care Act.

This week, Grassley asked the Inspector General and Attorney General to review existing state False Claims Acts to ensure that they comply with these recent improvements to the federal False Claims Act.

“Updated information will help states fine tune existing state laws and state-level proposals, in order to be eligible for the federal incentive and beef up fraud-fighting efforts,” Grassley said. “This kind of effort at the state and federal level is more important than ever as Medicaid programs are expanded and face new burdens and growing fiscal challenges. Every dollar lost to fraud is one less dollar for those who depend on the program and harms the sustainability of the Medicaid program.”
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IRS Whistleblower Office Announces Important Changes, New Procedures for IRS Whistleblower Program

April 28, 2010
Michael Sullivan

IRS Whistleblower Office Director Steve Whitlock announced important, long-awaited developments in the new IRS Whistleblower Program yesterday at the Second Annual “IRS Whistleblower Boot Camp” in Washington.

First, Director Whitlock finally announced how the IRS will share information that will allow whistleblowers to understand the Whistleblower Office’s decisions about what awards are made to whistleblowers.

A year ago in my interview with the IRS Whistleblower Office Director, Mr. Whitlock discussed the need to solve the vexing question of how the IRS can share this information with whistleblowers and their attorneys, while also complying with legal requirements for confidentiality of taxpayer information under section 6103 of the Internal Revenue Code.

The new procedures described yesterday for what will happen with IRS Whistleblower claims–once the IRS has recovered money as a result of a whistleblower claim– are as follows:

1. After the Whistleblower Office receives a report from the IRS Operating Division that handled the matter, the Whistleblower Office Analyst will review the files and recommend an award to the whistleblower.

2. That recommendation then will go to the Whistleblower Office Director for review and approval.

3. A summary of the award recommendation then will be provided to the whistleblower and the whistleblower’s attorney for comment. That summary will identify:

(a) the amount of money collected by the IRS based on information provided by the whistleblower;

(b) the recommended award percentage to the whistleblower (15-30% of the funds recovered, unless an exception under the statute applies to lower the percentage);

(d) the recommended award amount; and

(e) the whistleblower’s options upon learning of this recommendation.

In welcome news to whistleblower attorneys, the IRS Whistleblower office also will make available a “detailed” award recommendation to whistleblowers and their attorneys who sign a confidentiality agreement. The whistleblower and counsel then may review in person (but not copy) the documents in the IRS administrative file that are the basis of the award recommendation, and comment to the Director about the award. Violation of the confidentiality agreement will lead to reduction of the award.

The new procedures are to be published in the Internal Revenue Manual in June 2010, and later will be included in regulations, with an opportunity for notice and comment.
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New IRS Whistleblower Program Developments Discussed This Week at “IRS Whistleblower Boot Camp”

April 25, 2010
Michael Sullivan

On Tuesday, April 27, 2010, the Second Annual “IRS Whistleblower Boot Camp” will convene in Washington, D.C., sponsored by Taxpayers Against Fraud.

Representatives of the IRS Whistleblower Office will discuss the latest developments in the IRS Whistleblower Program, though which tax whistleblowers can receive up to 30% of recoveries by the IRS. Other IRS and DOJ representatives will take part as well, as they analyze what lawyers representing IRS whistleblowers should know in pursuing these claims.

Like last year’s program, this one is a sell-out. I am looking forwarding once again to moderating a panel discussion, this time on “Protecting IRS Whistleblowers from Criminal and Civil Liability.”

Among the important new developments to be discussed is the “clarification” issued in February 2010, on what contacts the IRS may have with whistleblowers (or “informants”) who are current employees of taxpayers who are the subject of whistleblower claims. (The full notice is reprinted below.)

We expect there may be other major new developments to report at this year’s IRS Whistleblower Boot Camp. We will update you upon returning from D.C. this week.
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SEC Charges Goldman Sachs With Fraud in Synthetic CDO Tied to Subprime Mortgages

April 16, 2010
Michael Sullivan

As Congress finally works to establish a more meaningful SEC whistleblower program, the SEC has just announced that it has charged Goldman Sachs and one of its vice presidents with fraud, in connection with a “financial product tied to subprime mortgages, as the U.S. housing market was beginning to falter.”

Often maligned for failing to protect investors before the recent financial crisis, the SEC now charges that Goldman structured and marketed a “synthetic collateralized debt obligation” (CDO) like those that “contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market,” and then violated the federal securities laws in connection with that product.

The SEC’s Complaint alleges a “securities fraud action against Goldman, Sachs & Co. (“GS&Co”) and a GS&Co employee, Fabrice Tourre (‘Tourre’), for making materially misleading statements and omissions in connection with a synthetic collateralized debt obligation (“CDO”) GS&Co structured and marketed to investors. This synthetic CDO, ABACUS 2007AC1, was tied to the performance of subprime residential mortgage-backed securities (“RMBS”) and was structured and marketed by GS&Co in early 2007 when the United States housing market and related securities were beginning to show signs of distress.”

The Complaint further charges:

Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure. Given its financial short interest, Paulson had an economic incentive to choose RMBS that it expected to experience credit events in the near future. GS&Co did not disclose Paulson’s adverse economic interests or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials provided to investors.

In sum, GS&Co arranged a transaction at Paulson’s request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors, as part of the description of the portfolio selection process contained in the marketing materials used to promote the transaction, Paulson’s role in the portfolio selection process or its adverse economic interests.

The full SEC anouncement is reprinted below.
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SEC Whistleblower Program–The SEC Inspector General’s Report

April 5, 2010
Michael Sullivan

Post-Madoff, we have followed the legislative efforts to help establish an effective SEC whistleblower program. We know that the Senate Banking Committee in particular has worked hard in attempting to devise the best overall arrangement to encourage and reward whistleblowers who report fraud within the SEC’s jurisdiction.

Shortly before Congress authorized the first meaningful IRS Whistleblower Program in December 2006, the Treasury Inspector General for Tax Administration issued its report on many of the changes needed for the IRS to use whistleblowers effectively.

Now, the SEC’s Inspector General David Kotz has issued his report, “Assessment of the SEC Bounty Program.” No one is surprised that it concludes that the SEC has not effectively encouraged, used, or rewarded whistleblowers over the past decades. Perhaps this report will pave the way for something meaningful–like the TIGTA report that preceded the now-promising IRS Whistleblower Program, which rewards whistleblowers with 15-30% of the government’s tax recoveries.

The SEC report recommends adopting the “best practices obtained from DOJ and the IRS into the SEC bounty program.” The SEC Inspector General’s report states as follows:

Although the SEC has had a bounty program in-place for more than 20 years for rewarding whistleblowers for insider trading tips and complaints, our review found that there have been very few payments made under this program.
Likewise, the Commission has not received a large number of applications from individuals seeking a bounty over this 20-year period. We also found that the program is not widely recognized inside or outside the Commission. Additionally,
while the Commission recently asked for expanded authority from Congress to reward whistleblowers who bring forward substantial evidence about other significant federal securities law violations, we found that the current SEC bounty program is not fundamentally well-designed to be successful.
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Well Worth a Read: SEC Whistleblower Harry Markopolos’ “No One Would Listen: A True Financial Thriller”

April 5, 2010
Michael Sullivan

After meeting with the Department of Justice in Washington recently to discuss another whistleblower case, I picked up Harry Markopolos’ recent book, “No One Would Listen: A True Financial Thriller.” It is a fun and engrossing read, with humor that I did not expect to find in this subject.

We have written previously to applaud Harry Markopolos’ work in figuring out Bernie Madoff’s Ponzi scheme, and then in trying to get the SEC’s attention for years. In an era when fraud is being exposed in so many industries through the courage of whistleblowers, his book shows just how paper-thin our government’s resources can be in recognizing and stopping the next huge fraud scheme.

Neither I nor my law firm has any financial interest in recommending this book, and no one has asked me to mention it, but I do believe that any thinking person will enjoy it.
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