I've posted it before, but it's such a great story, I'm posting it again.
If you're a drug company and you provide physicians financial incentives to use your drug that falls under the False Claims Act if Medicare/Medicaid are paying (there are some Safe Harbor areas, but not many). Same thing with charging the gov't the incorrect price (there are a ton of rules around what you can charge - the Medicaid Best Price rules are a good example).
So anyways, this pharmacy down in the Florida Keys started to loss a lot of business back in the 80's. So the pharmacist started looking at what was driving that (he has visibility into both the pharmacy cost and the gov't reimbursement). Turns out drug companies were telling Medicaid the price was $X, but they were charging pharmacies $X*10% and the pharmacies pocketed the difference. That's a bit of a simplification as the price differential existed for a long time, but basically drug companies pushed it so far that they got the smack down.
Ven-a-care launched a whistleblower lawsuit, the Federal gov't joined and they won, so Ven-a-care got a nice payout. Then they found another example and got another payout, then another and another. By 2011, they had received several hundred million in pay outs.[1] In 2013, they received a $597M payout.[2]
Keep in mind this was a team of a few pharmacists and some lawyers. They basically turned whistleblowing into a business.
They were even involved in the Epipen settlement in 2017.[3] I've never seen the total payouts they've received but it must be over $1B by now.
We need more of this across the board, not just in SEC. Whistleblowers in corporations and in federal agencies throughout. And the justice department should pay handsome fees for taking the risk - one can just retire off of it.
Kind of like Bug bounties but for corruption/illegal behavior.
No one would trust anyone for partnering with corruption schemes and it would just die out.
I love this, although I can't help but think this is such a capitalist solution to this problem: private detectives, private whistleblowing, private bounty hunters. The american market is obviously better without those frauds, but what does that mean in the long run ? Any fraud under this threshold (without whistleblowing bounties, or too small bounties) can continue happening ?
In the long run, it should mean investment into products and services that lower the cost/difficulty, expanding the number of whistleblowers. A threshold shouldn’t exist unless there is a protectionist element to the SEC program (I have not participated myself.)
A friend briefly held a job keeping the books for a penis pill company. They offered a money back guarantee, didn't honor it, and then, when the credit card companies locked their accounts for chargebacks, used a series of social security numbers from borderline mentally disabled "employees" to continue opening financial accounts to perpetuate the fraud.
Her didn't blow the whistle because he "didn't want to be a snitch". Because of that, several additional innocent people had their credit ruined, and gullible consumers were taken for millions or perhaps tens of millions of dollars.
I would really encourage anyone thinking of coming forward to do so. And I'd also encourage everyone else to celebrate the people who have come forward as witnesses.
> I would really encourage anyone thinking of coming forward to do so.
The problem with whistleblowing - especially for larger cases - is that with the choice to do so also comes the high probability to have your own life turned upside down or even completely ruined, and people know that. So many examples where whistleblower protection was severely lacking, and the whistleblower bears the consequences for life.
When it comes to accountants or financial controllers, having a track record of high integrity is actually a bonus for well-run companies.
Procurement and financial controlling are both areas very sensitive to corruption and top management will be looking for high integrity people to hire in these places.
The whistle blower awards are great but aren't always sufficient. How much would he have gotten for this? Enough to have his life turned upside down and moved to a different country? The awards also need to come with witness protection and other help. The bigger the fraud, the larger lengths people will go to fight it. Most people just want to get through the day and do their own thing. We need to over-incentivize and over-protect them to get more people coming forward. In the end, it is also way cheaper than the police/military complex we try to use to solve it now.
I really don't understand why financial crimes need to be special. Anyone showing a pattern of illegal behavior involving casual disregard for the well-being and rights of obvious victims should be taken behind the shed. If anything, financial crimes require planning and organization, and consequently maintaining that utter lack of regard for others for a far longer duration, than a smash-and-grab, an assault or some other non-financial crime.
I really wish crimes not causing direct 'physical' harm were weighted appropriately.
Execs and doctors driving the bulk of opioid deaths should absolutely be held accountable, especially for continuing after the outcome of their action was clear.
Loan sharks, predatory colleges, quick eviction landlords, and so many other bad practices cause physical and mental stresses that destroy countless individuals' entire lives, and repeat.
I'm generally of the "it's the system, you can't blame the individuals" type of thinker, but truly, a few CEO's taken out back could truly help the situation.
I would nominate the CEO of Merke and Monsanto, to start. Next in line would be the oil compainies such as Halliburton and ETP.
Just a FYI- You arent going to find any info on what case/fraud this has to do with. IIRC, the SEC announces these payments up to 24 (!) months from the original enforcement action, so that there is no real way to figure out which company was blown. I suppose if you want to, you could go back 2 years in time for every SEC enforcement and find all of them above 38m in penalties.
The IRS has a Whistleblower Office that pays out rewards to those who blow the whistle on others who aren't paying taxes.
Back in 2017 during the last crypto bubble, people were posting on reddit about cashing out and not paying taxes. Some of the accounts practiced zero opsec while claiming (and posting screenshots) of $500k+ sums.
I imagine there will be more similar opportunities during the next crypto bubble if anyone is interested.
Whistleblowers are needed.
“Bad men need nothing more to compass their ends, than that good men should look on and do nothing.” - John Stuart Mill
FYI, this is the actual quote that is more often attributed to Edmund Burke in the altered form of “The only thing necessary for the triumph of evil is for good men to do nothing."
Some people are actually conscientious objectors to having their money being used to topple democratically elected governements, running drugs into inner cities, and to further fuel the long violent decline of evil empires, for example.
If you're a citizen, they're lying, cheating, and stealing from you. Turning a blind eye because it's a kind of crime you don't feel much of the impact from is shameful.
I have trouble with this. For potential whistleblowers (which this thread is about), this is their world of influence. They are part of an organization that is actively defrauding/harming individuals and they have the power to do something.
I'm completely non-religious but your comment reminds me of a fun Christian parable I heard when I was young. A person is warned of a flood, and then when it comes various people try to rescue them from an increasingly desparate situation, culminating in a rescue helicopter while they're sitting on the roof of their entirely submerged house, but they tell each one "no thanks, God will rescue me". They eventually drown, and when they get to meet God they ask him "why didn't you rescue me?" to which he replies "I sent people to warn you, rescue you and even sent a friggin' helicopter - what more did you expect?"
If you believe in karma then you should surely expect people to play a part in it. Or are we supposed to hope that rocks are more likely to fall, by chance, onto the heads of evil people?
If society is set up to serve up what's coming to people that lie, cheat, and steal, then and only then do they get what's coming to them.
McCarthyism style snitching would be making vague and unspecific accusations towards ones personal enemies; making evidenced accusations of wrongdoing out of a sense of responsibility is pretty much the opposite.
Not only that, the article says that he actually took it across the finish line:
'"In many meritorious cases, the government decides to 'intervene' at that stage of the proceedings, basically taking over the lead of the case," lawyers for Thomas said. "But here, that never happened. This left Mr. Thomas and his lawyers at the point of the spear – going against a venerated academic institution with enormous resources."
Thomas' attorneys, from the law firms Gentry Locke; Healy Hafemann Magee & Thomas; and Brooks Pierce, said that in the fallout from the case, Joseph Thomas was "vilified and suffered substantial personal hardships as he found himself out of work for over a year."'
> “[...] a whistleblower who exposes fraud on the government may bring a qui tam lawsuit on behalf of the government and potentially receive a share of the recovery recovered by the government as a reward for bringing that action.”
The US govt netted $1.75 billion ($2.5 billion - $750 million returned to investors) from this scheme being exposed. How much money do they make when someone exposes US Govt wrongdoing?
It depends on whose wrongdoing is getting outed. US Gov is fine when the whistle is getting blown on someone else. When US Gov's misdeeds get brought to light, it has no greater purpose than deploying revenge against the whisteblower.
You can get a list of these on the SEC website. Another recent one was in amount 27 million. Some pay a fraction of the fines awarded. Big numbers here particularly if the whistle-blower approaches it in the right way. I have a few ideas on that...
> Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.
Interesting. I wonder if the whistleblower can be a third party that decided to investigate.
As Matt Levine likes to say, everything is Securities Fraud. Didn't disclose a risk factor in your SEC filings that your computer systems are potentially hackable? Well, a discovered vulnerability is Securities Fraud!
(Though, usually that's for a shareholder lawsuit instead of an SEC enforcement action)
I wonder if there is an AI application here if you have access to the full transaction log from the exchanges. Basically something that looks for series of trades that align with previously fraudulent trading patterns.
I think this is a new program set up in the aftermath of those widely publicized scandals during (or shortly previous) to the financial crisis in the late 2000s
The SEC talks about their enforcement actions all the time: https://www.sec.gov/news/pressreleases Pretty much every week there's a "$COMPANY pays $MILLIONS to settle charges" announcement, so these aren't being swept under the rug.
The important point is that there's no way to link which whistleblower award comes from which enforcement. The public doesn't need to know this.
Note that the SEC cannot press criminal charges, but they can send evidence to a federal prosecutor (e.g. the United States Attorney for the Southern District of New York) who can initiate criminal cases. They also like to advertise their cases: https://www.justice.gov/usao-sdny/pr?f%5B0%5D=field_pr_topic...
Sometimes those details are enough to identify the informant, or for someone with enough sleuthing skills.
For funsies, I once figured out a confidential informant in a DoJ investigation. There was enough info because they were running a business in a niche field in a state not known for it. Didn't act on it in anyway.
Was wondering that myself, but didn't see any benefit to telling anyone even if it were legal.
Based on your link, it seems like publishing their ID would be illegal. But if a reporter called them up and interviewed them without publishing identity, no law would be broken. Not legal advice.
The SEC reaches out to the company to let them know they are considering an investigation (Wells Notice) and then decides if they want to do an investigation after they confirm issues.
Then they settle with the companies.
If settlement is large enough, whistleblower gets paid some too.
As the whistleblower is not the accuser in the civil charge, the company doesn't get to know who it was.
This was my initial thought too, but reflecting, I think at least part of the reason they aren't naming the guilty party here is to protect the identity of the whistle blower. If you could reason from knowledge of the guilty party whom the whistle blower is, knowing they just got an $8.3 million payout, it just might be worth your time to go after said whistle blower. I don't think it's unreasonable that someone could figure that out.
I wonder what goes through the whistleblowers head in terms of timing and how much they should help the crime. If you wait a little longer or help the crime, the payout increases. Maybe there are already people designing schemes in which they can do the crime, whistleblow, and get a legal payday.
I haven’t worked on an SEC case but your typical Federal whistleblower suit prosecuted by the DOJ remains under seal until the government decides whether to intervene (in the legal sense, meaning becoming a party to the case). I doubt a pre-intervention settlement would automatically unseal it, particularly if the settlement is confidential.
I knew a libertarian activist who never paid taxes on $1 million+ earned over 5-years. He'd get giant letters from the IRS in the mail. Years later he got involved in crypto and promoted a $750 million scheme. Knowing he had issues with the IRS, he contacted them offering information on international money launderers. He flew to Florida and was arrested by the FBI. He's facing 20+ years.
This is encouraging, but I wonder how whistleblowers or BBB backed complaints haven't resulted in more federal / class-action suits against get-rich-quick scammers like Grant Cardone and Thai Lopez common on YouTube?
Well, I don't think Grant and Thai are scammers from SEC point of view. They run marketing companies, selling books, lectures, online courses. They also have investment vehicles on the side, but they are pretty straight forward.
SEC mostly will be fine if principals disclose the risks to investors in prospectus and do correct accounting.
Companies mostly run intro trouble with SEC for issuing securities illegally, not complying with market reporting procedures, cooking books.
We can open the company that teaches people how to live longer, based on some BS that we cooked up and charge 10k an hour.
As long as in our prospectus we are clear, that there is no scientific evidence that our product does anything and we believe that our BS teachings help people to live longer, we should be good in SEC eyes.It will help to lawyer up when we are doing those prospectus, but I am pretty sure Grant and Thai lawyered up to their ears.
If you're a drug company and you provide physicians financial incentives to use your drug that falls under the False Claims Act if Medicare/Medicaid are paying (there are some Safe Harbor areas, but not many). Same thing with charging the gov't the incorrect price (there are a ton of rules around what you can charge - the Medicaid Best Price rules are a good example).
So anyways, this pharmacy down in the Florida Keys started to loss a lot of business back in the 80's. So the pharmacist started looking at what was driving that (he has visibility into both the pharmacy cost and the gov't reimbursement). Turns out drug companies were telling Medicaid the price was $X, but they were charging pharmacies $X*10% and the pharmacies pocketed the difference. That's a bit of a simplification as the price differential existed for a long time, but basically drug companies pushed it so far that they got the smack down.
Ven-a-care launched a whistleblower lawsuit, the Federal gov't joined and they won, so Ven-a-care got a nice payout. Then they found another example and got another payout, then another and another. By 2011, they had received several hundred million in pay outs.[1] In 2013, they received a $597M payout.[2]
Keep in mind this was a team of a few pharmacists and some lawyers. They basically turned whistleblowing into a business.
They were even involved in the Epipen settlement in 2017.[3] I've never seen the total payouts they've received but it must be over $1B by now.
[1]https://www.cnbc.com/2011/02/10/how-four-men-got-rich-exposi... [2]https://www.bloomberg.com/news/articles/2013-08-13/florida-p... [3]https://www.cnbc.com/2017/08/17/grassley-says-mylans-465m-ep...