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Thursday, February 27, 2014

Current and former employees of financial institutions can anonymously file Whistleblower claims and may be entitled to rewards.

The Wall Street Journal reported today about a record breaking $14 Million Whistleblower award.  The SEC paid the tipster the $14 Million reward for providing information that eventually uncovered a Chicago-based scheme to defraud foreign investors seeking U.S. residency.  According to the Wall Street Journal:


The case that led to the $14 million-plus payment centers on allegations last year that about 250 investors, mostly Chinese, were "duped" by 30-year-old Anshoo R. Sethi and his two Chicago, Ill.-based companies into paying a total of more than $155 million for a supposed plan to build a hotel and conference center, said the people familiar with the matter. The SEC said the investors 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.

In fact, the agency alleged, 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."
Tipsters who provide information that leads to a successful SEC sanction of more than $1 Million, can receive as much as 30% of the money collected. The $14 Million reward was the largest ever paid by the SEC.

However, the SEC's program is just one of the many government whistleblower programs designed to reward those tho provide information that leads to convictions/enforcement actions. The IRS paid $104 Million in 2012 to a former UBS AG banker for providing prosecutors with evidence about the firm's efforts to promote tax evasion. This is believed to be the largest reward ever paid under these programs.

What is important to remember for those still working in the financial services industry is that tipsters can be current or former employees of the financial institutions. The program also provides strong tools to protect the tipster's anonymity, prevents retaliation from employers and can reward the tipster with a significant monetary award. However, some recent court decisions do call into question the extent of the protection if proper procedures are not followed.

This program is a great way to help regulators ferret out fraud and protect the public. Of course, tipsters can be investors as well.

If you know of fraud at your current or former firm and want to discuss filing a #Whistleblower tip, please do not hesitate to contact me to discuss.

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