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$279 Million SEC Whistleblower Remains a Mystery

Posted  May 31, 2023

It is the largest award ever made to a whistleblower on record under any of the ever-expanding list of whistleblower rewards programs$279 million by the Securities and Exchange Commission (SEC) “to a whistleblower whose information and assistance led to the successful enforcement of SEC and related actions.”  That is pretty much all the SEC disclosed in announcing the award because of the agency’s strong commitment to maintaining the confidentiality of its informants.  The identity of this record-setting whistleblower remains a mystery.

But thanks to some special sleuthing by the Wall Street Journal, we now know the blockbuster award stems from the more than $1 billion Swedish telecom giant Ericsson paid in December 2019 to settle SEC and Department of Justice (DOJ) charges of foreign bribery.  According to the government, Ericsson violated the Foreign Corrupt Practices Act through illicit payments — concealed through sham contracts and false invoices — to officials in Djibouti, China, Vietnam, Indonesia, and Kuwait to secure business in those countries.

Under the SEC Whistleblower Program, whistleblowers who report violations of the securities laws that lead to successful enforcement actions may receive between 10 and 30 percent of any SEC recovery.  As was the case here, they also may be entitled to a share of related recoveries from other agencies resulting from the information the whistleblower reports to the SEC.  Given the SEC’s strong protections of its whistleblowers, we do not know what this particular whistleblower reported or how they assisted the SEC and DOJ in its investigation to warrant such a large monetary award.

All we know from the SEC’s heavily-redacted Order supporting the award is that the whistleblower voluntarily provided the SEC original information the agency considered “significant” and which saved it a lot of time and resources in bringing down Ericsson.  We also know the whistleblower provided their information after the SEC had already opened its investigation into Ericsson and that the information only related to a subset of the misconduct for which the SEC ultimately charged Ericsson – making the size of the award all the more notable.

In what has become the SEC’s standard practice of heralding its whistleblowers and trumpeting the success of its whistleblower program, the agency praised the unknown whistleblower and dangled the huge payout as an enticement for other potential whistleblowers to step forward.  From the words of Gurbir Grewal, the Director of Enforcement himself:

The size of today’s award — the highest in our program’s history — not only incentivizes whistleblowers to come forward with accurate information about potential securities law violations, but also reflects the tremendous success of our whistleblower program.  This success directly benefits investors, as whistleblower tips have contributed to enforcement actions resulting in orders requiring bad actors to disgorge more than $4 billion in ill-gotten gains and interest.  As this award shows, there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations.

That the identify of the Ericsson whistleblower remains a secret is particularly surprising given the size and attention of the award and underlying conduct.  On the other hand, it also serves as a powerful testament to the SEC’s appreciation of the critical role of whistleblowers in government enforcement.  Even more importantly, it underscores the agency’s understanding of the need to provide a safe and confidential channel for whistleblowers who are so often the target of retaliation and retribution for daring to say something when they see something that rubs against their moral compass.

So a big shout-out to this mystery whistleblower for this record result.  And to the SEC for setting the bar so high for other agencies to follow in embracing, protecting, and rewarding their whistleblowers.  Definitely a model for the DOJ (federal False Claims Act), State AGs (state False Claims Acts), IRS (tax fraud), CFTC (commodities fraud), NHTSA (auto safety), Treasury (money laundering), and OFAC (foreign sanctions) to follow in how they treat their whistleblowers and manage their rewards programs.

And to all those would-be whistleblowers thinking about whether to stand up and be heard in the face of misbehavior, who’s got next?

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Tagged in: Fraud in CFTC-Regulated Markets, Importance of Whistleblowers, SEC Whistleblower Reward Program, Whistleblower Rewards,