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Constantine Cannon Client Scores SEC Whistleblower Win

Posted  October 30, 2020

Adding to our list of significant achievements in the whistleblower arena, Constantine Cannon obtained a $1.7 million payout for our SEC whistleblower client.  Of particular note, we convinced the SEC to increase our client’s award after SEC recommended a lower amount, which the SEC very rarely does. Our client’s award comes on the heels of last week’s blockbuster $114M award and adds yet another notch in the SEC’s record-breaking year of awards.

Since its inception in 2012, the SEC Whistleblower Program has paid out approximately $687 million to 109 claimants. The SEC reconsidered its preliminary determination and increased the claimant’s award in fewer than 7 percent of those cases. That increases are so rare is further testament to the strength and effectiveness of our Firm’s whistleblower practice, particularly under the SEC Whistleblower program.

The SEC Whistleblower program awards claimants who provide high-quality, original information that leads to enforcement actions involving over $1,000,000 in sanctions. These awards range between 10 and 30% of the money collected. To apply for an award, a claimant must submit an award application, called a Form WB-App, to the SEC’s Office of the Whistleblower within 90 days after the SEC announces the enforcement action in a Notice of Covered Action on its website. The SEC’s Claims Review Staff (CRS) then makes a preliminary determination on the whistleblower’s award claim. If the claimant is not satisfied with the result, they can appeal the award determination. The first appeal, within the SEC, requires the CRS to reevaluate the preliminary decision and then send its proposed final determination to the full Commission. If the Commission them denies the application, a claimant can appeal again in an appropriate appellate court.

In rare instances, such as our clients, the SEC will reconsider and increase the award based on certain factors. These may include the significance of information provided, the extent of the whistleblower’s assistance, the law enforcement interest in deterrence, and the extent to which the whistleblower participated in their company’s compliance systems, which often include reporting problematic issues via internal procedures. Our team successfully argued for an increase on behalf of our client, a former company insider, after our client provided extensive and ongoing assistance to the SEC over the course of the investigation. After considering the specific facts and circumstances in the violations on appeal, the SEC acknowledged our client’s attempts to alert investors to the misconduct and to mitigate harm to investors. Further, they noted our client’s justified fear of retaliation while employed—common among company insiders. These concerns factored into the final determination, resulting in an award increase.

The SEC’s award discretion is not a one-way street, however. The SEC can decide to decrease the award as well if, for example, the whistleblower was a participant in, or culpable for, the securities law violations they reported; if they unreasonably delayed reporting the violations; or if they interfered with their company’s internal compliance and reporting systems via false statements or other efforts to hinder the company’s investigative efforts.

This recent success exemplifies our whistleblower team’s commitment to rooting out fraud to level the playing field for all investors and taxpayers. If you would like information about whistleblower reward or protection programs, or would like to speak to a member of Constantine Cannon’s whistleblower lawyer team, please click here.


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