SEC Awards Whistleblower $5.5M

In its first whistleblower award this year, the Securities and Exchange Commission is awarding a tipster who worked for a company accused of wrongdoing and had gone directly to the agency with what he knew with $5.5M.

According to The National Law Journal, This is the first time since the SEC began granting whistleblower awards in 2013 that a whistleblower did not have to abide by rules established by the 2010 Dodd-Frank Act. Under those rules, whistleblower tips need to be submitted in writing by fax, mailed, or submitted through the regulator’s website in order for the person providing the information to be eligible for an award. This whistleblower, however, had started working with the Commission on the case before the tip could be eligible for the awards authorized under Dodd-Frank. This latest award means that the SEC has now awarded 38 whistleblowers a total of $142M.

Meantime, the Commission continues to take action against companies that retaliate against whistleblowers. Last month, the regulator announced that SandRidge Energy Inc. settled charges accusing it of using illegal separation agreements and taking retaliatory action against a whistleblower who had brought concerns to the oil and gas company’s attention regarding the way that reserves were calculated. SandRidge is not denying or admitting to the SEC’s findings. It will, however, pay a $1.4M penalty.

According to the SEC order, despite reviewing its separation agreements multiple times after new whistleblower protection rules went into effect more than five years ago, SandRidge Energy continued to employ restrictive language in these agreements. This barred employees leaving the company from taking part in any government probe or disclosing information that could possibly embarrass or hurt the oil and gas company.

The SEC said that SandRidge fired the internal whistleblower. This was after the employee was offered a promotion, which the person refused. Months later the employee was let go for being “disruptive.” The regulator also noted that the company never conducted a substantive probe into the whistleblower’s concerns—only an internal audit that was not completed.
The employee had a separation agreement with the prohibitive language that violated whistleblower protections.

In 2015, the SEC awarded a whistleblower $600K for providing important and original information leading to a successful enforcement action. That amount was 30% of the enforcement action collected and the maximum whistleblower award payment allowed. The Commission charged  the company, Paradigm, with retaliating against the whistleblower.

Last year, International Game Technology (IGT) agreed to pay a $500K civil penalty for firing an employee that reported possible to both senior management and the SEC that there might be distortions in the company’s financial statements. The employee was removed from significant work assignments soon after expressing concerns about International Game Technology’s cost accounting model. He was fired about three months later.

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The SEC Order Regarding This Whistleblower Claim (PDF)

The SEC Order in the SandRidge Case (PDF)

Dodd-Frank Act (PDF)

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