On March 19, 2018, the SEC announced three multi-million dollar awards to whistle-blowers to reward them for reporting misconduct. One whistle-blower received $33 million, which constitutes the largest SEC whistle- blower award in history; the two other whistle-blowers will split a $50 million award. These significant awards continue a trend of rising awards by the SEC, which continues to focus on publicly incentivising and protecting whistle-blowers.
In response to the recent record-breaking awards, Jan Norberg, Chief of the SEC's Office of the Whistle- blower, commented that, "We hope that these awards encourage others with specific, high-quality information regarding securities laws violations to step forward and report it to the SEC." Indeed, since 2012, the SEC has awarded over $262 million to 53 whistle-blowers, with an average award of approximately $5 million.
The SEC's promise of substantial awards for whistle-blowers is bolstered by its active pursuit of enforcement actions against companies that retaliate against whistle-blowers or take steps that can be construed as impeding reporting in violation of the Dodd-Frank Act and the Sarbanes-Oxley Act. Since 2014, the SEC has brought enforcement actions against two companies for alleged retaliation against whistle-blowers, eight for allegedly impeding whistle-blowers from reporting misconduct, and one for both, resulting in a total of $19 million in penalties. While some of these fines have been modest considering the size of the corporations that paid them, these cases also expose the companies involved to private litigation brought by the whistle- blowers themselves, which can significantly increase the financial risk. For example, in 2017, a jury found that Bio-Rad violated the Sarbanes-Oxley Act and Dodd-Frank Act whistle-blower provisions when it fired its general counsel, who had reported suspected violations of the Foreign Corrupt Practices Act to the company's audit committee. The general counsel was subsequently awarded over $8 million in lost wages and punitive damages, as well as $3.5 million in litigation costs by the court.
The potential for a multi-million dollar award and the option to sue for damages and penalties if subjected to retaliation combine to create a strong incentive for potential whistle-blowers to report to the SEC. And every headline-grabbing award prompts even more potential whistle-blowers to take notice.
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