
SEC Announces Its Largest-Ever Whistleblower Awards - ColinFCodeChef
https://www.sec.gov/news/press-release/2018-44
======
refurb
Whistleblowing can be it's own business model, just do a google search for
Ven-a-care.

Ven-a-care is a small pharmacy down in the Florida Keys. A few decades ago, it
started to notice that the price it was paying for certain drug was _very_
different from what the gov't thought they cost. Gov't price reporting is
incredibly strict in pharma due to past mucking with the numbers.

So they started a lawsuit which was picked up by the DOJ.

Then they did it again, and again, and again.

Last I saw, they've racked up almost $600M in whistleblower awards.[1]

[1][https://www.cnbc.com/id/41491563](https://www.cnbc.com/id/41491563)

~~~
gadders
Bradley Birkenfeld did quite well whistleblowing on UBS [1]. $104m.

[https://en.wikipedia.org/wiki/Bradley_Birkenfeld#Whistleblow...](https://en.wikipedia.org/wiki/Bradley_Birkenfeld#Whistleblowing_and_arrest)

~~~
s73v3r_
Considering many of these people end up blacklisted from their industry, we as
a society kind of owe it to them.

~~~
maxxxxx
We owe that guy 104 million?

~~~
marvin
We definitely owe them enough money that they could comfortably fill the
payment gap to their next job (which might be never, meaning enough money to
pay for inflation-adjusted lost income during the entire remainder of their
career).

But in the name of pragmatism, it is unlikely that whistleblowers would blow
the whistle on a purely economical basis if the reward wasn't higher than
that.

~~~
maxxxxx
Then we should also pay whistleblowers who report environmental issues a lot
of money. I don't think that's the case.

------
nostrademons
Interesting to see the SEC finally grow some teeth, between the recent ICO
enforcement actions, Theranos penalty, and now this. When I was in financial
software (06-07) they were basically a joke; my employer had developed some
software to help enforce a (relatively obscure) regulation and tried to sell
it to them, and they were completely indifferent. Kind of a welcome change, if
they manage to get people to be more interested in actual productive activity
than fleecing dumber investors, but it'll take a while to change a culture.

~~~
topspin
"When I was in financial software (06-07) they were basically a joke"

I spent a few weeks causally reading testimony transcripts from the Madoff
investigation when these were published by the SEC. The SEC was far worse than
a joke. The SEC was an enabler. Years and years of Potemkin audits blessing
Madoff and his Ponzi scheme as a worthy investment allowed hundreds of
individuals and investors to rationalize their participation in the fiction.
Complaints were filed, absurdities were pointed out and the SEC turned a blind
eye to it all. By the time the gears finally stripped the SEC had had its nose
rubbed in it multiple times.

~~~
conistonwater
> _The SEC was an enabler. Years and years of Potemkin audits blessing Madoff
> and his Ponzi scheme as a worthy investment allowed hundreds of individuals
> and investors to rationalize their participation in the fiction._

This doesn't sound right at all, the SEC doesn't conduct audits. See, for
example, [1].

[1] _Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi
Scheme \- Public Version_
[https://www.sec.gov/files/oig-509.pdf](https://www.sec.gov/files/oig-509.pdf)

~~~
topspin
"the SEC doesn't conduct audits"

Poor terminology on my part I believe. The term used in the report is
"examination." SEC staff, including Sollazzo, Lamore, Ostrow, Nee (mentioned
in the report you cite) conducted on-site examinations of Madoff's operations.
Similar events occurred with Madoff at least four times with over a period of
about 20 years.

I'm having trouble locating the actual transcripts now[1]; they appear to have
disappeared into the memory hole. At one time the mass of raw PDF files were
available from the SEC website. I recall very specific testimony from these
examiners including details such as the type and locations of the offices
provided for examiners by Madoff, recollections of in person meetings in
Madoff's office and details about the physical files involved.

The results of these 'examinations' were cited by Madoff to establish
credibility with investors.

[1] Here they are:
[https://www.sec.gov/news/studies/2009/oig-509/oig-509_exhibi...](https://www.sec.gov/news/studies/2009/oig-509/oig-509_exhibits.htm)

Here is an SEC staff accountant discussing documents received from Madoff:
[https://www.sec.gov/news/studies/2009/oig-509/exhibit-0262.p...](https://www.sec.gov/news/studies/2009/oig-509/exhibit-0262.pdf)

------
matt4077
This program is a great example how setting the right incentives can
destabilize a criminal conspiracy. It’s also worth noting that “traditional”
law enforcement in white collar crimes is essentially the same: the
possibility of criminal proceedings almost always outweighs the sort of
incentives a corporation can offer lower-level employees. Would you risk jail
time as a bookkeeper earning a 5-figure salary at #bigCorp Inc?

It’s arguably the same dynamic now befalling the presidential administration,
only that the salaries are even lower than in the private sector, and you’re
almost certainly looking at 6-digit bills from your lawyer just because
working in the building will make you a potential witness.

~~~
_red
Those incentives cut both ways. It also creates a huge avenue for rogue
employees to suddenly craft themselves payout strategies.

The law firm that we use recently told about such an action they defended for
another client. A disgruntled employee, who suspected they would soon be fired
for lack of performance, "setup" certain actions, documents, prompted specific
executive responses to emails, etc. The claim was that there was prejudiced
hiring practices ongoing. However very little true evidence existed...most of
it was in fact crafted by the employee.

The whistleblower action resulted in a meager voluntary fine that the company
paid (didn't make financial sense for company to fight, easier to pay the $10K
and move on). The ex-employee for their part received $1500. Currently they
are in a recovery program for crack addiction.

~~~
CryptoPunk
In both East Germany and Revolutionary France people had their enemies
destroyed through these kinds of methods. They either found some dirt on them
(not hard to do when everything is illegal), and reported it to the
authorities, or simply fabricated allegations and reported those.

In East Germany it meant loss of their job, and possibly imprisonment. In
Revolutionary France it was off with their heads.

------
kevin_thibedeau
Just don't dream of whistle blowing against the government itself or a federal
contractor. Then you'll be utterly destroyed for such insolence.

------
matt_wulfeck
While I appreciate a criminal getting caught, these types of systems that
incentives private citizens spying and reporting on one another are bothersome
on many levels.

~~~
turc1656
Why does it bother you? Do you equate it with some sort subset of McCarthyism
- i.e. turning the government loose on your neighbor, etc.? To me, it's more
of a "see something, say something" deal. But the issue with that is that
there is a substantial personal risk to doing so when one works in the
industry and usually the employer they are blowing the whistle on. That means
they run the risk of destroying their career (because most firms in their
field will hot hire them after that)...all for "doing the right thing". That's
why I think it's OK to have this incentived. There is substantial personal
risk to them. It's not like reporting a suspicious bag at the airport.

~~~
dmix
Completely agree, the reward is a counter balance to the real-world risks.
It's not some idealistic regulatory system that bets on a finite group of
agents to catch malicious actors in a rapidly changing systems with millions
of events each day.

Nor does it create massive inefficiencies in the system by forcing every
company/employee/transaction to jump through arbitrary hoops in order to
verify they are legit, designed to catch yesterdays criminals.

Instead of paranoid dragnets it promotes enforcement on a case-by-case basis,
sourced closer to problem and by the people who actually understand the
problem.

------
anonytrary
Pump-and-dump telegram groups are basically done if their members see a get-
rich-quick opportunity from the SEC which surpasses the promised returns of
the pump-and-dump scheme.

------
maybeiambatman
Does anyone know what kind of violations they reported (and which companies)?

~~~
jonknee
Merrill Lynch insiders who supplied information for a 2016 case against Bank
of America.

[https://www.bloomberg.com/news/articles/2018-03-19/two-
whist...](https://www.bloomberg.com/news/articles/2018-03-19/two-
whistleblowers-share-50-million-in-sec-s-largest-ever-award)

------
zyxzevn
Can I report a few trillions that are missing in the Pentagon Budget? Send
money to <redacted>.

------
dopamean
Does the SEC have a line item in its budget for whistleblower awards? If so
what do they do if there are a lot of cases to pay out? Can they run out of
money for these things? I'd love to know what that process looks like.

~~~
mikeyouse
The whistleblower awards are typically a fixed percentage of the fines that
the SEC levies (10% - 30% depending on circumstances). So if you blow the
whistle on your company and the SEC fines them $100M, the SEC will get ~$80M
and the whistleblower will get ~$20M.

So in that sense, no, they can never run out of funds to pay them off.

[https://www.sec.gov/whistleblower](https://www.sec.gov/whistleblower)

~~~
dopamean
Ah yes. I remember hearing about this now. Thanks!

------
kbutler
> By law, the SEC protects the confidentiality of whistleblowers and does not
> disclose information that might directly or indirectly reveal a
> whistleblower’s identity.

I wonder if they tell the IRS?

~~~
bastawhiz
I would think it's in their best interest to not disclose anything to anyone.
You don't want to do anything to disincentivize whistleblowers.

------
maxxxxx
In any other industry you have to be happy to not get your life ruined as
whistle-blower but in banking we again have to give them a huge amount of
money to do something. It really bothers me. Why do we have to give millions
of dollars? Anywhere else you would get a small reward or nothing.

~~~
matte_black
Because if you blow the whistle you will never work in that industry again.

~~~
joering2
Says who? I think with $100MM he can start his own financing/brokerage company
and even paddle it on the idea of a “good guy starting financing corp”

------
karpodiem
They need to come down on Tesla. Musk's tweets/lies have driven the stock up
to an established automaker's market cap.

The only problem is, Tesla is no where near profitable (they've lost money
nearly every quarter except for two or three, I believe. And in those
quarters, the profit was very small compared to other quarterly losses) as
either of these companies, and the cash burn isn't stabilizing as they attempt
to scale, it's increasing.

China/Europe deliveries have collapsed to start 2018. Bloomberg is tracking
VIN assignments and pegs weekly production to 750 vehicles a week; that's only
25% to what Musk said they'd be doing by 2018.03.30.

S and X production during the M3 ramp up is reduced, based on channel checks.

Deliveries to regions in the US are staggered as M3's require an extensive
amount of re-work before and after being received by a customer. Simply put -
they want to fulfill all of their California orders to cut down on logistic
costs/take payment, but their delivery centers can't handle the amount of
service/re-work that would be required for all the new M3 owners.

This quarter should be an absolute bloodbath for TSLA - the end has already
begun.

~~~
nl
This is hardly a secret, it’s why Tesla has so many short sellers.

