SEC and CFTC Whistleblower Programs – Information and News

Phillips & Cohen's expertise as whistleblower lawyers handling SEC and CFTC whistleblower cases is widely recognized in the media. Below are some news articles with comments and observations by Phillips & Cohen attorneys.

"Ex-SEC Whistleblower Chief Lands at Phillips & Cohen," National Law Journal, 9/6/16.

"I am extremely proud of the work accomplished by the whistleblower office team during my time as chief," [Sean X.] McKessy said. "I think my experience and knowledge will help whistleblowers work in the most effective way with the SEC to stop securities law violations."

"S.E.C. Whistle-Blower Program's First Chief Joins Law Firm," New York Times, 9/5/16.

"I feel I've established that I honor the work whistle-blowers do," [Sean X.] McKessy said in an interview. "I am hoping to convince many people who are on the fence witnessing fraud to come forward."

His new employer, Phillips & Cohen, is one of the nation's most prominent law firms specializing in whistle-blower cases. It represented the informer who in 2014 received $30 million under the S.E.C.'s program, its largest award. The firm also represents individuals who identify fraud at government agencies. It has recovered more than $11.6 billion from civil settlements and criminal fines related to its cases

"SEC's First Whistleblower Office Leader Announces Departure as Awards Mount," National Law Journal, 7/8/16.

"He took the outlines of a program and implemented it in a way that was very powerful and very creative. Right from the beginning, he paid attention and understood the importance of the culture at the SEC vis-a-vis whistleblowers," said Erika Kelton, a Phillips & Cohen partner who represented the recipient of a $30 million whistleblower award, the largest in the program's history. "From the start, he was committed to building a culture there for protecting whistleblowers and utilizing their information and expertise fully."

"SEC whistleblower program gains momentum with $17 million award; tips on developing cases rise," Reuters Regulatory Intelligence, 6/10/16.

"They are doing great now as the word gets out about the program and they continue to pay out these kinds of large awards and more people come forward to help in investigations," said Erika Kelton, a Phillips & Cohen partner who represented a whistleblower in the record $30 million SEC case in 2014. "The pace is going to pick up."

"Ex-Oracle employee sues company claiming she was fired after threatening to 'blow the whistle,'" InsideCounsel, 6/6/16.

"Financial accounting is a very high priority for SEC enforcement," Kelton explained. "While these allegations concern Oracle's cloud services business, the SEC is going to want to know about serious missteps in financial accounting practices."

"SEC continues to pay out sizeable awards for help from whistleblowers," Inside Counsel, 5/24/16.

"The recent $3.5 million award is significant because it demonstrates the SEC's willingness to reconsider its preliminary decisions about whistleblower awards and to credit whistleblowers with more indirect-though still important-contributions to the SEC's enforcement actions," Erika A. Kelton, an attorney at Phillips & Cohen, said. "The award makes clear that individuals who provide the SEC with significant information that advances an investigation-not just those whose information is the basis for initiating an investigation-also may receive awards."

"SEC Awards Whistleblower $3.5 Million for Help in Ongoing Investigation," National Law Journal, 5/13/16.

"What the whistleblower initially argued was his or her information caused the commission to inquire into different conduct. The commission interpreted that provision and said no, that doesn't fit here. But what it does fit is the significant contribution prong," said Phillips & Cohen partner Erika Kelton, who represented a tipster who received $30 million from the SEC, the largest whistleblower award in the program's history.

"CFTC Whistleblower Office Comes Of Age With Record Bounty," Law360, 4/4/16.

"It's a clear message, a very strong message, that the program is working and that it's worthwhile to participate," said Erika Kelton, a Phillips & Cohen LLP attorney who's represented some of the most successful Dodd-Frank whistleblowers, including an overseas tipster who scored a bounty worth more than $30 million from the SEC in September 2014.

"U.S. Commodities Agency Rewards $10M to Whistleblower--a Record," National Law Journal, 4/4/16.

"I think [the reward] was inevitable. I'm sure the CFTC and the CFTC whistleblower office is enormously pleased, because there is nothing like the publicity from a whistleblower award to generate more interest in the program," said [Phillips & Cohen partner Erika Kelton], who represented a tipster who received $30 million from the SEC, the largest whistleblower award in the program's history. "I expect that the CFTC will see a jump in the applications they'll receive."

"Expert's $700K Award Signals Return to SEC Whistleblower Program Roots," National Law Journal, 1/25/16.

"In noting that, I think the SEC is sending a message that people who are not inside should not be discouraged, that their information, if substantive, will be taken seriously," said Erika Kelton, a Phillips & Cohen partner who represented the foreign tipster who received $30 million-the largest whistleblower award in the program's history. (Another client of Kelton's received a $3 million award, the third largest since the program's inception.)

"Whistle-Blower Win, Justice Targets, Reverse Mergers: Compliance," Bloomberg, 9/11/15.

The bigger issue, the court found, was that those working in finance -- as well as attorneys -- have a duty to report suspected wrongdoing internally before going to the SEC. The duty shouldn't pre-empt a retaliation suit, the court said.

Erika Kelton, an attorney at Phillips & Cohen LLP who represents whistle-blowers, called the ruling a positive step.

"5 Things GCs Need To Know About Whistleblowers," Law360.com, 5/27/15.

"We've found that employees are going to report internally anyway, but they have the additional incentive now because of the way the SEC reward factors are structured," said Colette Matzzie, who represents whistleblowers at Phillips & Cohen LLP.

"So it's a real opportunity for inhouse counsel to be attentive to internal reporting and address problems as quickly as possible," Matzzie added. "If a company is cooperative with federal agencies and conducts its own investigation and shares it with the government, that is always helpful to the company in our experience."

"Arrest of U.K Trader Puts a Spotlight on Whistle-Blowers," Institutional Investor, 5/12/15.

Anonymity has been central to the successes that have occurred so far, according to Erika Kelton, a partner at Phillips & Cohen in San Francisco and Washington. "Congress quite rightly recognized that in the financial services sector, the risks are great for whistle-blowers," says Kelton. Her law firm, which specializes in the whistle-blower practice, represented the client who won the $30 million award from the SEC.

"Lawyers on All Sides See Whistleblowing Evolving Fast," Corporate Counsel, 1/6/15.

In September, the commission [SEC] authorized a payout of $30 million to a whistleblower living abroad. Erika Kelton of Phillips & Cohen, the attorney responsible for securing that award and a webinar speaker, thinks the word is getting out about the benefits of whistleblowing, and that this will result in more tips. "As these big awards become publicized, you're going to see the trends spike up," she said, adding that she's confident there will be a whistleblower award "fairly soon" that surpasses $30 million.

"Companies Risk SEC's Wrath By Discouraging Whistle-blowers," FierceCFO, 12/12/14.

In that vein, Erika Kelton, a partner in the Washington, D.C., office of law firm Phillips & Cohen, a leading representative of whistle-blowers, observed during the Gibson Dunn webcast that the biggest mistake a company can make is "isolating and victimizing the whistle-blower." Added Kelton, "When somebody is not heard, you're putting that person on the periphery and putting them in an extremely uncomfortable position."

"Foreign Whistleblowers Gaining Traction," The Wall Street Journal,12/12/14.

Whistleblower attorney Erika Kelton, also speaking at the seminar, said foreign tipsters primarily find her over the Internet, though some come through referrals or after hearing her speak abroad. "Many really understand the program quite well," she said. Ms. Kelton, of Phillips & Cohen LLP, represented the foreign tipster who earlier this year was awarded the SEC program's largest-ever whistleblower award.

"Who Would Be a Whistleblower?" The Independent, 11/12/14.

Phillips & Cohen, the law firm representing the latest whistleblower, said the Dodd-Frank Act allows SEC whistleblowers to remain anonymous "to the fullest extent allowed by the law" to encourage and reassure people who often put their careers and more at risk by reporting wrongdoing.

Phillips & Cohen said the company exposed in the latest case went to great lengths to conceal a fraud.

"Our client exposed extraordinarily deceitful and opportunistic practices that were deeply entrenched and well hidden," said Erika Kelton of Phillips & Cohen.

"SEC: Banks May Be Shifting Asset Risk for Better Capital Treatment,"American Banker, 10/22/14.

Bigger is definitely the signal the SEC is sending, according to Phillips & Cohen LLP attorney Erika Kelton. The SEC last month announced the largest ever whistleblower payout in its history. Kelton helped negotiate the record $30 million check that the SEC awarded her client.

"I'm very confident there will be even larger cases moving ahead, but they are not only focused on large ones."

"SEC Award May Spur Whistle-Blower Growth," Bloomberg, 9/24/14.

Erika Kelton, the lawyer at Phillips & Cohen LLP who represented the whistle-blower . . . said an employee who blows the whistle "does so at great personal and professional risk." While federal law prohibits retaliation, people sometimes still lose their jobs, both attorneys said.

"CFTC Set to Make First Award To Whistle-Blower Under 2011 Program,"Securities Law Daily, 5/20/14.

According to whistle-blower lawyer Erika Kelton, Phillips & Cohen LLP, Washington, the award shows that the program is off to a "promising" start more than two-and-a-half years after its inception...

"The agencies have no understanding of the fraud when the submissions are made," Kelton observed. "They need to organize their enforcement team, investigate, then they need to negotiate or in some way take enforcement action. That takes a lot of time."

"The Plight of an Overseas Whistleblower," i-Sight, 4/1/14.

With an influx of overseas whistleblowers participating in a US government program that offers rewards for uncovering legal violations, it's not uncommon for attorney Erika Kelton to get international calls from people "who are extremely uncomfortable with the business practices that exist internationally."

"Walk, Don't Run - Experts Advise Prudence and Caution for Potential Whistleblowers," CFA Institute Magazine, March/April 2013.

Do make sure that you really want to file a whistleblower claim. "Once it's filed, it sets in motions something that you cannot stop," says Erika Kelton, partner in the Washington, DC, law office of Phillips & Cohen. "It's important to thoroughly reflect on, and be prepared to do this and assess how long it will take, what to expect, how disruptive to your life this can be, and what risks you are taking."

"Erika Kelton on the Rise of SEC Whistleblower Cases," Corporate Crime Reporter, 2/5/13.

Erika Kelton is a partner at Phillips & Cohen in Washington, D.C. She's a pro at bringing whistleblower cases.

She has a couple of billion dollar plus False Claims Act qui tam cases under her belt. Pfizer $2.3 billion. Glaxo $3 billion. But a significant amount of her caseload is now SEC/CFTC and tax cases.

"Companies Prod SEC on Whistleblower Proposal," The Wall Street Journal, 2/17/11.

. . . Lawyers for whistleblowers counter that requiring internal reporting would kill the program by discouraging would-be tipsters from coming forward for fear of being identified.

"If mandated internal reporting were required, it would be like turning off the tap" of whistleblower tips, said Erika Kelton of law firm Phillips & Cohen LLP.

"Firms face sudden rush of whistleblower claims," Corporate Counsel, 9/9/10.

. . . Erika Kelton, partner at the plaintiffs' powerhouse Phillips & Cohen in Washington, D.C., agreed that the outpouring [of SEC whistleblowers] is huge. . . . Kelton was the lead attorney for a whistleblower suit against Pfizer Inc., which paid a record-setting $2.3 billion in mid-2009 to settle civil and criminal charges for using illegal sales tactics.

"Larger bounties spur surge in fraud tips," Wall Street Journal, 9/7/10.

"The SEC is offering some protections for informants. . . . These features, combined with the guaranteed minimum payout for whistle-blowers who qualify, are encouraging insiders to step forward," said Erika Kelton of Phillips & Cohen LLP.

"SEC Now Offering Big Payoffs To Whistle-Blowers," Time, 8/19/10.

Money can be "extraordinarily effective" in getting people to blow the whistle when they see fraud, says John Phillips, whose law firm Phillips & Cohen LLP specializes in whistleblower cases.

In the past, the SEC's whistleblowing program was limited to insider trading cases and offered only small discretionary, rather than mandatory, rewards ranging from 0 to 10% of the money recovered. "It was completely ineffectual, completely discretionary," says Phillips.

"Financial crime whistleblowers to be rewarded," The Daily Transcript, 7/10/10.

"The SEC whistleblower provisions will be an extremely effective enforcement tool that will have an immediate impact, probably far quicker than any other aspect of the financial reform legislation," said attorney Erika Kelton with Phillips & Cohen.

"Financial reform law includes big cash incentives for whistle-blowers," Los Angeles Times, 7/23/10.

The new SEC whistleblower program "is very significant and will have an immediate impact," said Erika Kelton, a Washington lawyer who has represented whistle-blowers. "It will motivate knowledgeable insiders to step forward and tell the enforcement agencies what they know. It is the secret weapon in this massive bill."

Goldman Sachs recently agreed to pay $550 million to settle a suit brought by the SEC accusing the investment banking firm of misleading investors who bought mortgage-backed securities just as the housing market collapsed. Had the case arisen from a whistle-blower's tip under the new law, "it would mean at least $55 million for the whistle-blower," Kelton said.