SEC Files Response to Whistleblower Lawsuit Objecting to Long Delays in Paying Awards to Whistleblowers

On April 29, 2019, an anonymous Dodd-Frank Act whistleblower filed a petition to the U.S. Court of Appeals seeking to have the SEC issue a decision in his/her case. The whistleblower’s claim was pending before the Commission for approximately two years, and the whistleblower challenged this “delay.” 

Last week, on July 11, 2019, the SEC responded. The SEC’s brief is important for two reasons:

First, it confirms the vital role that whistleblowers play in international Foreign Corrupt Practices Act (FCPA) cases. According to the SEC’s filing, there were six whistleblowers in the case, and all of them appear to have provided significant information. The bribery case resulted in $519 million in sanctions, for which the whistleblowers could obtain a reward within the range of $52 million — $156 million.    

Second, the Commission reinforced the global nature of the Dodd-Frank Act by confirming that numerous whistleblowers provided information about Teva’s bribery. The Commission also reinforced the law’s critical role in combatting international corruption, which distorts markets and places U.S. companies at a substantial disadvantage. Teva is a non-U.S. based pharmaceutical company, with its home in Israel.  The Commission sanctioned the company for paying bribes, not in the United States, but Russia, Ukraine, and Mexico.

Department of Justice and FBI officials further explained the goals behind the FCPA and its broad international scope: 

“Teva and its subsidiaries paid millions of dollars in bribes to government officials in various countries, and intentionally failed to implement a system of internal controls that would prevent bribery,” said Assistant Attorney General Caldwell.  “Companies that compete fairly, ethically and honestly deserve a level playing field, and we will continue to prosecute those who undermine that goal.”

“No matter where corruption occurs, the FBI and our global partners are committed to diligently rooting out the corruption that betrays the public trust and threatens a fair economy for all,” said FBI Assistant Director Stephen Richardson.  “As demonstrated by this case, the Foreign Corrupt Practices Act has a long reach,” said William J. Maddalena, Assistant Special Agent in Charge, FBI Miami. 

The Commission’s brief also carefully explains the internal procedures used by the SEC in adjudicating reward applications. It is essential reading for whistleblowers or their counsel who want to understand the reward process. 

“The Commission’s filing reinforces the need for a legislative mandate requiring expeditious decisions of reward determinations in whistleblower cases. Whistleblowers place their jobs and even their safety at risk when reporting corruption. These dangers are especially true in Foreign Corrupt Practices Act cases, as many of the whistleblowers are non-U.S. citizens and do not have protection under U.S. anti-retaliation laws,” said Stephen M. Kohn, a top whistleblower attorney and partner in the qui tam law office of Kohn, Kohn and Colapinto.

“The Teva case reinforces the importance of qui tam laws in incentivizing whistleblowers. Long delays in the payment of rewards undermine the goal of whistleblower reward laws and discourage sources from coming forward,” added Kohn.

Important links:

Petition for a writ of mandamus directed to the Securities and Exchange Commission to compel agency action that has been unreasonably delayed

The SEC’s response

Stephen M. Kohn is also the author of The New Whistleblower’s Handbook, and Chairman of the Board of Directors of the National Whistleblower Center.