As the Dodd-Frank mandated whistleblower program has generated success, a new batch of legal tactics used by regulated firms has been targeting whistleblowers with increasing frequency. This has led a collation of financial reformers to take action. SEC filings SEC Enforcement

SEC Whistleblower Programs benefits employees who have information on wrongdoing

The Securities and Exchange Whistleblower Programs provides employees who have information on wrongdoing a method to anonymously report on the crimes and obtain monetary rewards regardless of nationality.  The SEC’s largest whistle blowing award was $14 million in a case that was completed in six months, a relatively short period of time. Jordan Thomas, Chair of the Whistleblower Representation Practice at the law firm of Labaton Sucharow a former Assistant Director in the SEC’s Enforcement Division, said the whistle blowing program makes SEC more efficient. “Often times we hear from senior executives who were in the meetings when illegal activities were discussed,” he said in an interview. This allows investigators to get right to the heart of illegal activity quickly and effectively, but there is a problem. “As awareness and interest in the SEC Whistleblower Program and other similar programs has grown, they have come under stealth attack by Corporate America,” Thomas said. In the interview he said this could be a major threat to progress being made by the SEC.

Illegal workplace behavior

A recent study by Labaton and Sucharow found 23 percent of people survived were aware of illegal behavior taking place in the workplace and 89 percent were willing to report such activity if they were given protections and incentives for doing so. The problem is many firms are adopting legal counter measures to mitigate whistle blowing activities. Targeted firms are requiring employees sign agreements that they would forfeit any whistleblower rewards and even have employees sign whistleblower gag orders as a condition of employment. In the interview Thomas said the most cases of whistle blowing occur in the financial services sector, and he noted it was almost becoming a best practice in the industry to create legal road blocks within regulated firms to prevent or discourage whistle blowing. “If this isn’t addressed it could seriously undermine state and federal regulators,” Thomas said. “If the SEC doesn’t adopt appropriate counter-measures, gag orders, retaliation and other forms of legal bullying will quickly erode the potential of this powerful investor protection tool,”

Petition for SEC to address this growing threat to the whistleblower program

Financial reform advocates including the Government Accountability Project, Americans for Financial Reform, the International Brotherhood of Teamsters and others have collected a petition with over 2 million signatures calling for the SEC to address this growing threat to the whistleblower program. “Virtually every corporation in America has internal policies that encourage employees to report wrongdoing and promise to protect them from retaliation for doing so,” said Tom Devine, GAP Legal Director and author of The Corporate Whistleblower’s Survival Guide. “The problem is the reality gap between what these organizations say and what they do, because they have not been held accountable. Currently, corporations have little or nothing to lose from legal bullying. The worst that can happen is they won’t get away with it. The SEC can change this.”