Many tax fraud cases also involve securities law violations.  For instance, corporations engaged in tax evasion may also be creating fraudulent financials or offering securities to investors by providing misleading or untruthful information.  The most common compliant categories reported by whistleblowers to the SEC in fiscal 2017 were Corporate Disclosures and Financials, Offering Fraud, Manipulation, and Insider Trading.

The SEC’s whistleblower program is moving full steam ahead according to the 2017 Annual Report of the SEC Office of the Whistleblower.  The Report highlighted the program’s growth, painted a rosy picture for awards into the future, conveyed the value the SEC places on whistleblower information, and underscored the SEC’s commitment to protecting whistleblowers through processes and through enforcement actions.

The SEC received over 4,400 tips in fiscal year 2017, an increase of nearly 50 percent since the program’s first full year in 2012.  In 2017, the SEC ordered awards totaling approximately $50 million to 12 individuals.  Although that award number is about $7 million less than last year, every indication is that the SEC’s whistleblower program is about to hit stride.  Three of the ten largest whistleblower awards were made by the SEC during fiscal year 2017.  Even more interesting than that is the SEC is preparing for a big year of awards in fiscal year 2018, as indicated by the following statement in the SEC’s Financial Report for 2017:

The SEC recognized a contingent liability for the year ended September 30, 2017 of $221 million, which represents a recognized liability for estimated whistleblower awards where the payment is considered probable.

This contingent liability for 2017 will likely include the largest individual SEC whistleblower award ever – an amount that currently sits at $30 million. 

The SEC’s annual report made crystal clear the value whistleblowers have added to SEC enforcement, stating “Whistleblower information has aided the SEC’s efforts to uncover and stop fraudulent investment schemes.” 

The annual report also highlighted the lengths the SEC will go to in order to protect whistleblowers.  The SEC whistleblower program permits whistleblowers to submit information anonymously through an attorney and in any event, by law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.  However, the SEC also has weapons to protect whistleblowers and combat whistleblower intimidation and other tactics used by companies and individuals to deter persons from reporting to the SEC.  In 2017, the SEC brought two actions against companies for imposing restrictions in their employee separation and severance agreements that operated to deter whistleblowers from providing information to the SEC or partaking in proceeds of an SEC whistleblower award.  In another enforcement action, a financial services company agreed to a $500,000 civil penalty and to cease and desist from attempting to uncover the identity of a presumed whistleblower and requiring former employees to sign severance agreements that waived potential whistleblower awards. The annual report notes that the SEC will continue to review facts and actions to impede communications with the SEC “to ensure that whistleblowers can freely report information to the Commission and feel comfortable reporting wrongdoing without fear of reprisal.”

An SEC press release at the end of November announced awards of more than $8 million each to two whistleblowers, sending SEC enforcement actions involving whistleblower awards over $1 billion in financial remedies ordered against wrongdoers.

If you have information about large-scale tax underpayments or you would like to know more about reporting securities violations to the SEC anonymously, contact the attorneys at The Ferraro Law Firm today for a free consultation. 

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