If you recall, the Dodd Frank whistleblower provisions were promulgated partially in response to the SEC‘s failure to heed the warnings of whistleblower Harry Markopolis who warned the agency early on about Bernie Madoff.
What flowed from the Madoff debacle was an expanded whistleblower rewards program. And this is a good thing. Yet what was not addressed was the problem that was at the root of the SEC’s failure to address Markopolis’ warnings — staffing!
The SEC has one (yes “1”) examiner for every $12 billion in assets that it has to oversee. And the agency is so overworked that there is no guarantee that a whistleblower will ever make personal contact with an SEC investigator. The Dodd Frank Whistleblower rules actually anticipate this predicament. Once the whistleblower files with the agency, the rules encourage the whistleblower to check out the SEC’s website to determine if the agency settled a case like the one the whistleblower reported. It is than up to the whistleblower to file papers explaining to the agency how he or she provided help in securing a resolution. Shouldn’t the agency already know this?
Making whistleblowers part of the SEC’s compliance program is important. But the only way the system will really work is if whistleblowers are able to pursue their cases in the absence of SEC action. This is how the False Claims Act works and this year recoveries will be in the billions. Having recently represented the lead whistleblower in the government’s $1.6 billion recovery against Abbott labs for marketing derelictions with regard to the drug depakote, we have personal knowledge that whistleblowers who hire an experienced attorney to represent them as they navigate the SEC process works.