FOIA documents discredit articles attacking SEC whistleblower program

This article is the second of the WNN series investigating SEC FOIA documents on the agency’s whistleblower program. The first article described Big Law’s new involvement in the SEC program. Read it here.

In response to a Freedom of Information Act (FOIA) request filed by Whistleblower Network News and the National Whistleblower Center (NWC), the United States Securities and Exchange Commission (SEC) released the 1,034 pages of documents that served as the basis for recent articles attacking the SEC Whistleblower Program.

In July and August, Bloomberg Law and Professor Alexander Platt of the University of Kansas published separate articles criticizing the SEC’s highly successful whistleblower rewards program. Bloomberg and Platt claimed that documents released by the SEC in response to their FOIA requests revealed that the program is shrouded in secrecy and favors a small group of law firms with ties to the agency.

WNNThe FOIA’s investigation of the documents reveals that these allegations unfairly criticize the Commission’s whistleblower program.

“The documents demonstrate that the SEC carefully handled numerous whistleblower claims from unrepresented individuals. It also shows that a large majority of law firms that have successfully represented whistleblowers have no former SEC employees on staff,” explained whistleblower attorney Stephen M. Kohn, who represented WNN in the FOIA process.

“Furthermore, the SEC’s extensive cooperation with FOIA requests demonstrates the agency’s commitment to transparency around the whistleblower program while maintaining its commitment to protecting whistleblower confidentiality,” Kohn added.

Main conclusions:

  • The argument presented by Bloomberg and Platt that a small group of former SEC employees dominate the program is inaccurate. FOIA documents revealed that 64 different law firms represented whistleblowers who won awards, and more than 80% of those firms never employed a former SEC attorney.
  • The articles stated or implied that the program was harmful to unrepresented whistleblowers. FOIA documents revealed that 54 winners were pro se and unrepresented by an attorney. This number represents an incredibly high percentage of positive award decisions, given that courts almost always dismiss pro se claims.
  • The FOIA documents produced no direct evidence of any wrongdoing.
  • No evidence that the SEC program was illegally “shrouded in secrecy.” Indeed, FOIA requests identifying the law firms that represented the whistleblowers were answered completely, except in three cases where identifying the firm could have resulted in the identification of the whistleblower. Regarding these cases, the SEC advised Platt of his right to appeal the hold in court.
  • The SEC FOIA office fully cooperated with Platt’s FOIA requests for two years. The FOIA documents identify the attorneys and law firms representing the successful applicants in all but three cases. They also identify the cases involved, copies of the decisions involved, and the amounts awarded (or the percentage of a reward) in each case. Similarly, each award given to a for himself dispute has been identified, along with the amount of each award and the underlying award decision.

Attacks against the program

July 26, Bloomberg Law published an article entitled “SEC Enriches Fraudsters, Lawyers as Secrecy Shrouds Tips Program”. The article’s sensational opening paragraph concludes that the program “often ignores its own rules, shields much of its work from the public, and has been a financial boon to law firms that have hired former agency heads.” “.

On August 4, Platt published a “draft” of his non-peer-reviewed paper titled “The Whistleblower Industrial Complex.” Platt alleged that the SEC’s “tip-triage function has been outsourced to a group of well-connected, repeat offender, private whistleblower attorneys who are exempt from any meaningful transparency, regulation, or public accountability.”

WNN’s review of the same FOIA documents provided to Platt and Bloomberg discovered strong documentation refuting these arguments and the negative inferences raised in the articles.

No Evidence of Favoritism or “Whistleblower Industrial Complex”

In his article, “The Whistleblower Industrial Complex”, Platt claims that the program was “captured by a small group of well-connected repeat offender lawyers”. Platt suggests that the whistleblower program unfairly rejects unrepresented whistleblowers and that companies that employ former SEC officials are favored by the SEC’s whistleblower program. This line of thought is also put forward in the Bloomberg article, which highlights boastful comments from SEC-linked whistleblower attorneys as evidence of unfair favoritism or access to this “tight circle.”

WNNreview of FOIA documents reveals no supporting evidence for Platt and Bloombergthe revendications. First, not a single document showed favoritism or privileged access granted to companies with former SEC employees. Although he had access to over 1,000 pages of SEC filings, Platt could only base these allegations on guesses, distorted facts, and comments from a few SEC whistleblower lawyers trying to oversell their connections to win customers.

In fact, the documents do not support Platt and Bloomberg’s claims. They undermine them directly. FOIA documents revealed that the SEC ruled in favor of whistleblowers represented by 64 different law firms. Platt examined each of these companies and concluded that 12 of them had former SEC employees working at the company. More than 80% of successful companies had no “inside” leads due to the hiring of former government employees. Additionally, many of the law firms that hired former SEC or Justice Department attorneys were traditional defense firms. The Bloomberg and Platt’s articles do not mention these companies.

The Commission also disclosed information on the number for himself whistleblowers got rewards. Not only did these whistleblowers have no insider connections, but they also represented themselves (a process the Commission promotes and makes extremely easy by publishing a user-friendly online form that anyone can fill out). The SEC revealed that 54 of these for himself whistleblowers got rewards. This number does not include whistleblowers who were only represented after the SEC launched investigations based on their disclosures or whistleblowers who only obtained counsel after the SEC has issued a preliminary ruling in the case.

“The staff of the SEC clearly takes for himself whistleblowers seriously, investigating their concerns and rewarding them when they qualify,” said Siri Nelson, executive director of the National Whistleblower Center.

Bloomberg relied heavily on quotes from two SEC whistleblower lawyers with SEC ties to back up his story. However, SEC documents support Bloomberg‘s conclusion that these boastful comments were most likely made “as a way to attract new customers”.

“Globally, more whistleblowers have received awards that were not represented by attorneys than those represented by a firm with SEC ties. Similarly, more than 80% of successful law firms do not employed former SEC officials. The program was not “captured” by a small clique of “insider” law firms like Platt and Bloomberg portrayed,” Nelson added.

SEC’s Responsive to FOIA’s Shows Transparent and Cooperative Program

Another central claim made by Platt and Bloomberg is that the SEC’s whistleblower program is “shrouded in secrecy” and lacks transparency. The agency’s cooperation with FOIA requests directly confronts this notion.

FOIA documents reveal that the SEC bent over backwards to process the claims filed by Professor Platt for two years. Platt received a full fee waiver and was not charged any copying or search fees, despite the extraordinary efforts the Commission had to make to identify the information requested by Platt.

According to numerous internal correspondences and appeals, the SEC’s FOIA office thoroughly reviewed the confidential enforcement records of every successful whistleblower case from the program’s inception through a specific date in 2021 over two years. He identified: (a) each instance in which the whistleblower represented himself, and the rewards obtained; (b) the identity of each instance where a whistleblower was represented by counsel; (c) the name of each case corresponding to the lawyer or for himself Alert launcher [this enabled Platt to carefully review the facts of each case and the basis for each award in an attempt to identify misconduct]; and the amounts of the rewards obtained. Finally, each case had to be carefully reviewed to ensure that the SEC would not disclose confidential information and that leaked documents could not inadvertently lead to the identification of a whistleblower. Thus, the Commission published all the information to disclose requested on each case where a lawyer was involved and each case where a for himself whistleblower got a reward. He only retained the identity of the lawyer in three cases where this information could have made it possible to identify the confidential whistleblower.

Platt was advised of his right to sue for the requested documents when disagreements arose. No lawsuit was ever filed. There was 100% transparency regarding each law firm representing whistleblowers, the awards obtained and the cases involved. The Commission even provided Platt with a copy of the FOIA request filed by WNN and the National Whistleblower Center.

“Documents show a well-run, honest and fair program. The program clearly values ​​pro se whistleblowers, and there is no direct evidence that it plays favorites with companies that have former SEC employees on staff,” whistleblower attorney Kohn said.

Further reading:

Selected FOIA documents released by the SEC

WNN Exclusive: SEC FOIA Documents Reveal Major Legal Defense Firms Confidentially Represent Dodd-Frank Whistleblowers

List of Law Firms That Achieved Awards in Whistleblower Cases in 2021

List of awards obtained by the six defense law firms

List of pro se cases where whistleblowers have obtained a reward

SEC Dodd-Frank Act Program FAQs

Dodd-Frank Act Claims Privacy FAQs

Amanda J. Marsh