This article is the second in the WNN series investigating FOIA documents from the SEC about the agency’s whistleblower program. The first article outlined Big Law’s newfound 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 U.S. Securities and Exchange Commission (SEC) has released the 1034 pages of documents that served as the basis for recent articles attacking the SEC Whistleblower Program.
In July and August, Bloomberg Law and University of Kansas Professor Alexander Platt published separate articles critiquing the SEC’s highly successful whistleblower award program. Bloomberg and Platt claimed that the 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 connections to the agency.
WNN’s investigation into the FOIA documents reveals that these allegations unfairly criticize the Commission’s whistleblower program.
“The documents demonstrate that the SEC carefully processed numerous whistleblower claims from individuals not represented by attorneys. It also shows that a vast majority of the law firms that successfully represented whistleblowers do not have any former SEC employees on staff,” explained whistleblower attorney Stephen M. Kohn, who represented WNN in the FOIA proceeding.
“Furthermore, the SEC’s extensive cooperation with the FOIA requests demonstrates the agency’s commitment to transparency around the whistleblower program while retaining its commitment to protecting whistleblowers’ confidentiality,” Kohn added.
- The Argument presented by Bloomberg and Platt that a small group of former SEC employees dominates the program is inaccurate. The FOIA documents revealed that 64 different law firms represented whistleblowers who obtained rewards and that over 80% of these firms never employed a former SEC attorney.
- The articles stated or implied that the program was prejudicial to whistleblowers not represented by attorneys. The FOIA documents revealed that 54 award recipients were pro se and not represented by counsel. This number is an incredibly high percentage of positive reward decisions, given that courts almost always dismiss pro se claims.
- The FOIA documents produced no direct evidence of any misconduct.
- No evidence that the SEC program was illegally “shrouded in secrecy.” Indeed, the FOIA requests identifying the law firms that represented whistleblowers were responded to in full, except in three cases where identifying the firm could have resulted in identifying the whistleblower. Regarding those cases, the SEC advised Platt of his right to appeal the withholding in court.
- The SEC FOIA office fully cooperated with Platt’s FOIA requests over two years. The FOIA documents identify attorneys and law firms representing 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 an award) in each case. Likewise, every award given to a pro se litigate was identified, along with the amount of each award and the underlying award decision.
Attacks on the Program
On July 26, Bloomberg Law published a story entitled “SEC Enriches Fraudsters, Lawyers as Secrecy Shrouds Tips Program.” The article’s sensational lead paragraph concludes that the program “often ignores its own rules, shields much of its work from the public, and has been a financial boon for law firms that hired former agency officials.”
On August 4, Platt published a “draft” of his non-peer-reviewed article entitled “The Whistleblower Industrial Complex.” Platt alleged that the SEC’s “tip-triage function has been outsourced to a group of well-connected, repeat-player, private whistleblower lawyers who are exempt from any meaningful transparency, regulation, or public accountability.”
WNN’s review of the same FOIA documents provided to Platt and Bloomberg uncovered strong documentation rebutting these arguments and the negative inferences raised in the articles.
No Evidence of Favoritism or a “Whistleblower Industrial Complex”
In his article, “The Whistleblower Industrial Complex,” Platt claims that the program has been “captured by a small group of well-connected repeat player attorneys.” Platt suggests that the whistleblower program unfairly dismisses whistleblowers not represented by attorneys and that firms that employ former-SEC officials are privileged by the SEC Whistleblower Program. This line of thinking is also put forward in the Bloomberg article, which highlights braggadocious comments by whistleblower attorneys with ties to the SEC as proof of unfair favoritism or access to this “tight circle.”
WNN’s review of the FOIA documents reveals no proof to support Platt and Bloomberg’s claims. First, not a single document showed any favoritism or privileged access granted to firms with former SEC employees. Despite receiving access to over 1000 pages of SEC documents, Platt was only able to base these allegations on supposition, distorted facts, and comments by a few SEC whistleblower attorneys trying to oversell their connections to gain clients.
In fact, the documents do not support Platt and Bloomberg’s allegations. They directly undermine them. The FOIA documents revealed that the SEC had ruled in favor of whistleblowers represented by 64 different law firms. Platt reviewed each of these firms and concluded that 12 of them had former SEC employees working in the firm. Over 80% of successful firms had no “inside” track as a result of their hiring of former government employees. Moreover, many of the law firms that did hire former SEC or Justice Department lawyers were traditional defense firms. The Bloomberg and Platt articles did not mention these firms.
The Commission also disclosed information on how many pro se whistleblowers obtained rewards. These whistleblowers not only had no insider connections but also represented themselves (a process the Commission promotes and makes extremely easy by publishing a user-friendly online form that any individual can file). The SEC revealed that 54 such pro se whistleblowers obtained rewards. This number does not account for whistleblowers who were not represented until after the SEC had launched investigations based on their disclosures or whistleblowers who obtained an attorney only after the SEC issued a preliminary decision in the case.
“The SEC staff clearly takes pro se whistleblowers seriously, investigating their concerns and awarding them when they qualify,” said Siri Nelson, the Executive Director of the National Whistleblower Center.
Bloomberg heavily relied upon quotes from two SEC whistleblower attorneys with connections to the SEC to justify its story. However, the SEC documents support Bloomberg’s conclusion that these braggadocious comments were most likely made “as a way to lure new clients.”
“Overall, more whistleblowers received awards that were not represented by attorneys than those represented by a firm with connections to the SEC. Likewise, over 80% of successful law firms did not employ former SEC officials. The program has not been ‘captured’ by a small clique of ‘insider’ law firms as Platt and Bloomberg portrayed,” said added Nelson.
SEC’s Responsive to FOIA’s Shows Transparent and Cooperative Program
Another central claim advanced by Platt and Bloomberg is that the SEC Whistleblower Program is “shrouded in secrecy” and lacks transparency. The agency’s cooperation with FOIA requests directly confronts this notion.
The FOIA documents reveal that the SEC bent over backwards to process, over two years, the requests filed by Professor Platt. Platt was granted a full fee waiver and was not charged any copying or search fees, despite the extraordinary effort the Commission had to engage in to identify the information requested by Platt.
According to numerous back-and-forth correspondence and internal appeals, the SEC’s FOIA office painstakingly reviewed the confidential enforcement records of every successful whistleblower case from the program’s inception until a specific date in 2021 over two years. It identified: (a) every case in which the whistleblower represented him or herself, and the awards obtained; (b) the identity of every case where a whistleblower was represented by an attorney; (c) the name of each case matched with the attorney or pro se whistleblower [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 awards obtained. Finally, each case needed to be carefully reviewed to ensure that the SEC would not release confidential information and that the released materials could not inadvertently result in the identification of a whistleblower. Thus, the Commission released all requested disclosable information on every case where a lawyer was involved and every case where a pro se whistleblower obtained a reward. It only withheld the attorney’s identity in three cases where that information could have resulted in identifying the confidential whistleblower.
Platt was informed of his right to file a court case to obtain the materials requested when disagreements emerged. No lawsuit was ever filed. There was 100% transparency regarding every law firm representing the whistleblowers, the rewards 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.
“The documents show a program that is well-run, honest, and fair. The program clearly values pro se whistleblowers, and there is no direct evidence that it plays favorites with firms that have former SEC employees on staff,” said whistleblower attorney Kohn.
Selected FOIA Documents Released by the SEC
WNN Exclusive: SEC FOIA Documents Reveal Big Law Defense Firms are Confidentially Representing Dodd-Frank Whistleblowers
List of Law Firms that Obtained Rewards in Whistleblower Cases as of 2021
List of Awards Obtained by the Six Defense Law Firms
List of pro se Cases where Whistleblowers Obtained a Reward
FAQ on the SEC’s Dodd-Frank Act program