The Financial Times reports that the new SEC and CFTC whistleblower provisions of the Dodd-Frank law of 2010 has caused an increase in reliable tips to federal regulators. Sean McKessy, head of the SEC Whistleblower Office indicated that the SEVC has received a number of tips with signs of reliability either because they are coming from someone working at the company or there is a sufficient amount of specificity.
The IRS has recently published “Rewards and Awards for Information relating to Violations of Internal Revenue Laws; Final Regulations.” The 8-page documents contains final regulations regarding the payment of awards under the Whistleblower program. The new publication clarifies definitions concerning “proceeds of amounts collected” and “collected proceeds” for purposes of determining whether to pay an award to a whistleblower.
Several months ago we reported about Judge Jed Rackoff’s rejection of a settlement between the SEC and Citigroup for its marketing of collateralized debt obligations. The judge found insufficient facts that the settlement was reasonable or in the public interest because Citibank would not admit to liability. That decision is now on appeal to the United States Court of Appeals for the Second Circuit.
In the flurry of litigation following the mortgage crisis and on the heels a $158 million deal with Citigroup and a $1 billion settlement with Bank of America, Flagstar has agreed to pay $133 million to settle civil allegations that it improperly approved mortgage loans to be insured through a Federal Housing Administration (FHA) program.
In a move that should have whistleblowers rejoicing, Tony West is taking over the position of associate attorney general at the Justice Department. West, who has been the head of the Justice Department’s Civil Division since 2009 is taking over for Thomas Perrilli, who leaves the position after three years.
John Kinnucan, a research analyst who has recently been critical of government insider trading laws and prosecutions has been arrested for insider trading. The Department of Justice and the SEC have charged Kinnucan with paying insider sources with gifts including vacations and meals for tips that he passed along to two hedge funds.
Gunnison Energy Corporation and SG Interests settled a series of claims under the federal antitrust statutes and the false claims act related to their agreement not to compete in bidding for natural gas leases that the US Department of the Interior’s Bureau of Land Management sold at auction. The lawsuits and settlement resulted from a whistleblower who filed a qui tam action under the False Claims Act.
India is seeking to fight corruption by passing its own false claims act modeled on the United States’ version of the act. It would allow whistleblowers to bring claims against contractors and to receive a cut of the proceeds received from such claims. Indian government officials are considering the legislation to counter routine fraud in the infrastructure sector in which poor quality work is rampant.
Kentucky’s Speaker of its House of Representatives, Greg Stumbo, announced that he was introducing false claims act legislation to give whistleblowers strong tools and incentives to expose misuse of state dollars. Stumbo supported his legislation by pointing to other states, such as California and Texas, that have successfully prosecuted cases under their own false claims acts.
The United States settled claims against Pennsylvania-based Capmark Finance LLP for making false statements in connection with loans insured by the Department of Housing and Urban Development (HUD). The government claimed that Capmark falsified information relating to the creditworthiness of two nursing homes that subsequently defaulted on the loans. Capmark (which filed for bankruptcy) agreed to pay the government $3.9 million to settle the claims.
