A 2019 U.S. Court of Appeals decision highlighted the importance of hiring a good SEC whistleblower attorney at the outset, before submitting a tip or information to the Securities and Exchange Commission (“SEC”).
In 2017, the SEC gave out whistleblower awards in connection with a case involving Deutsch Bank (the “DB award”).
The SEC also denied whistleblower awards to several other people in the Deutsche Bank case. Three of them appealed that decision to the courts. One of them was identified in court papers anonymously as “John Doe”. The court case was called Kilgour, Williams & Doe v. SEC.
In 2019, the Court of Appeals upheld the SEC’s decision to deny a whistleblower award to John Doe.
The Court Order
The Dangers Of Not Hiring An Experienced SEC Whistleblower Attorney From The Beginning
According to the court’s Opinion, the SEC opened an investigation into Deutsche Bank. This was in June 2010, before John Doe contacted the SEC. The investigation was being handled by a team of SEC attorneys (the “SEC’s DB team”).
Approximately three months later, John Doe met with enforcement staff in the SEC’s Complex Financial Instruments Unit (“CFIU”). The CIFU staff he met with were not part of the SEC’s DB team.
The CIFU’s Deputy Chief said that during the meeting John Doe “appeared to be very disjointed and had difficulty articulating credible and coherent information concerning any potential violation of the federal securities laws”. (Court Opinion, p. 5.) Also, John Doe’s files were “jumbled and disorganized”. (Court Opinion, p. 25.) The CIFU team “concluded that Doe was ‘not a credible source of information’”. (Court Opinion, p. 6.)
In April 2013, John Doe met with the separate SEC team that was investigating Deutsche Bank. The SEC’s DB team formed a similar impression of John Doe. (Court Opinion, p. 18.)
The court explained that the SEC’s DB team found John Doe to be “very difficult to follow, as [he] jumped from topic to topic”. They also said that most of the information that John Doe provided during their April 2013 meeting was duplicative of information that the SEC had already received from other sources. (Court Opinion, p. 8.)
According to the SEC, it did not use John Doe’s information. Furthermore, the SEC said that John Doe’s information did not contribute to the success of its enforcement action against Deutsche Bank. (Court Opinion, pp. 5-6.)
The court ruled that “It was reasonable for the SEC to credit its staff’s informed determination that Doe had not provided a credible submission”. (Court Opinion, p. 25-26.) The court upheld the SEC’s denial of an SEC whistleblower award to John Doe. (Court Opinion, p. 28.)
John Doe’s case illustrates some of the possible dangers faced by a whistleblower who decides to submit his or her information to the SEC alone, rather than hiring an experienced SEC whistleblower attorney at the very beginning before submitting anything to the SEC.
Some Ways In Which A Knowledgeable SEC Whistleblower Attorney Can Help
The court asked readers to imagine a situation where there are two whistleblowers. Whistleblower 1 makes a confusing presentation and submits scrambled documents to the SEC. Whistleblower 2 makes a coherent presentation, and clearly explains why the documents that he or she is providing are incriminating and useful to the SEC. (Court Opinion, p. 21.)
The court explained that it would be reasonable for the SEC to use Whistleblower 2’s information, rather than Whistleblower 1’s information. According to the court, whistleblowers should be encouraged to organize or “curate” their information before submitting it to the SEC, so that it will be helpful to the SEC. (Court Opinion, p. 22.)
1. Up-Front Triage: A former SEC Director of Enforcement explained that a knowledgeable SEC whistleblower attorney can help to curate or triage a whistleblower’s information “up-front”, and identify information that will be important to the SEC.
2. Writing The Form TCR: A whistleblower’s initial tip on Form TCR is reviewed by the SEC’s Office of Market Intelligence (“OMI”). If the OMI marks the TCR submission as “NFA” (no further action), it will not be passed along to enforcement staff responsible for conducting investigations. Therefore, it is important that a whistleblower make a good first impression in his or her written Form TCR.
A skillful SEC whistleblower attorney can help a whistleblower to write his or her TCR submission in a compelling way that will hopefully have a better chance of resonating with the SEC’s lawyers and staff. He or she can also organize the whistleblower’s documents in a way that will enable the SEC to understand what the documents mean and why they are incriminating.
3. Meeting Preparation: An experienced SEC whistleblower attorney, especially one who has decades of experience representing individuals in SEC investigations, can prepare a whistleblower for his or her meetings with the SEC. A capable SEC whistleblower attorney can get a client ready to make a coherent verbal presentation that the SEC will be better able to understand and find helpful.
4. Assistance During Meetings: It can be intimidating meeting with the government. Also, while whistleblowers know what information is important to them, if they have not been trained as lifelong securities lawyers, they might not know what information will be the most helpful to lawyers at the SEC.
Having an SEC whistleblower attorney means that a whistleblower will not have to go it alone. During meetings, a seasoned SEC whistleblower attorney can help the whistleblower to prioritize and stay focused on what is likely to be important to the SEC lawyers. An experienced SEC whistleblower attorney also has a better chance of spotting misunderstandings or miscommunications that arise during meetings with the SEC lawyers, and clearing them up as they occur.
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In these and other ways, a sophisticated SEC whistleblower attorney, with extensive experience representing individuals in SEC investigations, can improve a whistleblower’s chances of becoming eligible to receive an SEC whistleblower award and hopefully avoid a fate similar to John Doe.
Additional Information
For additional information about the John Doe case, click on the links below:
- The court’s Order in the John Doe case. (External link to the court’s website.)
- The SEC’s award Order in the Deutsche Bank case. (External link to the SEC’s website.)
- Article about the court’s Order in the John Doe case. (Note: external link to The Pickholz Law Offices website.)
- The former SEC Enforcement Director’s speech. (External link to the SEC’s website.)
- Article about the former SEC Enforcement Director’s speech. (Note: external link to The Pickholz Law Offices website.)
