Last month, the Wall Street Journal reported that an Ericsson whistleblower received a $279 million whistleblower award from the Securities and Exchange Commission (SEC).
It was the largest such award in the SEC whistleblower program’s short history. The program has received universal acclaim. But little is known as to how the program actually works.
For the past couple of years, Alexander Platt has been using the Freedom of Information Act (FOIA) to get detailed information out of the SEC about the inner workings of the program.
And he has recently published a paper – The Whistleblower Industrial Complex – detailing his findings from the SEC and Commodity Futures Trading Commission (CFTC) programs.
Platt finds that tipsters represented by lawyers significantly outperform unrepresented ones, that repeat-player lawyers outperform first-timers, and lawyers who used to work at the SEC outperform just about everybody.
“The upshot is that the SEC and CFTC have effectively privatized the tip-sifting function that is at the core of the whistleblower programs,” Platt writes. “Private lawyers have likely extracted hundreds of millions of dollars in fees and expenses from these programs, with a disproportionate share going to a concentrated group of well-connected, repeat players.”
The paper finds that both programs are dominated by a small set of well-connected firms. At the CFTC, a single firm accounts for two-thirds of all dollars paid out.
At the SEC, a single firm accounts for...
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