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Blowing the

Dodd-Frank Whistle

 _______  _______ 

Dan HargroveDan HargroveWaters & Kraus, LLPWaters & Kraus, LLP

1. The False Claims Act ± aquick history lesson

2. The SEC WhistleblowerProgram

1. The CFTC WhistleblowerProgram (condensed)

Points I¶ll cover

But the Government reliesupon whistleblowers . . .

The False Claims Act is theFederal Government¶s most

powerful tool to combat fraud The False Claims Actauthorizes a ³whistleblower´

to prosecute

a Qui Tam action

What is a Qui Tam Action?

The Law Has Been Rewarding

Whistleblowers Since the Civil War

U.S. Army Major Justus McKinstry ± theAmericanQui Tam God Father

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Example Qui Tam Cases Mischarge case:

Doctor bills Medicare for services notactually provided

Spotting Qui Tam Cases

False negotiation:

Contractor bribes governmentcontracting officer to obtain contract

Collusion or bid-rigging among

contractors

Note: pecuniary harm to theGovernment is not necessary

Spott ing Qui Tam CasesThe False Claims Act has been a Huge Success

Over $9 Billion will be recovered in 2012 using the FCA:

Merck: The Vioxx off-label marketing fraud has been settledfor $950 million.

GlaxoSmithKline: A series of drug frauds is said to be settledin principle for$3 billion.

Oracle: The company has settled a GSA price-gouging case for

$200 million.

Agility/Public Warehouse. The Kuwaiti-based defensecontractor is expected to settle a price-gouging case for asum in excess of $500 million.

Johnson & Johnson: The company has agreed to settle acriminal charge related to illegal marketing of Risperdal, and

a civil settlement in excess of $1 billion is expected.

The False Claims Act protectsthe Federal Fisc only . . .

The False Claims Act, with itsreliance upon whistleblowers, wasthe model for the Dodd-Frank Act

whistleblower programs

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The Dodd-Frank Act

Whistleblower Programs

What is the SEC WhistleblowerIncentive Program?

1. A bounty incentive program

1. Anti-reprisal cause of action

The Whistleblower Program providesmonetary incentives for individuals toreport possible violations of the federalsecurities laws to the SEC.

³Eligible whistleblowers´ are entitled toan award of between 10% and 30% of the monetary sanctions collected inactions brought by the SEC and relatedactions brought by other regulatory andlaw enforcement authorities.

What is the SEC Whistleblower Bounty Program?

A person who voluntarily provides the SEC withoriginal information about a possible violationof the federal securities laws that has occurred,is ongoing, or is about to occur. Theinformation provided must lead to a successfulSEC action resulting in an order of monetarysanctions exceeding $1 million. One or morepeople are allowed to act as a whistleblower,but companies or organizations cannot qualifyas whistleblowers. The whistleblower is notrequired to be an employee of the company tosubmit information about that company.

S ee Rule 21F-2

Who is an ³eligible whistleblower´?

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The Whistleblower must submit a FormWB-APP within 90 calendar days to theOffice of the Whistleblower after the SECposts the Notice on its web page.

See Rule 21F-10

How does a Whistleblowerapply for an award?

If the SEC follows the factors described above,authorizes an award, and the amount awardedis between 10% and 30% of the monetarysanctions collected in the SEC¶s or relatedaction, then the SEC¶s determination of theamount of the award is not  appealable.

The whistleblower may, however, appeal thedenial of an award to a United States Court of Appeals within 30 days of the decision beingissued.

See Rule 21F-13.

Can the SEC's award decision be appealed?

The SEC Whistleblower Anti-reprisal cause of action

Employers may not discharge, demote,suspend, harass, or in any waydiscriminate against an employeebecause of any lawful act done by theemployee in providing information tothe SEC under the whistleblowerprogram or assisting the SEC in anyinvestigation or proceeding based onthe information submitted.

See Rule 21F-2

How is a Whistleblowerprotected from acts of reprisal by an employer?

The employee has a private actionin federal court against hisemployer.

Remedies include: reinstatement,double back pay, litigation costs,expert witness fees, and attorneysfees.

See Rule 21F-2

How is a Whistleblowerprotected from acts of reprisal by an employer?

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The SEC can also take legal actionin an enforcement proceedingagainst any employer who

retaliates against a whistleblowerfor reporting information to theSEC.

See Rule 21F-2

How is a Whistleblowerprotected from acts of reprisal by an employer?

The Commodity Futures TradingCommission Whistleblower Program

Bounty & Whistleblower Protections

If you have questions . . .If you have questions . . .

Dan L. Hargrove, J.D., LL.M.Waters & Kraus, LLP

The Vogue Building600 Navarro St., Floor 5

San Antonio, Texas 78205(210) 349-0515

(210) 349-3666 (f)

dhargrove@waterskraus.comwww.waterskraus.com

www.govtfraudlawyer.blogspot.comwww.govtfraudlawyer.com