On July 26, 2022 Bloomberg Law published an “investigation” into the Dodd-Frank Act whistleblower program. Its 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.”

Nothing could be further from the truth.

But before we dig into the distortions in the article we would be remiss to point out the failure of Bloomberg to identify its own bias related to the Dodd-Frank Act. Information published by the SEC’s Office of the Whistleblower confirms this conflict of interest. Bloomberg itself was sanctioned by the SEC for securities law violations. The case was disclosed on the SEC’s Office of the Whistleblower website as one of the cases for which a whistleblower could obtain a reward. The SEC’s notice on its whistleblower page is available for all to read at: https://www.sec.gov/litigation/admin/2020/33-10783.pdf. Bloomberg should have disclosed this conflict.

Bank of America also owns a 12% stake in Bloomberg. That also presents a big conflict of interest that was not disclosed to readers of the “investigation.” Bloomberg’s minority owner, BofA was sanctioned by the SEC in three cases published on the Office of the Whistleblower webpage, and had to pay a total of $272.6 million to victims of the frauds and the SEC. Its subsidiary, Merrill Lynch was sanctioned another $415 million by the SEC. The Merrill case was triggered by a whistleblower, a fact publicly acknowledged by the whistleblower’s attorney.

Wall Street hates whistleblowers and Dodd-Frank. Why? The law holds them accountable. These biases should have been disclosed in the Bloomberg “investigation,” particularly when Bloomberg sharply criticized the whistleblower lawyers in the Merrill Lynch case for receiving favoritism from the SEC.

In regard to the “investigation,” we have to wonder why Bloomberg chose not to contact the National Whistleblower Center and our law firm for comment. The NWC and our firm have had the most engagement with the SEC on Dodd-Frank issues than any other non-profit or law firm. For example, in 2010 our firm was consulted on the language in Dodd-Frank. Shortly after the law was passed our firm and the NWC were the first groups contacted by the SEC Chairman’s office for input into the regulations under development. Thereafter, our firm and the NWC submitted the most detailed and extensive comments on the original 2011 rules and met with every Commissioner about the program. In 2018 the NWC and our firm engaged directly with 4 of the 5 Commissioners and extensively met with all of the Commissioners’ respective staffs on the rule amendments approved in 2020. Our comments have been liberally cited by the SEC in all of its final whistleblower rules, both accepting many of our recommendations, and rejecting others.

We have filed numerous TCR complaints with the SEC whistleblower program and have participated in numerous SEC investigations. We have prevailed in a number of cases, including one of the top-ten highest whistleblower rewards ever given by the SEC. But we have also challenged the Commission when we believed they were wrong. Our firm has filed more judicial appeals of SEC whistleblower denial orders than any other law firm. We support the Commission when they are doing the right thing, and we hold them to task when they do not.

So why did Bloomberg not contact us? Perhaps because we would have explained how the Dodd-Frank Act program, warts and all, is the best managed whistleblower program in the United States.

The staff is dedicated, they meticulously and carefully protect confidentiality, and we have detected no bias or favoritism whatsoever. We disagree with many of their decisions and have been denied claims. We have (and are) vigorously challenging Commission rulings and recommendations. But even where we strongly disagree, the Commissioners, their staffs, and the Office of the Whistleblower have been professional and open to criticism. None of the allegations contained in Bloomberg’s “investigation” have any merit. Indeed, if these reporters worked with the SEC Whistleblower Office and enforcement staff pursuing difficult and complex investigations triggered by whistleblowers, we are certain that they never would have published their attack.

A couple of points to clear the air. The Bloomberg “investigation” alleges that fraudsters get awards. This is a complete distortion. In point of fact if any whistleblower is found guilty of a criminal violation related to his or her whistleblowing they are disqualified from a reward. While Bloomberg found 2 out of 561 cases publicly posted by the SEC where participants were rewarded these whistleblowers were not the kingpins. Anyone with any experience in complex white collar crime investigations knows how important it is to turn participants into government witnesses. This law is intended to do just that.

The Dodd-Frank Act is based on the original False Claims Act. The FCA was signed into law by President Abraham Lincoln and drafted by the Civil War Republican party as a key reform necessary to fight fraud undermining the Union army. As the FCA’s sponsor stated on the Senate floor in 1863, the law was intended to incentivize persons participating in a conspiracy to become witnesses for the government. This principle remains in effect today and is a cornerstone of all successful whistleblower reward laws. Harmed investors and the public benefit when whistleblowers voluntarily – and without any plea agreement or immunity agreement – come forward and disclose frauds. A secretary who puts a stamp on a piece of mail fraud may very well be a “participant” in the crime, but he or she can also become an invaluable witness.

Bloomberg also failed to note that any of the whistleblowers who were alleged participants in the frauds had to be voluntary informants. These are not individuals who participate in plea deals or other tactics used by the government to obtain information. Because they have to be “voluntary” those with the most liability, who plan the crimes, never step forward. They know they will be charged with a crime. Instead, the law incentivizes the lower level participants to turn on their bosses and expose major crimes.

To qualify for a reward a whistleblower must voluntarily first report the crimes to the SEC , Congress, the news media, the Justice Department or other law enforcement agency. If the government identifies them and offers them a deal, they can never qualify for an award. Don’t confuse a criminal kingpin with a whistleblower.

The SEC program is accused by Bloomberg of being a “boon” to lawyers who formerly worked for the SEC. Any comments on this issue can only be attributed to professional jealousy or a veiled attempt to smear those former government lawyers. Our firm, which has sued the SEC three times, has no former government employees working for it, and has been highly critical of many of the rules instituted by the Commission. Despite this, we have not detected any corruption or bias in favor of attorneys who used to work for the SEC. Supposition and speculation should not be the foundation of an “investigation.” Moreover, the fact that former SEC attorneys are deciding to represent whistleblowers is an incredibly significant and positive development. In the bad old days the former government lawyers took jobs with defendants, representing some of the biggest bad actors that committed securities fraud. It is a tribute to the program and the law that skilled former government lawyers are now representing whistleblowers. The public benefits from this.

Bloomberg’s complaint that there is too much secrecy in the SEC whistleblower program is actually dangerous and a total red-herring. The fact that Dodd-Frank permits anonymous whistleblowing is one of the most important and progressive features of the law. Companies hate this provision. They want to know who the whistleblowers are so they can better defend their crimes. They want to know what the whistleblowers are providing to the government so they can minimize their liability. It is not a stretch to understand that wrongdoers will use every tool at their disposal to discover the identity of a whistleblower who might have turned them in. Just last week the D.C. Circuit rejected a Freedom of Information Act claim to protect a confidential whistleblower from a “revenge-seeking” requester seeking to unveil the whistleblower’s identity. The Court properly found that the whistleblower was entitled to confidential informant status. By not knowing who a whistleblower is, or even if there is a whistleblower, companies must voluntarily provide information they never would have before this law existed. Strictly protecting the whistleblower’s identity also protects the integrity of the government’s investigation of securities fraud and, in the end, benefits investors and taxpayers.

Bottom line, the confidentiality provisions of the law are among the most important features of the law. Simply stated, a company cannot retaliate against a whistleblower if they do not know who the whistleblower is.

Finally, Bloomberg complains that certain rules have been waived by the SEC to give some whistleblowers an award. The provision of law used to waive requirements is not part of the Dodd-Frank Act. Section 36(a) of the Securities Exchange Act was passed years before Dodd-Frank and permits every publicly traded company to seek exemptions of rules. These exemptions are regularly requested and given if they are in the “public interest” and “protect investors.” Bloomberg does not complain when billionaires and multinational corporations get an exemption from a SEC rule. Why are they picking on the handful of whistleblowers – all of whom were truly deserving based on the reported decisions?

Furthermore, the SEC’s exemptions have been used in only two narrow circumstances in whistleblower reward cases. First concerns filing information on a Form TCR. This is a technical rule that requires original information to be submitted on a specific form. Whistleblowers who provided information to the SEC or other government entities but did not use the proper form have obtained “exemptions.” In fact, the failure to give exemptions in these circumstances would be a clear violation of Congress’ intent upon passing the law. Whistleblowers should not be denied simply by failing to timely fill out a form. Luckily, the Commission, most of the time, understands this common sense fix to an otherwise harsh rule.

The second area concerns the definition of a “voluntary” disclosure. The Commission’s rules are extremely narrow in this regard. For example, if a whistleblower voluntarily discloses a massive fraud to the news media, and the SEC learns about the fraud from reading the New York Times, that whistleblower would be automatically disqualified from obtaining a reward, if the SEC (or Congress or the Justice Department) called the whistleblower before the whistleblower filed the TCR form called the SEC. In other words, if the “voluntary” rule was strictly construed, a whistleblower who voluntarily disclosed the fraud to a labor union, the news media, or the victim of a crime would be automatically disqualified for a reward if the SEC called them on the phone, before they called the SEC.

The Commission has used the exemption authority to ensure that their very narrow definition of “voluntary” is not used in circumstances to deny an award to an otherwise eligible whistleblower who clearly voluntarily reported the frauds, but did not directly report them initially to the SEC. In most cases where this comes up the Commission understands that a common-sense definition of “voluntary” should apply, and they use Section 36(a) authority to ensure that the law is interpreted to serve the public interest and protect investors. The Bloomberg “investigators” should have explained this.

Finally, the Bloomberg “Investigation” missed the entire point of Dodd-Frank. Instead of looking at the tiny percentage of cases where former SEC lawyers are involved, or the 2 in 280 cases where a participant properly obtained a reward after a thorough and rigorous review, Bloomberg should have looked at how the law has deterred wrongdoing, incentivized companies to enhance their compliance programs, and returned billions to the taxpayers. As of September 2021 Dodd-Frank Act cases have directly returned over $1.3 billion to harmed investors. $5 billion in sanctions have been obtained, the vast majority of which has been returned to the taxpayers. This is the true story of Dodd-Frank: Restitution to victims of securities fraud, billions to the taxpayers, compensation and protections for the whistleblowers, and some accountability on Wall Street.