"" For more than 20 years, the Securities and Exchange Commission (SEC) has had a program in place to reward whistleblowers who provide the agency with information about insider trading. But a new audit by the SEC Office of Inspector General (OIG) reveals that the program has almost never been used, is barely recognized inside or outside the SEC, and has fundamental design flaws.
It turns out the SEC has received very few applications in the past two decades for bounties under the program -- and only five people have actually received payments since the program first began:
Design Flaws in the Bounty Program
The OIG also found that the program suffers from the following deficiencies: it's poorly recognized by the public and even within the SEC; the criteria for judging bounty applications is overly vague; the SEC does not have good internal policies to guide staff in reviewing bounty applications; the SEC rarely provides whistleblowers with status reports on their applications (a problem we've also heard about at other IG offices); once the applications are passed on, there are no systems in place to ensure that they are processed in an adequate and timely fashion; and the documentation for bounty referrals is often incomplete.
Many Whistleblowers Are Ignored or Even Subjected to Retaliation
POGO previously reported on anecdotal evidence of the problems described by the SEC OIG.
Writing for Politics Daily, we described how one whistleblower was retaliated against after inquiring whether he would be eligible to receive a bounty payment under the SEC's program. Peter Sivere, who at the time was working as a compliance officer at JPMorgan, first approached the SEC with evidence showing that his employer had failed to disclose documents sought in a wide-ranging SEC probe into a practice known as market timing. He was told that he didn't qualify for a bounty payment, but he provided the information anyway.
But instead of protecting Peter Sivere, the SEC enforcement attorney investigating the matter told JPMorgan's counsel about Peter Sivere's initial inquiry about a cash payment. JPMorgan's counsel then used this information to disparage Peter Sivere's whistleblower credentials at a proceeding before the Occupational Safety and Health Administration, in which Peter Sivere had contended that JPMorgan retaliated against him after he went to the SEC.
A subsequent investigation by the SEC OIG found that the enforcement attorney, George Demos , had violated agency rules by disclosing non-public information in an ongoing investigation, and recommended that disciplinary action be taken. George Demos left the SEC shortly thereafter and is now running for Congress.
OIG's Recommendations
To help correct the many deficiencies in the whistleblower bounty program, the OIG's latest audit recommended that the SEC's Enforcement Division develop a communications plan to publicize its existence; post the application on its website with clear instructions for the whistleblower; establish better policies to follow up with the whistleblower once the complaint is received; develop specific criteria for recommending bounty awards; improve its internal controls for tracking tips and complaints; require that a bounty file with minimum documentation be created for each application; and incorporate best practices from comparable programs run by the Department of Justice (DOJ) and Internal Revenue Services (IRS).
Congressional Reforms and Problems with Other Bounty Programs
In the meantime, Congress is also considering legislation to improve the SEC's whistleblower bounty program. The financial regulatory overhaul bill passed by the House last fall included a provision to authorize the SEC to award bounty payments tied to any judicial or administrative action brought by the SEC (i.e., not just insider trading cases) that results in monetary sanctions of over $1 million.
The provision also enables the whistleblower to receive up to 30 percent of the amount recovered (the current limit is 10 percent).
Senate Banking Committee Chairman Christopher Dodd's (D-CT) bill would go even further, ensuring that the whistleblower receives no less than 10 percent of the monetary sanctions, and allowing the whistleblower to appeal any aspect of the SEC's decision, including whether, to whom, and in what amount to make the award.
We applaud these legislative fixes and hope that the final bill reflects the stronger language proposed by the Senate. However, the SEC should also learn from the shortcomings in comparable whistleblower reward programs run by other agencies.
While the False Claims Act has resulted in over $20 billion in recoveries since 1986, the IRS's program to reward whistleblowers who spot tax problems in their workplace shares some of the same problems uncovered by the SEC OIG.
The IRS program, which was established under the Tax Relief and Health Care Act of 2006, enables whistleblowers to receive between 15 and 30 percent of the collected proceeds.
However, a recent audit by the Treasury Inspector General for Tax Administration found that the IRS's Whistleblower Office does not have a good system in place to manage and track cases, and that no awards have actually been paid out under the new program, in part because the claims can take over a decade to process.
One well-known whistleblower who's still waiting to hear whether he will receive an award is former UBS employee Brad Birkenfeld, who was sentenced to 40 months in prison after he attempted to inform the IRS and DOJ about his role in soliciting wealthy Americans to evade taxes through services provided by the Swiss bank.
Although his ordeal isn't necessarily a reflection on the IRS program, it does highlight the dangers often faced by individuals who blow the whistle on corporate wrongdoing.
In any event, the SEC could use all the help it can get when it comes to handling whistleblower complaints, and we hope that the OIG's recommendations and Congress's legislation will finally enable the SEC to give whistleblowers the protection and recognition they deserve.
-- Michael Smallberg ""Sourcehttp://pogoblog.typepad.com/pogo/2010/04/if-the-sec-has-a-whistleblower-program-but-nobody-ever-uses-it-does-it-really-exist.html
Showing posts with label Peter Sivere Whistleblower. Show all posts
Showing posts with label Peter Sivere Whistleblower. Show all posts
Thursday, April 8, 2010
Tuesday, March 16, 2010
Whistleblower Peter Sivere Provides Affidavit to OSHA and DOL - JP Morgan -JP Morgan Securities
DOL OSHA asked that Peter Sivere provide an affidavit to them after they "heard" that the SEC said Peter Sivere requested payment for documents and information.
Click Here for Peter Siver Affidavit
""... On September 30th 2004, the Wall Street Journal.. published an article entitled Trading Class Action Suit Widens. The WSJ articl state, in part, that: Mr. Stern (of Canary Capital) asked a J.P. Morgan Banker who had been working with Mr. Stern's family for a loan to finance his hedge funds trading in the PBHG funds.
The Suit contends that Mr. Stern explained his trading systme "in detail" to the executive.
According to the lawsuit, J.P. Morgan Securities made loans to business entities tied to Canary totalling as much as $105 Million. These Loans were made to finance trades that would make Canary money when the price of PBHG funds declined.
This Subject of the WSJ article appears to be consistent with the information in the Kelleher Email.
... After the September 30th, 2004 WSJ article was published, I continued to do strategic surveillance together with my interim monitoring duties.
.. On or about October 5, 2004, I located an October 4, 2004 email in which a JPM executive referring to the September 30, 2004 WSJ article, inquires about JMP's relationship with Canary.
The Email indicates that Mr. Palmer and Davis Polk and Wardell had previously indicated that JPM had no knowledge of improper trading practices. In a response to the E-mail Mr. Palmer acknowledged that JPM assisted Canary by providing a line of credit to finance Canary's mutual fund trading.
On October 6, 2004, I located an E-mail in which JPM's President and Chief Operating Officer asked JPM's Co-General Counsel about JPM's Relationship with Canary.
On October 7, 2004, I was Terminated for Alleged inappropriate use of the firms E-mail and for not cooperating with an internal fraud investigation. The Emails referred to above were on my desk at JPM at the time I was terminated. I was not permitted to return to my desk after I was terminated... ""
Read this Full Document Click HERE
Click Here for Peter Siver Affidavit
""... On September 30th 2004, the Wall Street Journal.. published an article entitled Trading Class Action Suit Widens. The WSJ articl state, in part, that: Mr. Stern (of Canary Capital) asked a J.P. Morgan Banker who had been working with Mr. Stern's family for a loan to finance his hedge funds trading in the PBHG funds.
The Suit contends that Mr. Stern explained his trading systme "in detail" to the executive.
According to the lawsuit, J.P. Morgan Securities made loans to business entities tied to Canary totalling as much as $105 Million. These Loans were made to finance trades that would make Canary money when the price of PBHG funds declined.
This Subject of the WSJ article appears to be consistent with the information in the Kelleher Email.
... After the September 30th, 2004 WSJ article was published, I continued to do strategic surveillance together with my interim monitoring duties.
.. On or about October 5, 2004, I located an October 4, 2004 email in which a JPM executive referring to the September 30, 2004 WSJ article, inquires about JMP's relationship with Canary.
The Email indicates that Mr. Palmer and Davis Polk and Wardell had previously indicated that JPM had no knowledge of improper trading practices. In a response to the E-mail Mr. Palmer acknowledged that JPM assisted Canary by providing a line of credit to finance Canary's mutual fund trading.
On October 6, 2004, I located an E-mail in which JPM's President and Chief Operating Officer asked JPM's Co-General Counsel about JPM's Relationship with Canary.
On October 7, 2004, I was Terminated for Alleged inappropriate use of the firms E-mail and for not cooperating with an internal fraud investigation. The Emails referred to above were on my desk at JPM at the time I was terminated. I was not permitted to return to my desk after I was terminated... ""
Read this Full Document Click HERE
Monday, March 15, 2010
At SEC, the system can be deaf to whistleblowing - Is the SEC Listening to WHAT will Cost Shareholder Billions?
"" By Zachary A. Goldfarb
Washington Post Staff Writer Thursday, January 21, 2010
Eric Kolchinsky was an executive at Moody's, the credit rating company, when he called a top official at the Securities and Exchange Commission in September to warn that his firm might be violating securities law.
He reported that Moody's was blessing mortgage-backed investments that it knew were dangerous, according to a person familiar with the conversation. The SEC official assured Kolchinsky that someone from the agency would call him back shortly.
But the call never came, Kolchinsky later told congressional investigators who were examining how the credit rating industry's failures contributed to the financial crisis. He had gone to Congress after losing patience with the SEC.
Kolchinsky is one in a series of whistleblowers who in recent years tried to tip off the SEC to potential wrongdoing, only to be ignored, misunderstood or left to wonder whether they were being listened to. The SEC has no system in place to guide how officials should handle tips and complaints from outsiders, making it difficult for investigators to take advantage of an invaluable source of information.
This failure helped to continue two of the most celebrated frauds of the last decade for several years, potentially costing unwitting investors millions of dollars. Countless others may have been left vulnerable to shysters because of warnings that went unheeded.
Since SEC Chairman Mary L. Schapiro took office last year, she has said that fixing the holes in the process for handling tips and complaints has been a top priority. But improving the way hundreds of thousands of tips are analyzed and pursued has proven difficult.
The SEC's enforcement division got back in touch with Kolchinsky about his allegations only after he told the story publicly to a congressional committee last fall, according to a person familiar with the matter.
The SEC said it responded to Kolchinsky's concerns but declined to provide details or to say how fast it did so. Moody's said it examined his allegations and found nothing improper.
The SEC has a haphazard, decentralized system for analyzing outsider information. Tips arrive by phone, mail and e-mail to officials throughout the agency -- investor education to enforcement divisions.
A study commissioned by the SEC last year and conducted by Mitre, a nonprofit group that does research for the federal government, found that the SEC lacks technology to analyze tips and complaints, as well as cohesive policies for what officials should do when they get information.
Whistleblower complaints are one of the main ways that investigators should be tipped to wrongdoing, SEC officials say, along with inconsistencies in financial filings and alerts from financial exchanges about suspicious trading patterns. But the SEC lags behind some other federal agencies in handling tips.
The Internal Revenue Service, for instance, pays reward money to whistleblowers who provide credible information about tax fraud. The Federal Trade Commission has set up a call center for tips and complaints.
On top of structural problems at the SEC, agency officials individually made mistakes in handling several recent cases, sometimes violating agency rules.
Members of Schapiro's management team said they recognized problems with the system for handling whistleblowers shortly after taking over.
"There was no uniformity to it. Every division and office had its own system of recording, tracking or handling tips and complaints. That system was pretty rudimentary," said Steve Cohen, the official tasked by Schapiro to overhaul the agency's tips, complaints and whistleblower program. "We're already working to acquire and deploy technology that centralizes all of the agency's tips and complaints so they can be sorted, reviewed, analyzed and tracked." "
Full Article and Source
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/20/AR2010012005125.html
Washington Post Staff Writer Thursday, January 21, 2010
Eric Kolchinsky was an executive at Moody's, the credit rating company, when he called a top official at the Securities and Exchange Commission in September to warn that his firm might be violating securities law.
He reported that Moody's was blessing mortgage-backed investments that it knew were dangerous, according to a person familiar with the conversation. The SEC official assured Kolchinsky that someone from the agency would call him back shortly.
But the call never came, Kolchinsky later told congressional investigators who were examining how the credit rating industry's failures contributed to the financial crisis. He had gone to Congress after losing patience with the SEC.
Kolchinsky is one in a series of whistleblowers who in recent years tried to tip off the SEC to potential wrongdoing, only to be ignored, misunderstood or left to wonder whether they were being listened to. The SEC has no system in place to guide how officials should handle tips and complaints from outsiders, making it difficult for investigators to take advantage of an invaluable source of information.
This failure helped to continue two of the most celebrated frauds of the last decade for several years, potentially costing unwitting investors millions of dollars. Countless others may have been left vulnerable to shysters because of warnings that went unheeded.
Since SEC Chairman Mary L. Schapiro took office last year, she has said that fixing the holes in the process for handling tips and complaints has been a top priority. But improving the way hundreds of thousands of tips are analyzed and pursued has proven difficult.
The SEC's enforcement division got back in touch with Kolchinsky about his allegations only after he told the story publicly to a congressional committee last fall, according to a person familiar with the matter.
The SEC said it responded to Kolchinsky's concerns but declined to provide details or to say how fast it did so. Moody's said it examined his allegations and found nothing improper.
The SEC has a haphazard, decentralized system for analyzing outsider information. Tips arrive by phone, mail and e-mail to officials throughout the agency -- investor education to enforcement divisions.
A study commissioned by the SEC last year and conducted by Mitre, a nonprofit group that does research for the federal government, found that the SEC lacks technology to analyze tips and complaints, as well as cohesive policies for what officials should do when they get information.
Whistleblower complaints are one of the main ways that investigators should be tipped to wrongdoing, SEC officials say, along with inconsistencies in financial filings and alerts from financial exchanges about suspicious trading patterns. But the SEC lags behind some other federal agencies in handling tips.
The Internal Revenue Service, for instance, pays reward money to whistleblowers who provide credible information about tax fraud. The Federal Trade Commission has set up a call center for tips and complaints.
On top of structural problems at the SEC, agency officials individually made mistakes in handling several recent cases, sometimes violating agency rules.
Members of Schapiro's management team said they recognized problems with the system for handling whistleblowers shortly after taking over.
"There was no uniformity to it. Every division and office had its own system of recording, tracking or handling tips and complaints. That system was pretty rudimentary," said Steve Cohen, the official tasked by Schapiro to overhaul the agency's tips, complaints and whistleblower program. "We're already working to acquire and deploy technology that centralizes all of the agency's tips and complaints so they can be sorted, reviewed, analyzed and tracked." "
Full Article and Source
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/20/AR2010012005125.html
Sunday, March 14, 2010
Howard L. Shapiro - Counsel to the Inspector General. Dan Petrole - Peter Sivere Whistleblower Smackdown. Blatant Disregard.
SEC Investigators - OSHA Investigators - SEC OIG Report of Investigation - Industry Whistleblower - SEC Fraud and Failing the Public.
Howard L. Shapiro - Counsel to the Inspector General
Deputy Inspector General, Dan Petrole
Below is What Seems to Me Like a Whistleblower Smackdown, as the SEC Fails Over and Over to Protect Whistleblower, Consumers, Shareholders and Faild to Investigate Fraud. Is there No Accountability, Transparency or Rights on any Level?
***********
In a message dated 2/17/2010 7:55:05 A.M. Eastern Standard Time, shapiro.howard@oig.dol.gov writes:
Mr. Sivere:
The Deputy Inspector General, Dan Petrole, has asked me to respond to your recent e-mail to him, in which you state:
In light of the new public interest in this matter I would like for you to re-open this investigation. Please see the attached documentation from Mr. Heddell (signed by you on his behalf) and his reasoning for not re-opening this investigation.
Specifically, Mr. Heddell stated "our review of the SEC OIG Report of Investigation does not provide sufficient basis to revisit this determination."
Why didn't OSHA ever produce a final determination in this investigation? Did OSHA ever interview George Demos or speak directly with the SEC in regard to his allegations of me?
Upon review of the linked web pages (in your e-mail), it appears that the new public interest in this matter primarily relates to actions taken (or not taken) within the SEC, and does not provide a sufficient basis or justification for the DOL OIG to re-visit its previous determination regarding the opening of an investigation with respect to actions taken by OSHA employees.
Howard L. Shapiro
Counsel to the Inspector General "
************
From: PSivere@aol.com [mailto:PSivere@aol.com]
Sent: Thursday, March 04, 2010 6:10 AM
To: Shapiro, Howard - OIG
Cc: Petrole, Daniel - OIG
Subject: Re: Request to OIG
Dear Mr. Shapiro,
Nothing in the attached Memorandum of Understating between the SEC and DOL, entered into July 29, 2008 contain any restrictions on the DOL.
Has Mr. Petrole made any attempt to discuss this matter with the SEC OIG as outlined in the MOU? The fact that my confidential information was leaked during an OSHA investigation and the DOL OIG has no interest in investigating why OSHA investigators did not or will not investigate the leak is troubling.
At a minimum the OSHA investigators should have contacted the SEC investigators to compare "facts." The SEC OIG was concerned enough to investigate their own, why won't the DOL OIG do the same? What is the downside for DOL to produce a similar report as the SEC OIG did?
Thank You,
Peter ""
Howard L. Shapiro - Counsel to the Inspector General
Deputy Inspector General, Dan Petrole
Below is What Seems to Me Like a Whistleblower Smackdown, as the SEC Fails Over and Over to Protect Whistleblower, Consumers, Shareholders and Faild to Investigate Fraud. Is there No Accountability, Transparency or Rights on any Level?
***********
In a message dated 2/17/2010 7:55:05 A.M. Eastern Standard Time, shapiro.howard@oig.dol.gov writes:
Mr. Sivere:
The Deputy Inspector General, Dan Petrole, has asked me to respond to your recent e-mail to him, in which you state:
In light of the new public interest in this matter I would like for you to re-open this investigation. Please see the attached documentation from Mr. Heddell (signed by you on his behalf) and his reasoning for not re-opening this investigation.
Specifically, Mr. Heddell stated "our review of the SEC OIG Report of Investigation does not provide sufficient basis to revisit this determination."
Why didn't OSHA ever produce a final determination in this investigation? Did OSHA ever interview George Demos or speak directly with the SEC in regard to his allegations of me?
Upon review of the linked web pages (in your e-mail), it appears that the new public interest in this matter primarily relates to actions taken (or not taken) within the SEC, and does not provide a sufficient basis or justification for the DOL OIG to re-visit its previous determination regarding the opening of an investigation with respect to actions taken by OSHA employees.
Howard L. Shapiro
Counsel to the Inspector General "
************
From: PSivere@aol.com [mailto:PSivere@aol.com]
Sent: Thursday, March 04, 2010 6:10 AM
To: Shapiro, Howard - OIG
Cc: Petrole, Daniel - OIG
Subject: Re: Request to OIG
Dear Mr. Shapiro,
Nothing in the attached Memorandum of Understating between the SEC and DOL, entered into July 29, 2008 contain any restrictions on the DOL.
Has Mr. Petrole made any attempt to discuss this matter with the SEC OIG as outlined in the MOU? The fact that my confidential information was leaked during an OSHA investigation and the DOL OIG has no interest in investigating why OSHA investigators did not or will not investigate the leak is troubling.
At a minimum the OSHA investigators should have contacted the SEC investigators to compare "facts." The SEC OIG was concerned enough to investigate their own, why won't the DOL OIG do the same? What is the downside for DOL to produce a similar report as the SEC OIG did?
Thank You,
Peter ""
************
Message from Dan Petrole to Howard L. Shapiro
"In a message dated 3/4/2010 3:16:53 P.M. Eastern Standard Time,
Petrole.Daniel@oig.dol.gov writes:
Howard,
I assume that you are monitoring these e-mails. I also realize that Mr. Sivere agreed to a settlement regarding his issue. Just want to make sure you are comfortable that nothing comes back to bite us.
Dan"
************
"From: PSivere@aol.comTo: Petrole.Daniel@oig.dol.govCC: shapiro.howard@oig.dol.govSent: 3/11/2010 5:41:03 A.M. Eastern Standard TimeSubj: Re: Request to OIG
Mr. Petrole,
Leaving the settlement aside for a moment. Congress charges your agency with protecting the workers of this country. Specifically, it charges you to ensure that certain programs are administered and carried out without interference or political agendas.
Sadly, your comment below illustrates why the American people are fed up. You are in Washington to serve the people of this country. It's a sad state of affairs when the agency charged with protecting the workers of this country believe we are better protected when civil servants, like yourself, put politics before your actual mandate.
This is not a legal issue. This is a systematic breakdown of your agency and all you focus on is CYA. I purposely let your e-mail sit in my in box for the past week with the hopes of establishing some dialogue with you and your agency. Sadly, it did not happen.
Thank You,
Peter Sivere "
Message from Dan Petrole to Howard L. Shapiro
"In a message dated 3/4/2010 3:16:53 P.M. Eastern Standard Time,
Petrole.Daniel@oig.dol.gov writes:
Howard,
I assume that you are monitoring these e-mails. I also realize that Mr. Sivere agreed to a settlement regarding his issue. Just want to make sure you are comfortable that nothing comes back to bite us.
Dan"
************
"From: PSivere@aol.comTo: Petrole.Daniel@oig.dol.govCC: shapiro.howard@oig.dol.govSent: 3/11/2010 5:41:03 A.M. Eastern Standard TimeSubj: Re: Request to OIG
Mr. Petrole,
Leaving the settlement aside for a moment. Congress charges your agency with protecting the workers of this country. Specifically, it charges you to ensure that certain programs are administered and carried out without interference or political agendas.
Sadly, your comment below illustrates why the American people are fed up. You are in Washington to serve the people of this country. It's a sad state of affairs when the agency charged with protecting the workers of this country believe we are better protected when civil servants, like yourself, put politics before your actual mandate.
This is not a legal issue. This is a systematic breakdown of your agency and all you focus on is CYA. I purposely let your e-mail sit in my in box for the past week with the hopes of establishing some dialogue with you and your agency. Sadly, it did not happen.
Thank You,
Peter Sivere "
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