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SEC Whistleblowers Have an Ally

The job of a whistleblower can be a dangerous one. Exposing the corrupt practices of multi-million or billion dollar corporations, government agencies, or giant banks can lead to retaliatory efforts that range from termination of employment, to blackballing and the ending of a career, to actual physical threats to life and safety.

Government agencies responsible for whistleblower oversight are in direct opposition to the agencies who are in danger of being exposed. And generally, the agencies who are involved in corrupt practices and/or those lawmakers or government agents, are far more powerful than the agencies in place to protect whistleblowers.

That’s where Sean McKessy comes in. As the Director of the Securities and Exchange Commission, McKessy sees the protection of whistleblower identities as one of his most vital roles. So much so, that when he first took the position in 2011 and announced that whistleblower identities must be protected at all costs, he engendered the wrath of some co-workers and several other government agencies.

His policy was that the SEC would not be allowed to disclose the identity of a whistleblower to ANYONE outside of the office, and names of whistleblowers would only be used inside the office when absolutely necessary. This meant that the agency, even in cases where it was working with the Federal Bureau of Investigation or the United States Department of Justice, would not be allowed to give those agencies the name or names of any whistleblowers involved in the case, even with the whistleblower’s permission.

It was a strict, bright line policy that wasn’t hard to understand, but very hard for some SEC employees to swallow.

In a recent report by Law360, the Director said “Initially, I was literally the least popular person in the building. They were like: ‘That’s not possible. It can’t be that we can’t work with the U.S. Attorney’s office. It can’t be that we can’t work with the FBI. We’ve got a detailee from the FBI right down the hall. That can’t be possible. What are you telling us, Sean?'”

McKessy simply referred them to the statute the protected whistleblowers who chose to bring information of wrongdoing forth to the SEC, the Dodd-Frank Act. That Act also allowed the agency to share the settlements and/or judgments with whistleblowers, up to 30% of the total amount received. This new ‘profit sharing plan’ would lead to payouts of millions of dollars over the next few years. These huge payouts also made it increasingly difficult to hide the identities of whistleblowers, as media outlets and defendant corporations tried desperately to learn their names.

Since originally announcing that whistleblower names were sacrosanct, McKessy and other SEC managers have streamlined the whistleblower process so as not to break any laws. Potential whistleblowers whose cases must be worked up with other agencies are given the business card of the chief investigator from the other agency. It is then up to them whether they contact the agency, thereby revealing their names to investigators.

This takes the danger of violating the disclosure laws out of the hands of the SEC. In those cases that require that the identity of the whistleblower be disclosed to outside agencies, McKessy goes to the Commission to request permission to provide the information. In most cases however, reports that leave the SEC offices are heavily redacted so as to remove any sort of identifiers.

The agency has a system of thorough review, and in some cases table readings where one agent reads the report, while two others listen and redact whatever information they deem sensitive.

McKessy points out that while not all whistleblowers get paid, they do all have the right to keep their identities secret.

“If people feel like their identities are compromised, even after we’ve paid them, things can go horribly wrong – even if they get big pots of money – if they’re shunned as a whistleblower,” he said.

McKessy sees it as part of his mission to create that same sense of urgency in his staff. He regularly travels to regional offices, offering trainings and leading discussion panels to sensitize enforcement agents to the harm that can be caused to whistleblowers and their families should the agency fail to keep their information protected.

“You’re an enforcement attorney. There’s not a lot about your job that changes now that we have the whistleblower program, but the confidentiality, the identity of your whistleblower is something you really have to keep sacrosanct,” McKessy says.

He says that when he gets the go ahead from the Commission to pursue a particular case, he has his staff simply remove the name of the whistleblower at that point.

“Technically, we are allowed to share anything inside the building, but we’re trying to reinforce a culture of thinking about, ‘Do I need to have the name of this person? Do I even need to say it’s a whistleblower case?’ If it’s important that that be known, then of course. But if not, take it out,” he said.

Names generally don’t make any difference, until someone comes forward to apply for a share of the award. At that point, someone has to figure out who this person is.

What do I do if my employer is violating the law?

If this is a question you are asking, contact Stephen Danz & Associates at (877) 789-9707 or use the Contact Form on our website to schedule a FREE CONSULTATION with Stephen and one of his senior associates. Stephen is one of the most experienced whistleblower attorneys in the state, with over 30 years protecting the employees of California against the unlawful acts of their employers. He also speaks at whistleblower conferences, helping other whistleblower lawyers learn to handle their own cases. He will help ensure that your identity is protected and that your employer does not seek to retaliate against you for coming forward.