Thornton Law Firm Whistleblower Client Receives Largest-Ever Individual SEC Whistleblower Award

Client Awarded Nearly $50 Million After Providing Original Information To The Commission That Led To The Successful Enforcement Action Against the Bank of New York Mellon

Partner Michael A. Lesser, who leads Thornton Law Firm’s whistleblower representation practice, represented the whistleblower who received the historic award from the SEC. The almost $50 million dollar award is the largest amount ever awarded to one individual in the history of the SEC whistleblower program.

His client provided original information to the Securities and Exchange Commission that resulted in a successful enforcement action that returned a significant amount of money to harmed investors. The SEC’s investigations into the Bank of New York Mellon’s handling of foreign exchange transactions (also known as Forex, or FX) were some of the largest, broadest investigations ever conducted by the independent federal regulatory agency.

Mr. Lesser’s client was an FX trader who worked for Bank of New York Mellon. 

Based on the whistleblower’s information, the SEC found that the Bank of New York Mellon misled its custodial banking clients by telling them that the bank provided “best price” and “best execution” on custodial client FX trades. Instead, the bank traded for its own profit and against its customers, providing its custodial banking clients with FX prices at or near the worst reported interbank rates of the day or session. By ensuring that its clients almost always bought high and sold low, the bank made substantial profits, all coming from the pockets of its own clients: mutual funds, retirement funds, and pension funds – funds safeguarding the retirements of teachers, nurses, municipal workers and all other hard-working individuals trying to save for the future.

The bank paid approximately $894 million to Federal regulators and classes of investors and clients as a result of its practices being exposed, including more than $163 million to the SEC. “No settlements could have occurred, and no practices would have changed unless this whistleblower came forward and reported what he knew.” said Mr. Lesser. “My client would like to express his deep appreciation to the SEC’s enforcement and whistleblower staff for their tireless work on this groundbreaking matter. He is very happy with the award.”

The SEC Whistleblower Program offers protections and incentives that helped the firm’s client report what he knew to the SEC. This important program provides eligible whistleblowers with the ability to report securities law violations anonymously and the opportunity to earn substantial monetary awards in the event of a successful enforcement action. SEC whistleblowers may be eligible to receive 10 to 30 percent of the SEC’s recovery. To be eligible, a whistleblower must provide the SEC with original information, and only and original source of such information can be compensated under the whistleblower program. Investigations can take time; how quickly a whistleblower reports bad conduct can be a factor in the determination of that whistleblower’s award percentage. The SEC’s whistleblower program has awarded over $500 million to 83 whistleblowers since 2012

“Being a whistleblower can be enormously difficult. It can be a long and uncertain road. Without programs like the SEC’s that protect and reward meritorious whistleblowers, much harmful conduct would continue unreported,” said Mr. Lesser. “The SEC’s whistleblower program is vital to the mission of protecting investors and addressing violations of securities law. I am very grateful to the SEC and the Office of the Whistleblower for how they worked with my client on this groundbreaking case,” he said.

Information submitted to the SEC must involve violations of the United States securities laws. Whistleblower information submitted to the SEC may involve:

• Ponzi scheme, Pyramid Scheme, or a High-Yield Investment Program
• Theft or misappropriation of funds or securities
• Manipulation of a security’s price or volume
• Insider trading
• Fraudulent or unregistered securities offering
• False or misleading statements about a company (including false or misleading SEC reports or financial statements)
• Abusive naked short selling
• Bribery of, or improper payments to, foreign officials
• Fraudulent conduct associated with municipal securities transactions or public pension plans
• Other fraudulent conduct involving securities

About Thornton Law Firm:

Thornton Law Firm LLP in Massachusetts provides experienced legal representation to SEC whistleblower clients nationwide. Attorney Michael Lesser and his team represent whistleblowers in protecting and advocating for all their rights under the law. More information about the firm and its SEC Whistleblower, False Claims Act and Qui Tam practice is available at tenlaw.com. Call Mr. Lesser at (888) 491-9726 or use our secure contact form to tell us your story. We will evaluate your claim in the strictest confidence.

Corporate Culture and Employee Mistreatment: When Blowing the Whistle is Your Only Option

Billionaire Mark Cuban recently warned companies that how they treat their employees during the Covid-19 pandemic will “define their brand for decades.”[1] 

If you rushed in and somebody got sick, you were that company.  If you didn’t take care of your employees or stakeholders and put them first, you were that company . . . that’s going to be unforgivable.”[2]

Cuban is right.

While many employees are too familiar, to a certain extent, to the daily indignities and pride-swallowing that can come with climbing the company ladder (or even just staying on the same rung), there are times when corporate conduct becomes completely intolerable.  Forcing workers back into close confinement for 8 to 12-hour days during a pandemic, leading to further transmission of Covid-19 and significant harm to employees (and, ultimately, the employer) is, as Cuban observes, one of those times.  Unfortunately, this circumstance is not a generational black swan or singularly isolated occurrence.

The unfortunate truth is that corporations regularly force their employees into similar all-or-nothing situations by requiring them to commit unethical and improper conduct.  When corporate fraud becomes institutionalized, it is always done with either the tacit or direct approval of management.  It is most often carried out, however, by employees who are forced to choose between doing something they know is wrong on one hand and keeping their job on the other.  What can seem like an obvious ethical decision is clouded darkly by a mortgage, bills, and the fear of failing one’s family.  Corporate behavior – especially in many sales and commission-based fields – relies on this Hobson’s choice.  Employees faced with a choice of doing the right thing or keeping their job have no real choice at all.  While corporations regularly provide nominal opportunities for internal whistleblowing, “anonymous” internal reporting hotlines often do little more than identify and isolate the whistleblower.

The recent Wells Fargo banking scandal is a singular example of how effectively institutionalized corporate wrongdoing works hand-in-hand with unrelenting pressure on employees to commit fraud or lose a job.  As alleged in a recent action filed by the U.S. Treasury Department’s Office of the Comptroller of the Currency (“OCC”) Wells Fargo senior management created and enforced sales policies that resulted in employees issuing products and services to clients without client consent.[3] 

Wells Fargo employees were given impossible account-opening quotas and faced near-certain termination for failing to achieve those targets.[4]  In some cases, employees achieving 98% to 110% of their goals were put on notice that they would be terminated.[5]  Many employees were forced to achieve sales goals of 120%.[6]  Termination for failure was not the only penalty.  In some cases, employees were threatened with “transfer[] to a store where someone had been shot and killed,” solely as a punishment for failing to make their numbers.[7]

Despite suffering these insufferable working conditions, employees repeatedly spoke up and reported their concerns to senior management at the bank.  Their words are chilling.  Consider this quote:

“I was in the 1991 Gulf War . . . This is sad and hard for me to say, but I had less stress in the 1991 Gulf War than working for Wells Fargo.”[8] (emphasis supplied)

Or this one,

“[T]he noose around our necks ha[s] tightened: we have been told we must achieve the required solutions goals or [we] will be terminated. This type of practice guarantees high turnover, a managerial staff of bullying taskmasters, [and] bankers who are really financial molesters [and] cheaters . . .”[9] (emphasis supplied)

Or this one,

When employees are required to meet unreasonable numbers, they are forced into inappropriate activity to keep their jobs . . . Wells Fargo is playing a shell game – they are rewarding employees for fake accounts and will terminate them if they find out this is the case. Yet management will chastise and come very close to verbal abuse and put employees on written 12 notice if they are honest and do not open fake accounts to meet these unreasonable goals.  The termination ax is suspended over our head one way or another; meet unreasonable goals or you will be terminated, cheat to meet the unreasonable goals and you will be terminated when caught . . .[10] (emphasis supplied)

Infamously, Wells Fargo CEO John Stumpf blamed the employees for the bank’s actions, telling the Wall Street Journal, “there was no incentive to do bad things.”[11]  Contrary to Stumpf’s claims, the OCC alleges that senior leaders at the bank were long aware of and intimately familiar with the causes that had led to the “bad things.”[12] Even after repeated complaints and scrutiny led to internal oversight of employee account activities, the system’s monitoring threshold was specifically set to flag only .01% to .05% of improper behavior for further review – enabling 99.95% to 99.99% of all activity to continue unchecked when the bank knew it was fueled by continued cheating.[13] 

Wells Fargo acknowledged the OCC’s filing:

“The OCC’s actions are consistent with my belief that we should hold ourselves and individuals accountable.  They also are consistent with our belief that significant parts of the operating model of our Community Bank were flawed.  At the time of the sales practices issues, the Company did not have in place the appropriate people, structure, processes, controls, or culture to prevent the inappropriate conduct.

This was inexcusable.  Our customers and you all deserved more from the leadership of this Company.”[14]

As with Mr. Cuban’s present coronavirus prediction, the Wells Fargo account sales scandal will justifiably define the Wells Fargo brand for a significant time to come.  Despite laying the blame on its own “people, structure, processes, controls, [and] culture,” the corporation will continue.  Many thousands of bank employees, however, will be forever affected.

The Wells Fargo banking scandal is a stark reminder that employees are not always powerless in the face of institutionalized fraud.  Federal and state whistleblowing laws exist to protect and reward those willing to speak up about illegal conduct, financial fraud, and false claims.  Work should not be more stressful than war; employees are worth more than profits. 

If you have questions about reporting serious financial or corporate fraud or questions about how whistleblowing laws can protect you, contact Michael Lesser by calling 888-491-9726 or tell him your story using our online contact form.

We are experienced whistleblower counsel, representing clients pursuant to the SEC Whistleblower Program and Federal and state whistleblowing laws.

 

[1] https://www.cnbc.com/2020/03/25/coronavirus-mark-cuban-warns-against-rushing-employees-back-to-work.html

[2] Id.

[3] https://www.occ.gov/static/enforcement-actions/eaN20-001.pdf (“OCC Notice of Charges”)

[4] OCC Notice of Charges, ¶¶6,8,17,25,38,73,75,86

[5] OCC Notice of Charges, ¶¶75-76.

[6] Id.

[7] OCC Notice of Charges, ¶82.

[8] OCC Notice of Charges, ¶41.

[9] OCC Notice of Charges, ¶42.

[10] OCC Notice of Charges, ¶40.

[11] https://www.wsj.com/articles/wells-fargo-ceo-defends-bank-culture-lays-blame-with-bad-employees-1473784452

[12] OCC Notice of Charges, ¶3,6,8,17,25,73

[13] OCC Notice of Charges, ¶94,97,104.

[14] https://newsroom.wf.com/press-release/corporate-and-financial/wells-fargo-responds-occ-actions-regarding-former-employees

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