Another Interesting SEC Award

Earlier this week the Securities and Exchange Commission awarded $28 million to the person who blew the whistle on Panasonic Corp.’s extensive FCPA misconduct, which the company settled with U.S. regulators in 2018. 

And why is this particular award so interesting? Because it’s one of those rare occasions when compliance professionals can see how an SEC whistleblower award is calculated. 

Typically we don’t get to know much about specific SEC whistleblower awards. Yes, the SEC publishes award orders — but those orders are redacted to the extreme. Per SEC rules, award orders never divulge the specific company and its misconduct that led to an award or who the whistleblower is. We do know that all awards are between 10 and 30 percent of the total settlement, but the SEC won’t even disclose the exact percentage for an individual award.

In this instance, however, attorneys for the whistleblower confirmed that their client’s award stems from the Panasonic settlement. With that detail, we can now view that SEC award order in a much more informed light.

First, a quick recap of the Panasonic settlement itself. The company paid $280 million in 2018 to settle charges that its Panasonic Avionics division in California bribed foreign government officials in charge of state-run airlines overseas. The misconduct happened from 2007 into 2016, and while egregious, was nothing the FCPA community hadn’t heard before: improper use of overseas agents, falsified books and records, complicity of senior Panasonic Avionics executives. Par for the course, really.

So what did our whistleblower do that secured him a 10 percent piece of that $280 million enforcement action? 

The SEC Award Order

As explained in the SEC award order, the tipster was the first person to alert regulators that something amiss was happening at Panasonic, and his information did trigger an SEC investigation. But the misconduct he reported was not the same misconduct that ultimately led to Panasonic’s $280 million settlement. 

Apparently, our tipster alerted the SEC to misconduct in one unnamed country. The SEC then subpoenaed Panasonic for more information, and that prompted Panasonic to self-disclose its misconduct to the Justice Department — but Panasonic disclosed similar misconduct happening in other unnamed countries.  

We don’t know exactly when all this happened, but Panasonic disclosed its FCPA woes to investors in early 2017. So if the misconduct itself lasted into 2016, then one can presume the tipster provided solid intel to the SEC; solid enough to make the agency open an investigation quickly, and for Panasonic to disclose the matter to the Justice Department and regulators quickly thereafter. 

Ultimately, however, the settlement Panasonic and regulators reached in 2018 pertained to misconduct in those other countries, not in the country identified by the tipster. Since there was “not a strong nexus between the Claimant’s information and the Commission’s and [Justice Department]’s charges,” as the award order phrased it, the guy ended up with only 10 percent. 

We can speculate on a few other issues, too. For example, the SEC assigns a specific award percentage based on seven factors:

1. the significance of information provided to the Commission; 
2. the assistance provided in the Commission action; 
3. law enforcement interest in deterring violations in granting awards; 
4. participation in internal compliance systems; 
5. culpability; 
6. unreasonable reporting delay; and 
7. interference with internal compliance and reporting systems.

Well, in this particular order, the SEC makes no mention of any other assistance the tipster might have provided. Typically the SEC does include that sort of detail; consider our whistleblower case from last week, where one tipster involved clearly was an important employee who helped the agency extensively. 

This order contained none of that language; and the tipster’s lawyers said the person is not a Panasonic employee. So it seems like most of those seven factors above would not apply to an outsider. For all we know, the person might be a professional fraud investigator who digs into companies independently and hopes to collect an award.

Why Care About This?

Frankly, because compliance officers can be whistleblowers themselves under the right circumstances. So it’s worth understanding which circumstances might get you a 10 percent award, versus one that gets you 30 percent.

Of course, for the record — if a compliance officer does turn whistleblower to the SEC, usually that is a pretty damning statement about your corporate culture. It means your company ignored your concerns and efforts to rectify whatever problem you found. It probably also means you suffered retaliation along the way, which still happens far too often to compliance professionals. 

If that’s the case, compliance officers should pursue whatever course of action they believe best. And if that course takes you to the SEC whistleblower program, you might as well understand how to get maximum benefit for the risk you’re taking to do the right thing.