WHISTLEBLOWER QUOTES OF THE DAY:

“Employees are often best positioned to witness wrongdoing. When they report specific and credible tips to us, we will leverage that inside knowledge to advance our enforcement of the securities laws and better protect investors and the marketplace.”

—Andrew Ceresney, Director of the SEC’s Division of Enforcement

“The whistleblower program has seen tremendous growth since its inception and we anticipate the continued issuance of significant whistleblower awards in the months and years to come.”

—Sean X. McKessy, Chief of the SEC’s Office of the Whistleblower

DAILY WHISTLEBLOWER HEADLINES:

Former pharma exec headed to trial on kickback allegations

Between 2009 and 2012, W. Carl Reichel allegedly orchestrated a campaign to give doctors money, free meals, and phony speaking fees in exchange for prescribing medicines sold by Warner-Chilcott, where he had been the president of the pharmaceutical division, according to federal prosecutors.
 
Next week, he goes on trial in what is expected to be a closely watched case in the pharmaceutical industry. That’s because the case marks one of the relatively few instances in which federal prosecutors have sought to hold a high-ranking executive from a drug maker accountable for such activities.

“To the extent the executive is convicted, it will impact the industry,” said Anne Walsh, a former associate chief counsel at the US Food and Drug Administration who is now a director at Hyman, Phelps & McNamara, a law firm that specializes in regulatory matters.

To be sure, other drug company executives have faced penalties for illegal activities. Notably, three former executives at Purdue Pharma pleaded guilty in 2007 to misleading the public about the risk of addiction posed by the OxyContin painkiller. They were also banned from any dealings with federal health care programs, notably, Medicare and Medicaid.

But such instances are relatively rare in the pharmaceutical industry, even as a parade of drug makers has paid large fines for civil and criminal violations. Moreover, the Reichel trial gets under way just eight months after the US Department of Justice issued a memo that serves as a blueprint for pursuing individuals who engage in corporate malfeasance. read more »

State Street Nears Settlements to End Probes of Alleged Overcharges

By Dow Jones Business News

State Street Corp. is nearing a deal to pay more than $500 million to end long-running investigations from federal authorities and others into allegations that the custody bank unlawfully overcharged clients on foreign currency transactions, according to people familiar with the matter.

The settlement, which could be announced this summer, is expected to resolve claims from the U.S. Justice and Labor departments and the Securities and Exchange Commission, as well as lawsuits from clients including pension funds, these people said.

The lawsuits accuse State Street of promising to execute foreign exchange trades for clients at market prices, but instead using inaccurate or fake rates that included hidden markups. The alleged overcharges occurred between 1998 and 2009, according to the lawsuits.
In June 2015, the bank disclosed it set aside $585 million to cover all of the claims. In November, it quietly entered into a related $13 million settlement with the California Attorney General's office, according to a copy of the agreement.

State Street said in a statement that "settlement agreements have not been finalized," but it believes that the money it has set aside will resolve the claims and investigations. "Matters of this nature can drain both time and resources; so where possible and appropriate we feel it is in State Street's and our clients' best interests to pursue settlements," the bank said.

In a May 6 filing and in the statement Monday, State Street said that "although we believe this recorded legal accrual will address the financial demands associated with these claims, significant nonfinancial terms remain outstanding." Those terms include the admissions, the people said.

Last year, the world's largest custody bank, Bank of New York Mellon, paid $714 million to resolve similar allegations from federal and state authorities and clients. read more »

Federal fraud penalties might soon double for providers

by Lisa Schencker

Fraud penalties for healthcare providers could soon double if a rule released by an obscure federal agency is any indication of what's expected.

The U.S. Railroad Retirement Board released an interim final rule last week upping the minimum penalty from $5,500 to $10,781 per false claim submitted to a government program. The board also increased the maximum penalty from $11,000 per false claim to $21,563. Rules for healthcare providers accused of submitting false claims are likely to soon follow suit, experts say.

“It does not apply to healthcare False Claims Act cases generally, but it suggests that's where they're going to end up,” Jonathan Diesenhaus, a partner at Hogan Lovells, said of the Railroad Retirement Board's new higher penalties. “The statute that made the Railroad Retirement board run that calculation applies to all civil penalties.”

An increase in False Claims Act penalties isn't unexpected. But questions have remained about exactly how much those penalties would increase, and the Railroad Retirement Board's new rule seems to answer that question.

The Bipartisan Budget Act of 2015 mandated that civil monetary penalties be raised by August 2016 to account for inflation. Such penalties include those levied under the False Claims Act, which makes it a crime to submit tainted claims to government programs such as Medicare and Medicaid. It's been 20 years since those penalties increased. read more »

Would you dob in a dodgy boss for $3 million?

by John Kehoe

As a raucous public debate plays out on the dubious treatment of whistleblowers by Australian banks behaving badly, the American securities regulator has just awarded $US3.5 million ($4.8 million) to an employee who dobbed in their employer for white-collar crime.

Governments in the United States have paid out more than $1 billion to corporate tipsters, under an incentive system that recognises the negative career consequences for brave people who expose fraud by their colleagues.

Taxpayers do not foot the bill, but rather the inducements are paid out of fines recovered from entities and people breaking the law.

Australia's business and regulatory landscape often follows the US.

ASIC chairman Greg Medcraft has expressed interest in compensating whistleblowers.ASIC chairman Greg Medcraft has expressed interest in compensating whistleblowers. Dominic Lorrimer

Australian Securities and Investments Commission chairman Greg Medcraft last year expressed interest in compensating whistleblowers, given they usually destroy their career by speaking out. read more »

WHISTLEBLOWER SETTLEMENT:

SEC Awards More Than $5 Million to Whistleblower