Recent Securities and Exchange Commission (SEC) investigations are showing a pathway to potential big awards for whistleblowing employees and others who help expose wrongdoing by corporate officials. Earlier this month the SEC hit drugstore giant CVS Caremark Corp. with a $20 million fine for allegedly deceiving investors by cooking its books with deceptive accounting practices.
If the SEC finds that whistleblower information substantially aided a case, for example documents or emails provided by a whistleblower, it will award up to 30% of the $20M – $6,000,000 – to the employees for exposing the alleged fraud.
Financial fraud is far from a victimless crime. From small investors harboring their life savings to pension funds overseeing the retirement funds of millions of people, misleading financial information puts those retirement savings at risk.
Seemingly obscure procedures can add up to huge losses.
For example, in the CVS case, the SEC found that “In offering documents for a $1.5 billion bond offering in 2009, CVS fraudulently omitted that it had recently lost significant Medicare Part D and contract revenues in the pharmacy benefits segment. Investors were therefore misled about the expected future financial results for that line of business. When CVS eventually revealed the full extent of the setbacks on Nov. 5, 2009, its stock price fell 20 percent in one day.”
“The accounting standards are designed to provide the public with a fair and consistent measure of public company performance,” said Paul Levenson, director of the SEC’s Boston Regional Office. “Instead, CVS and [CVS retail controller Laird] Daniels used improper accounting tactics to give investors a misleading picture of the company’s retail pharmacy earnings.”
Employees wishing to report financial fraud can do so confidentially. Contact Loevy & Loevy’s experienced whistleblower attorneys if you think you may have evidence of financial slight of hand by officials at your workplace.
