There is only one former chief of the Securities and Exchange Commission’s Office of the Whistleblower.

His name is Sean McKessy.

He could have cashed out with any of a number of corporate defense firms. But he chose instead to continue to practice on the whistleblower side and last month joined Phillips & Cohen in Washington, D.C.

“Working for companies was certainly an option,” McKessy told Corporate Crime Reporter in an interview last week. “Representing corporations and companies was not unfamiliar to me. But I had contributed to building the SEC whistleblower program. And I had a hard time envisioning where that wasn’t going to be a part of my life. I made the decision that I wanted to continue to work in the whistleblower field and represent whistleblowers.”

“Having made that decision, I started asking around. There were certain players in DC that I was familiar with while I was at the SEC. I certainly got a lot of submissions from some of the more prominent whistleblower firms in town. I always felt good when I saw Phillips & Cohen on the return address. The quality of their work was top notch. I was very interested in only aligning myself with a firm that would allow me to continue with my reputation for high quality work. They certainly brought that in spades. Every time they brought a case to the office, I knew that while it may not get to a successful action, it would be well thought out, the clients would be well selected, and the analysis was always spot on.”

“They were at the top of my mind when I thought about doing this work. Phillips & Cohen checked all the boxes. A commitment to the SEC whistleblower process. This is not a passing fad but a rising growth industry. Infrastructure to deal with what I hope and expect will be a significant uptick in the number of tips that will be submitted to us. And a sense of collegiality. I’m hoping this will be my last job. And I wanted to make it so that I spend the day with people I enjoy spending the day with. They hit on all the things I was looking for. I really couldn’t have asked for a better fit.”

Was it a close call on whether you did plaintiff side or defense side work?

“Ultimately it wasn’t. When I first started thinking about this — what is the next phase of my life? — I tried to put both of them in even standing in my head. But very quickly I realized that given most of the things I was looking for, including my contributing to society, that this was the path I should go down.”

Were you recruited by defense firms?

“Recruited is probably too strong a word. But I did have people at firms who I know and who are colleagues reach out to me. And we had general discussions. But I made the decision pretty early on to be recruited on the whistleblower side. Certainly, there were general cordial conversations.”

When we talk about SEC revolving door, it’s people going back and forth to the defense firms. But now we are seeing some high profile hires going to the plaintiff’s side. Is this some kind of trend?

“We’ll know better in a year or two. Jordan Thomas left to join a plaintiff’s side firm. And now I have joined Phillips & Cohen. I know Jordan has gone on record to say that he gets a number of calls from SEC attorneys to see how he does what he does. The folks who I hired at the SEC are interested in how this side of the aisle works.”

“It’s probably too early to say. But the success of the program at the SEC has created an environment so that law firms will want to be in this space. And that means that there will be more opportunities. In the past, if you needed to go into the private sector after an SEC job, your options were limited and geared toward an in house position or a defense law firm. If the trend line continues as I believe it will, there will be more opportunities on the plaintiff’s side if they so chose.”

“We’ll look back in two to five years and see that in addition to being a game changer in stopping fraud and returning money to investors, it was also a bit of a legal employment game changer.”

You went from the corporate world to the SEC Whistleblower Office. How did that happen?

“At the time, I was living in Richmond, Virginia and flying up to New York every Monday — for my job at AOL — and flying back every Friday. I was starting to feel that with a wife and three kids, that was a tough way to go. I had maintained a lot of good contacts at the SEC over the years. I was thinking about returning to the SEC. It just so happened that one of my colleagues called me and said — they are creating this new SEC Whistleblower Office. He emailed me and said — take a look at this link. He said — with your background, you would be a great fit for it.”

“I loved the SEC when I was there in my first stint. I left because we had our first child and my wife wanted to stay home. So I had to make a little more money. I thought — that’s an agency that gets it right. I was always interested in returning at some point. I thought — to return to the SEC would be great. But to return and build something from the ground up really appealed to me.”

“When I saw this opportunity at the SEC, it was too good to pass up. After a couple of rounds, they offered me the job.”

“To build the office was fraught with peril. My friends and colleagues wondered if I had lost my mind when I returned to the Commission to take on this job. I saw the potential. And I thought that if done right, this could be a game changer not only for the SEC and the Enforcement Division, but for the country and for investors.”

What percentage of cases in the SEC whistleblower pipeline have a credible chance?

“What we look for is specific, timely and credible information,” McKessy says. “When I first started the job, I felt strongly that we would be able to transparently talk about the tips and say — of the x number of tips we got, this number were good and this number were bad. As it turned out and as I learned, that’s a difficult calculation to make. On the one hand, you get the tip that leads to a $30 million whistleblower payout. That’s clearly a good tip. And on the other hand you have a tip that has nothing to do with securities laws and just says — my cat got stuck in a tree. That’s clearly a bad tip.”

“But there is so much in between those two polar opposites. You may get a tip that is spot on. You say — my broker has stolen this money and I have him on tape admitting it. And I lost $377. That’s a great tip. You have all the goods. But it’s unlikely that the SEC will take it up. That doesn’t end up as a successful enforcement action. But do you put it in the bad tip file or the good tip file?”

“The SEC got tips in the whistleblower pool — which is a smaller pool than the broader pool of intelligence. But the conversion rate — the number of tips that get out of the pool — is higher in the whistleblower pool than in the general intelligence pool.”

“There was a time that the SEC reported that 10,000 tips had been submitted. At that time, about 800 to 900 investigations were pending throughout the country. Some of those had just come in the door. Some were at the end of the process. But if you use that as rough justice, you are talking about a one in ten conversion rate.”

“If you talked to a seasoned SEC person who was around before the whistleblower program and told them one out of every ten tips that came in would get into an investigation and actively be looked at — they would say that’s pretty high.”

How many staff does the SEC whistleblower office have?

“When we started, it was a staff of me. And morale was probably at its highest. By the time I left, we were up to about 20 people — 13 attorneys, five paralegals, and two administrative assistants. We grew during a period where slots weren’t easy to come by. It’s a testament to the front office’s understanding of the importance of what we are doing and the trend lines.”

“It went from me to me and Jane Norberg, who is now the interim chief. And then we brought in five attorneys. We were up to seven. And then we brought in another three attorneys. And then we brought in another four. As the number of tips and claims increased, the resources were allocated to address them.”

The SEC law allows for the whistleblower to remain anonymous. But can a defense attorney sense when there is a whistleblower driven case?

“It depends on the facts and circumstances. When the SEC makes a particular inquiry, or asks to speak with certain people, that could lead defense counsel to say — the only way they would know to ask for that document or speak to that person is if they are working with someone on the inside. Obviously, the SEC has to maintain the confidentiality of the whistleblower and not comment one way or another. That doesn’t mean that defense attorneys don’t ask and spend an untoward amount of time, rather than trying to get to the bottom of what happened, trying to find out who told you what happened.”

“But consistent with the SEC’s confidentiality requirements, there were several occasions that I am aware of where whistleblowers brought significant cases to the finish line, but there was still a fair amount of frustration expressed by defense counsel about how the SEC found out about it, who the SEC was working with. Even if they may know that there was a whistleblower, there are instances I know where a successful whistleblower is completely unknown to the company.”

“Often, it can be easier to determine that the SEC must be working with a whistleblower. And other times when you think the company must know, it turns out because of the SEC’s devotion to confidentiality, it never comes to light. And sometimes defense counsel says — I know you are working with somebody on the inside, and the SEC is not.”

Does it make it easier when the whistleblower wants to at least go public with his or her name to the SEC?

“It does. There is nothing like meeting someone face to face, knowing who they are, talking a bit about their background, knowing where they fit in the corporation. That certainly helps immensely.”

In what percentage of the cases do you get that?

“Very high. Seventy five percent or so. The SEC does allow for anonymous reporting. The anonymous whistleblower must use counsel. And that does happen sometimes, where somebody is so concerned about the consequences that they ask to be remain anonymous even to the SEC. I have participated in some calls where the person uses a voice anonymizer for a phone interview. If they are brought in for an interview, the SEC would meet them at a hotel so they wouldn’t have to show their ID at the SEC front desk, at security.”

“In the vast majority of cases, the whistleblower is fine with the SEC knowing who they are, but wants to make sure the SEC not share that with anyone.”

“But I have to say that there are some occasions, particularly where someone has been retaliated against, where there is a fair amount of urgency on the whistleblower’s part to have the government act as their agents, to go to the company and say — why did you fire so and so? That makes retaliation in the SEC space interesting. On the one hand, you have an obligation not to identify a whistleblower outside the SEC. On the other hand, how do you bring a retaliation case about what a company did to a particular individual unless you have some ability to ask questions about what happened to that person?”

“When we announce that we pay somebody at the SEC, the announcement is deliberately opaque if not obtuse. The SEC announces that they pay somebody in connection with some case some millions of dollars. That caused a lot of consternation. I felt it was our obligation to maintain whistleblower confidentiality, even after we paid whistleblowers.”

“That doesn’t mean that we didn’t have instances where whistleblowers said to me affirmatively — Sean I would love it if you would tell the world — I was right and the company was wrong. Or — Sean, I had such a good experience with your staff that if you want to have a press conference or press release that names me, we could have balloons — I have had that on more than a couple of occasions.”

“My counsel was — we are not going to do it because we have a statutory obligation not to identify you. You can do whatever you like. If you would like to talk to the media or hold a press conference, there is nothing I can do to stop you. But I have to tell you that while it would be helpful to my office for you to go out and tell your story, there is no upside to be outed as a whistleblower, no matter how much money you have. You ought to think long and hard about whether you want to do it.”

“There are some whistleblowers who got paid by the SEC who went out and went public. But the vast majority find that discretion is the better part of valor when it comes to going public.”

[For the complete q/a format Interview with Sean McKessy, see 30 Corporate Crime Reporter 36(11), Monday September 19, 2016, print edition only.]