Jordan Thomas Sets Up SEC Whistleblower Shop at Labaton
25 Corporate Crime Reporter 33, September 1, 2011

Name the last Securities and Exchange Commission (SEC) official who left to join a plaintiffs’ firm. Can’t think of one, right?

Neither could I.

Until I heard of Jordan Thomas.

While at the SEC, Thomas helped create the new SEC whistleblower law.

He was then instrumental earlier this year in developing the law’s regulations – which went into effect earlier this month.

Then, instead of jumping ship to a private defense side law firm, he went the other way.

And left the SEC to join Labaton Sucharow – where he heads the first in the nation exclusively SEC plaintiffs’ side whistleblower practice.

Thomas said he never even considered going to a defense side corporate law firm.

“For me, this work is more consistent with the work I’ve done,” Thomas told Corporate Crime Reporter in an interview last week. “I want to continue to protect investors and to be a plaintiffs’ attorney. It is an uncommon choice. The vast majority of lawyers when they leave the

SEC either go to work for a company or go to work for a defense firm.”

“In the eight years I was at the SEC, I was not aware of anyone who went to a plaintiffs' firm.”

What is it that made Thomas make that choice?

“I believe the SEC whistleblower program will revolutionize the way the SEC enforces the securities laws,” Thomas said.

“And having helped give birth to the program, I would like to be part of seeing it be successful.”

“For me, plaintiffs’ work seems more consistent with the work I’ve done before.”

“You build cases against those who have engaged in securities fraud. And then work side by side with my former colleagues to make them successful.”

“And that’s satisfying. It was satisfying at the SEC. It was satisfying at the Justice Department.”

“And in the short time I have been with Labaton Sucharow, I have found it to be equally satisfying.”

What is it about the culture at the SEC where the vast majority of lawyers who leave end up with corporate defense firms or with corporations themselves?

“It’s natural for people who regularly work with one another,” Thomas said. “Their future employers see them and say – gee, so and so is a great enforcement attorney and would be valuable at our firm.”

“So, there is recruiting occurring naturally during the process. And compared to plaintiffs’ firms, defense firms are the bigger potential employers.”

“I suppose that it doesn't hurt that the salaries tend to be larger on the defense side.”

Thomas believes that the new SEC whistleblower law – with its 10 to 30 percent bounty provision for whistleblowers – will be a “game changer.”

“It will revolutionize how the SEC does investigations,” Thomas said. “Too often, the SEC has had to do investigations based upon circumstantial evidence – where there has been a basis for thinking something might have happened, and the staff has had to work the case from the bottom up, to get the kind of evidence to bring an enforcement action.”

“When you have someone who is an insider, or someone who has inside information, they are able to dramatically make the SEC’s investigation more effective and efficient.”

“It’s like adding a 911 system to a policing system.”

“It’s going to mean that the SEC is going to be doing more cases, more significant cases, and the monetary sanctions are going to be larger.”

“The whistleblower program will also have a great deterrent effect.”

“After all, the probability of detection is now so much higher that individuals and entities who might have engaged in misconduct will be deterred from doing so.”

You can imagine an insider calling the SEC with criminal wrongdoing, the SEC calling in the FBI, the FBI wanting to wire the whistleblower.

“Absolutely,” Thomas said. “One of the cases I’m evaluating now has exactly that sort of dynamic.”

“I fully anticipate that the FBI and the Department of Justice will want to participate in the case.”

While at the SEC, Thomas and his colleagues had to settle a dispute between whistleblower advocates and corporate defense lawyers over

whether a whistleblower would first have to report the problem to the company.

“The whistleblower advocates believed that requiring people to report internally would have a chilling effect on people coming forward,” Thomas said. “They supported their viewpoint with studies that showed that as many as 40 percent of employees within companies questioned whether the company would do the right thing if they came forward.”

“The corporate interests were very concerned because they had invested substantial sums since Sarbanes Oxley was passed to strengthen their compliance programs and they feared that creating this alternative reporting channel would basically mean that people wouldn’t use internal compliance programs.”

“They were also concerned that they would not have access to this important information because the SEC’s investigative process is confidential and non-public.”

“And some of these tips may not warrant SEC investigations, but they would be of interest to the companies.”

“So, there was that sort of tension. The companies’ position was that the programs they had invested in would suffer and they wouldn’t get information to fix problems that may exist within their organizations.”

“And whistleblower advocates were concerned that the chilling effect would essentially kill the program.”

“The SEC chose to incentivize people to use internal reporting, but not require it.”

“Specifically, one of the SEC factors that determines whether someone gets 10 percent or 30 percent is whether they reported internally.

That’s one of the positive factors.”

“And there are negative factors – did the whistleblower impede internal investigations – lie, make misrepresentations internally – those factors would lower that number.”

[For a complete transcript of the Interview with Jordan Thomas, see 25 Corporate Crime Reporter 33(11, August 29, 2011, print edition only.]



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