Most large corporations tell their employees that if they see wrongdoing, they should speak up.

See something, say something.

By which these corporations mean — see something, say something to us.

But don’t say something to the Securities and Exchange Commission (SEC), the Department of Justice, or other law enforcement agencies.

In fact, most big companies have policies that specifically prohibit reporting outside the company.

But for four years now, the SEC has had up and running its whistleblower program.

Under that program, a whistleblower can file a complaint with the SEC anonymously and if the SEC secures a recovery, the whistleblower will be granted a reward of anywhere from 10 percent to 30 percent of the recovery.

While he was at the SEC, Jordan Thomas helped develop that program.

Now, as a partner at Labaton Sucharow in New York, Thomas heads a practice that is focused exclusively on bringing SEC whistleblower cases.

“As a long time law enforcement person, I have been surprised at how widespread knowledge of wrongdoing is within companies,” Thomas told Corporate Crime Reporter in an interview last week. “Prior to going into this line of work, my view of corporate America was more consistent with what the SEC staff was regularly being told. Misconduct was isolated within an organization. Misconduct was a result of rogue employees. Few people knew about the problem. In contrast, what I’ve seen since going into private practice is that a large percentage of people within organizations are aware of wrongdoing. And the breakdown of culture within these organizations has discouraged or prevented people from coming forward.”

“Organizations regularly encourage people to speak up. The official line is — see something, say something. But in practice, a high percentage of people who see something and say something are punished. And that is inconsistent with what I would have expected. And it’s inconsistent with the interests of organizations, because it undermines their culture of integrity. And many of those people who are retaliated against choose to report externally where they might not have but for the retaliation.”

“As a former law enforcement person, I’m also blown away by how many companies have employment agreements or policies that prohibit or discourage their employees from reporting wrongdoing to law enforcement.”

How does that fit with see something, say something?

“It’s exactly the opposite,” Thomas said. “These are gag agreements. They are saying — you can’t tell the cops about wrongdoing.”

“See something, say something relates to internal reporting. But they are saying you can’t talk to people outside the organization.”

The SEC’s whistleblower program is four years old and has dished out 17 awards totalling $50 million to whistleblowers. In 2013, the SEC received 3,600 tips under the program.

“Every year, the number of tips to the SEC under the program is growing,” Thomas said. “There has been a 10 percent to 15 percent increase in tips every year.”

“We are NOW four years out from the time the SEC whistleblower office was established. But in July it will be five years since Dodd-Frank passed.”

“So far, the SEC has paid out 17 awards to whistleblowers. And those awards have amounted to over $50 million.”

“One thing that is important to note about the SEC whistleblower program is that it takes two to four years for the SEC to investigate a matter.And this is a program that started out with zero public awareness. That’s why we are only now beginning to see bigger awards — and more awards coming out. Last year, the SEC had nine awards. You are starting to see some of the cases emerge from the pipeline.”

“My law firm has commissioned some Wall Street surveys. And one of the questions we ask is whether financial service professionals are aware of the SEC whistleblower program. We first asked that question about three years ago. And approximately 40 percent knew about it.”

“The last time we looked at it – about a year and a half ago — it was 60 percent.”

“We are seeing a continuing growth in awareness of the program. And this was true even though the biggest awards — the $14 million and $30 million award — had not been made. I fully expect that number will be even higher next time we do our survey.”

“Incidentally, the $30 million award a couple of months ago was to a foreign whistleblower. As of last year, foreign whistleblowers represent 11 percent of all tips received by the SEC. And the second largest award involved a domestic whistleblower and it was for $14 million.”

“SEC whistleblowers are entitled to 10 percent to 30 percent of the monetary sanctions collected by the SEC. And it’s key to note the word collected. There are times when the monetary sanctions the SEC secures from a court are not actually paid. As a result, some SEC whistleblower tips lead to successful enforcement actions but do not result in an SEC award.”

“The senior SEC officials regularly say that the tips they are receiving are high quality. I can confirm that. We are seeing people who in the past didn’t come forward. These are people who are very senior. They are gatekeepers and other knowledgeable individuals. They are not just coming and pointing the finger. They are bringing documents and recordings that are going to be critical to the success of the SEC down the road.”

In the four years, the SEC has received 10,000 tips under the whistleblower program, but paid out only in 17 cases. If the tips are of high quality, does that mean that the SEC can’t handle the caseload because of lack of staffing and resources?

“The SEC has always faced a challenge of having to pick among many good tips to investigate,” Thomas said. “Before the SEC whistleblower program, they were receiving 30,000 tips a year. Now, they are getting an additional 3,000 plus under the whistleblower program. They have always triaged cases. The benefit of the SEC whistleblower program is that they are able to work higher quality cases. These whistleblower cases often involve senior officers and tend to be a much higher quality than many of those involving the 30,000 tips outside the whistleblower program.”

Last week, the SEC put out a press release about the Paradigm case. It was a whistleblower retaliation case. But often, when the SEC puts out a press release announcing these cases, not only do they not name the whistleblower, they don’t name the company. Why wouldn’t SEC name the company?

“The Paradigm case was one of my cases,” Thomas said. “I also represented the first officer of a public company to receive a whistleblower award, which was announced about a month before the Paradigm case. But the SEC was directed by Congress to protect the identity of the whistleblower to the greatest extent possible. This was so important to Congress, they built into the program the ability to report anonymously, so even the SEC doesn’t know who the whistleblowers are until it’s time to cut them a check.”

“That is a core principle of the program. The more information the SEC makes public about a case, the easier it will be to identify a particular whistleblower.”

Was the Paradigm case an exception in that the SEC named the company in announcing the award?

“Yes,” Thomas said. “The Paradigm case was a rare exception. It may be the only exception.”

Why the exception?

“I can’t say,” Thomas said. “The SEC regularly doesn’t provide information about the identity of the whistleblower or the name of the company. Most of the time they don’t even disclose the type of misconduct. All of that is potentially identifying information.”

How many of the 17 award cases have been Foreign Corrupt Practices Act (FCPA) cases?

“In the last report to Congress, the SEC says that out of the 3,600 tips in 2014, about 200 related to the FCPA,” Thomas said. “That’s about five percent.”

“And I’m a little surprised by that. I would have expected to see more FCPA cases. The monetary sanctions have been significant in that area. The Department of Justice and the SEC have been aggressively pursuing FCPA cases. And there is greater international focus on these bribery cases, particularly after passage of the UK Bribery Act. Sadly, bribery is relatively common around the world. You would think there would be more cases.”

Why haven’t there been more FCPA cases?

“Some of the people who are most in the know are not aware of the program,” Thomas said. “The SEC doesn’t do a lot of international marketing. They do most of their speaking and writing domestically. For FCPA type cases, the most knowledgeable individuals reside overseas. That being said, the largest award to date under the program was to a foreign whistleblower, so there is some penetration going on internationally. But it’s going to take more time.”

If it’s not FCPA cases primarily, what kind of cases are being investigated?

“According to the SEC, and from what I see in the practice, accounting fraud is the number one thing being reported. Second is offering fraud and then market manipulation. Those are the big three according to the SEC. I would only add that I see a lot of trading and pricing violations. But that could be just because my office is two blocks from Wall Street.”

Under the False Claims Act, if the government chooses not to pursue the case, the whistleblower can proceed independently in court. Under the SEC whistleblower law, there is no independent right of action. Why not?

“It was considered at the time,” Thomas said. “But I can’t go into the details as to why it was not included in the law. This approach is consistent with the IRS and CFTC whistleblower programs. Because I was part of the process that led to the development of both the statute and the rules, I can’t share the deliberative process.”

[For the complete q/a transcript of the Interview with Jordan Thomas, see page 29 Corporate Crime Reporter 19(12), May 11, 2015, print edition only.]