CFTC seeks money laundering info from whistleblowers

CFTC money laundering whistleblower

A CFTC enforcement official said the agency wants whistleblowers to help it fight money laundering.

The Commodity Futures Trading Commission is encouraging whistleblowers with information about money laundering to come forward, according to remarks by an agency enforcement official at a conference last week in Washington, D.C.

The CFTC is pursuing money laundering under its authority to fight fraud involving the commodity futures markets. Commodity futures take a wide number of forms, ranging from contracts on tangible items such as oil and gas to contracts on financial products, including foreign exchange benchmarks and LIBOR.

One item that is sometimes overlooked as a commodity, however, is money. Because money laundering amounts to an unlawful use of a commodity, it falls squarely within the CFTC’s authority.

Outcome of AseraCare hospice case could hurt patients and other Medicare fraud cases

Aseracare Medicare fraud case

Taxpayers Against Fraud Education Fund’s amicus brief to the court says the court’s view of what the False Claims Act requires is too narrow.

A whistleblower group is asking a federal appeals court to reverse a trial court’s decision in a Medicare fraud case involving hospice provider AseraCare that could have troubling implications for future False Claims Act cases.

The nonprofit group, Taxpayers Against Fraud Education Fund (TAFEF), last week filed a friend of the court brief in support of the Justice Department’s efforts challenging a trial court’s decision in Alabama dismissing the “qui tam” (whistleblower) case alleging unnecessary medical treatment of Medicare patients by AseraCare.

Ex-SEC Whistleblower Office chief joins Phillips & Cohen

Former SEC whistleblower chief Sean McKessy, now a partner at Phillips & Cohen LLP

Sean X. McKessy joins Phillips & Cohen as a partner after five years as chief of the SEC’s Office of the Whistleblower.

Sean X. McKessy, who served as chief of the Security and Exchange Commission Office of the Whistleblower for five years, has joined Phillips & Cohen LLP as a partner to represent whistleblowers.

McKessy helped build the SEC whistleblower program from its inception under the Dodd-Frank Act into such a success that SEC officials call it a “game-changer” in their enforcement efforts. Under McKessy’s five-year tenure as chief, the SEC levied more than $500 million in sanctions as a result of whistleblower information and assistance and paid out more than $100 million in whistleblower rewards.

US Tax Court rules in favor of IRS whistleblowers with broad definition of ‘collected proceeds’

IRS whistleblower collected proceeds

A recent Tax Court decision could help IRS whistleblowers become eligible for greater rewards. (Photo via Flickr)

A recent US Tax Court opinion that adopted a broad definition of what counts as “collected proceeds” in a case — a key factor in determining IRS whistleblower rewards — will be a major boon for future tax whistleblowers.

The decision from US Tax Court Judge Julian Jacobs should help assure IRS tax whistleblowers that their information will have a greater potential for bringing in rewards.

Before this decision, while taxes collected under Title 26 were clearly part of the “collected proceeds” of a case, it was unclear whether criminal penalties and civil forfeitures were counted as well.

More states should consider creating reward programs for securities whistleblowers

state securities whistleblower reward

Just two states have implemented their own securities whistleblower reward programs.

Despite the rousing success of the Securities and Exchange Commission’s whistleblower reward program, just two states — Indiana and Utah — have created their own laws to pay whistleblowers who uncover securities fraud in their state. But now that Indiana has finally paid out its first whistleblower award earlier this month — $95,000 to a whistleblower who reported a violation of the state’s securities laws — states may start to think harder about the value of creating their own securities whistleblower reward programs.

The Indiana reward relates to a $950,000 settlement against JP Morgan for violation of Indiana securities laws. According to the state’s press release, the whistleblower brought forward “executive level information” that showed that JP Morgan was putting its own interests ahead of its clients.

SEC protects whistleblowers’ rights in severance agreements, stops ‘pretaliation’

SEC whistleblower office pretaliation

The SEC fined a company for “pretaliating” against whistleblowers by forcing them into restrictive severance agreements.

The Securities and Exchange Commission (SEC) took forceful action last week to ensure that companies do not discourage employees from reporting potential violations of securities laws.

BlueLinx, a building products distributor headquartered in Atlanta, paid $265,000 to settle SEC charges that the company’s severance agreements contained restrictive language that in effect penalized departing employees if they reported concerns of wrongdoing to the SEC. Employees had to sign the agreements to receive severance payments and other post-employment benefits.

“We’re continuing to stand up for whistleblowers and clear away impediments that may chill them from coming forward with information about potential securities law violations,” said Stephanie Avakian, Deputy Director of the SEC’s Enforcement Division, in a statement.

Compliance Officers: Management views compliance programs merely as a “regulatory requirement”

Ethics and compliance officers aren't on the same page as management.

More than 40 percent of ethics and compliance professionals say management thinks ethics and compliance programs exist merely to meet a regulatory requirement.

Compliance professionals mostly agree that promoting an ethical culture is the primary goal of a corporate compliance program, according to a recent report.

There’s just one problem: Their companies’ top brass view compliance programs as a box to check to appease regulators, they say, rather than an essential program to promote a positive corporate culture and root out fraud.

The report, a joint effort from the Society of Corporate Compliance and Ethics and the Health Care Compliance Association, surveyed members of the group to find out what they thought was the main goal of the ethics and compliance programs they run. They were then asked what they think management and the board of directors at their company though their main purpose was.

Florida bolsters its (unfortunate) reputation as a center for Medicare fraud with record healthcare fraud case

Florida health care Esformes

DOJ’s crackdown on the Florida-based Esformes Network was the largest single criminal health care fraud case against individuals in department history. DOJ’s diagram (above) illustrates the government’s allegations.

Florida has long stood out as a hot spot for Medicare fraud, and last month’s indictment of three individuals in Miami for allegedly carrying out a $1 billion scheme to defraud Medicare and Medicaid adds to that unfortunate reputation.

It is the largest single criminal health care fraud case against individuals the Department of Justice has ever brought.

The indictment charged Philip Esformes — the owner of more than 30 skilled nursing and assisted living facilities (the Esformes Network) — along with a hospital administrator and a physician’s assistant, with conspiracy, obstruction of justice, money laundering, and health care fraud involving numerous health care providers, including community mental health centers and home healthcare providers.

New York False Claims Act used to fight “inadequate” health care in Nassau County Jail

New York False Claims Act, Eric Schneiderman, Armor Correctional Health Medical Services

The New York False Claims Act is a powerful tool the state can use to go after contractors providing substandard service. In this case, Armor Correctional Health Medical Services “egregiously underperformed” on its duties to treat prisoners in a Nassau County jail. (Photo credit NY Attorney General)

The New York state lawsuit against Armor Correctional Health Medical Services is a good example of how the New York False Claims Act and other similar laws can be used to protect patients and improve patient care while at the same time hold government contractors accountable.

The lawsuit, filed by New York Attorney General Eric Schneiderman last month, alleges that Armor Correctional Health Medical Services, a for-profit health care services company, “failed to perform or egregiously underperformed” obligations laid out in an $11 million yearly contract with New York’s Nassau County to provide medical services in the Nassau County Correctional Center.

HSBC forex case highlights ‘front-running’ on Wall Street

HSBC forex traders' front-running scheme

“Front-running” is a practice where Wall Street traders use non-public information concerning pending orders to profit for themselves, often to the detriment of their client.

Wall Street banks may expect to see more prosecutions for “front-running” after two HSBC foreign exchange managers were charged in a large currency trade scheme this week.

Front-running occurs when Wall Street traders with non-public information concerning pending orders on securities or commodities futures and options use that information to trade ahead of those orders, often to the detriment of their clients.

The HSBC complaint charged Mark Johnson, the head of global foreign exchange cash trading at HSBC, and Stuart Scott, a former HSBC foreign exchange supervisor, with trading ahead of a client’s conversion of $3.5 billion into British Pound Sterling in October 2011.