The U.S. Circuit Court of Appeals in the District of Columbia denied two whistleblowers an Award from the U.S. Securities and Exchange Commission. However, it said in a split decision the rules governing the tipster payout program of the agency are ambiguous about the eligibility limits.
U.S. Circuit Court Judge David Tatel and Douglas Ginsburg rejected the appeals of two whistleblowers who were denied awards in connection to the $25 million settlement by the SEC with Novartis AG. The judges stated that although the rules were unclear, the SEC had reasonably interpreted them to deny payouts to the whistleblowers.
In January, Tatel called the rules the worst he’d ever seen during oral arguments.
The SEC’s Whistleblower Program has awarded more than $1.1 billion to individuals who have provided information that led to the successful enforcement of criminal laws.
After Novartis settled allegations it had bribed Chinese healthcare providers, the whistleblowers requested awards. The company denied any wrongdoing. They claimed that they were sources of news articles alleging similar violations by Novartis rivals in 2013.
According to the SEC settlement, Novartis conducted an internal review of China’s business dealings to respond to the news. According to the whistleblowers, their information led Novartis to inform the SEC.
The SEC denied these claims last March but awarded $5 million to two whistleblowers who provided tips that prompted it to investigate.
The D.C. Circuit met Friday to determine if the whistleblowing scenarios they describe are eligible for awards. The circuit determined that the rules are ambiguous about whether whistleblower scenarios are the only ones for which tipsters can be eligible for awards.
The court ruled that the SEC could limit the payouts in these cases.
Karen LeCraft Henderson, U.S. District Court Judge, agreed with her colleagues that the appeal of whistleblowers should be denied. However, she did not agree with the assertion that whistleblower rules are ambiguous.
Jane Doe v. SEC. U.S. Court of Appeals in the D.C. Circuit, No. 21-1097.