Quick Links:
Whistleblowers Who Expose Securities Fraud
Embarq ERISA Class Action
Cases against Mutual Funds For Excessive Fees

WHISTLEBLOWERS WHO EXPOSE SECURITIES FRAUD

The False Claims Act was passed after the Civil War, and allowed whistleblowers to get a percentage of the amount the U.S. was able to recover for "false claims" made by people who charged the U.S. for work done. For example, if a person with knowledge of overbilling for Medicare services, or for government contracts, reported that to the government, they could share in the recovery. Recent recoveries for Medicare fraud have exceeded hundreds of millions of dollars.

In 2002, Congress passed the Sarbanes-Oxley Act. Section 806, for the first time, created a "whistleblower" claim process for employees who reported securities fraud. The statute prohibited a publicly traded company from retaliating against an employee who reported financial misconduct at the company. This "whistleblower" protection only applied to employees against whom an employer took an unfavorable personnel action based, at least in part, on the whistleblowing--defined as reporting information the employee reasonably believed constituted a violation of federal mail, bank or securities fraud laws, federal laws relating to fraud against shareholders or any rule or regulation of the SEC. The employee had to report wrongdoing that was a present, not a potential or future, violation. The employee had to pursue a whistleblower claim by filing a claim with the Department of Labor. The employee also had to have a reasonable belief that the activity s/he complained of was a type of fraud prohibited by statute and that it was a material, not a minor, violation. Within six months, litigation had to be commenced if the Department of Labor took no action.

The Dodd-Frank Act significantly expands whistleblower recoveries. Now, a person or persons who provide(s) “original information” about a past, ongoing, or imminent securities fraud, whether it be insider trading or misstatements of financial results, to the SEC, which then obtains a recovery in excess of one million dollars, will receive up to 30%. The SEC must share any settlement it obtains with a whistleblower. The new Act:

1. Eliminates a requirement that an administrative action first be filed with the Department of Labor. Now whistleblowers can initially file in federal court. They also have a right to trial by jury. No whistleblower can be required to take these claims to arbitration.

2. Extends the statute of limitations: A complaint can be filed within six years after the violation occurred or three years after the whistleblower knew or should have known of facts material to the violation, provided the complaint is filed within 10 years of the violation,

3. Requires that the SEC provide a monetary award to individuals who provide it with "original information" that results in an SEC settlement or judgment exceeding $1 million, with limited exceptions. The "bounty" can range from 10 to 30% of the total amount of the settlement or judgment.

This legislation was passed to encourage people to expose securities and financial fraud to the SEC. It was passed, in large part, because of the Madoff fraud, and the SEC's inability to police the rampant securities fraud that occurred in the last ten years. Many Ponzi schemes have been belatedly discovered, after many Americans were victimized. The statute is designed to incentivize people to report financial fraud to the SEC and rewards them for doing so.

The SEC has reserved $425 million to fund the agency’s new whistleblower program. The SEC has determined that this legislative change will result in more tips from whistleblowers and is gearing up to pursue recovery. Diane Nygaard is currently assisting a whistleblower who is providing proof of a large Ponzi scheme to the SEC and rewards them for doing so.

EMBARQ ERISA CLASS ACTION

Retirees' Case Against Embarq Certified as a Class Action

On Tuesday, January 4, 2011, U.S. District Judge Eric Melgren granted class-action status to a lawsuit (William D. Fulghum, et al. v. EMBARQ Corporation, et al., Case No. 07-CV-2602 (EFM/JPO), United States District Court, District of Kansas) by retirees against phone companies Sprint Nextel and Embarq for cancelling their retirees' health insurance and reducing the value of their life insurance coverage.

Diane Nygaard is one of the attorneys appointed by Judge Melgren to represent the class of retirees. Click to read more about the EMBARQ Erisa Class Action case.

CASES AGAINST MUTUAL FUNDS FOR EXCESSIVE FEES

In a 2010 ruling, the U.S. Supreme Court held that mutual fund fees can be excessive if, after reviewing all the circumstances, they are found to be so high that they violate the Investment Advisors Act of 1940. The Court's logic has given support to the claims of investors that mutual fund fees, particularly those used to cover the marketing of such funds to new investors (“12b-1” fees), should not be charged against the existing owners of the mutual fund. 

Because Mrs. Nygaard represents many investors, many of whom own mutual funds, she has joined with other law firms to apply the Supreme Court's analysis to reduce the fees charged mutual fund investors.

Class Action Attorney

REMIC's (Real Estate Mortgage Investment Conduit)