Thomas said their understanding of how the agency identifies and investigates whistleblower claims helps them build cases in ways SEC officials can’t.
Thomas’ attorneys and clients don’t need a warrant to tape phone calls in certain states or gather documents and can build powerful cases before even filing an SEC complaint, making it more appealing for agency investigators. He said his law firm accepts only about a dozen clients per year and has spent hundreds of thousands of dollars hiring experts and readying cases.
A March 26, 2019, case illustrates Thomas’ ability to break through the throng of tips and get access to SEC attorneys.
Thomas met with SEC staff even before his client filed a formal complaint. They responded by elevating the not-yet-filed allegation to a “Matter Under Inquiry,” according to the final order.
His two clients eventually received $50 million, even though one of them “unreasonably delayed” reporting the crimes while investors continued to be bilked, according to the final decision.
Calling Old Friends
McKessy’s law firm, Phillips & Cohen, has won awards of at least $50 million for clients since he joined, it said in releases after each award. It received about $43 million when he headed the program.
McKessy plays up his connections as a way to lure new clients. Former colleagues still at the SEC ask him “all the time” to send good cases their way, he said in an interview. They discuss cases when he returns to his old offices for retirement parties and other events and he also calls former subordinates directly if he has a good case.
Asked if that gives him an unfair advantage, McKessy hesitated and then said:
“I’d say, probably yes. … That’s one of the reasons I think people would want me to be their counsel. They know that I’m known throughout the SEC, that I can make these phone calls.”
McKessy said there are also many times “where I can’t find a taker,” for cases he thinks are strong.
Washington attorney Jason Zuckerman, who represents several whistleblowers, said SEC investigators tend to turn to trusted lawyers they’ve dealt with before. With thousands of tips pouring in, it’s only natural that they would want to work with people whose information and research has proven reliable, he said.
“On a human level, would you pick up a phone call from someone you’ve dealt with before whose information is credible, or someone random?” Zuckerman said. “I don’t know if there is a monopoly on it, but there is credibility with people who have won a number of awards. It’s almost triage; they respond to us, and we bring only the best cases.’’
Balancing Act
Although protecting the informants is critical, several attorneys said the agency could do that while making more information available. That would improve the program’s impact and reputation, they said.
“For the first 10 years, having this unregulated system, like a gold rush, may have been the best way to get the program up and running,” said Platt, the University of Kansas law professor. “But now they are entering phase two, and need to change. The SEC is a disclosure agency, this is what they do. Why not impose those same disclosure policies on their own program?”
South Carolina attorney Richard Harpootlian, who handles False Claims Act cases, said Congress must step in because the agency has shown it can’t self-regulate.
“They need to revisit the statute; it clearly needs to be cleaned up and the Senate is the place to do that,” Harpootlian said.
Warren and Grassley have the sophistication and understanding to fix this, he said.
“I am just not sure people understand how secretive and out of control things have gotten.”
This article was provided by Bloomberg News.