SEC LogoOn November 19, 2013, we reported on a record-breaking $14 million whistleblower bounty payout by the SEC.  Earlier today, the Wall Street Journal reported that this award arose from an alleged “Chicago-based scheme to defraud foreign investors seeking U.S. residency.”  This is significant news because the SEC did not identify the company at issue or granular details underlying the tipster’s report in connection with issuing the bounty award.

According to the article, the award arose from a situation where approximately 250 investors were “duped” by 30-year-old Anshoo R. Sethi and his two Chicago-based companies into paying a total of more than $155 million for a supposed plan to build a hotel and conference center.  The investors (most of whom were foreign) were led to believe they were boosting their chances of green cards, because the scheme was designed to qualify for an immigration program that offers U.S. residency for job-creating investments.  However, the WSJ article indicated that Mr. Sethi and his companies lacked the necessary building permits, their claims to have the support of major hotel chains were false and the documentation they gave to the immigration authorities was “phony.”  

Also according to the article, the SEC brought civil charges against Mr. Sethi in February 2013, and two months later a court ordered the return to the investors of $147 million. The SEC awarded the tipster 10% of the recovery, representing the bottom of the range established by the Dodd-Frank whistleblower bounty program (which affords the SEC discretion to award up to 30% of the recovery).   

Employers should note that the SEC’s whistleblower bounty program is still at a fairly nascent stage, and as the article indicates, SEC officials have acknowledged that it typically takes at least two years for the SEC to conclude a probe arising from a whistleblower tip.  The article further explains that even if the probe results in sanctions, it is likely to take several more months for the whistleblower award to be approved and paid.  Nevertheless, employers can expect the SEC’s whistleblower bounty program to continue to pick up steam in the wake of this massive bounty award.

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Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular…

Steven J. Pearlman is a partner in the Labor & Employment Law Department and Co-Head of the Whistleblowing & Retaliation Group and the Restrictive Covenants, Trade Secrets & Unfair Competition Group.

Steven’s practice covers the full spectrum of employment law, with a particular focus on defending companies against claims of employment discrimination, retaliation and harassment; whistleblower retaliation; restrictive covenant violations; theft of trade secrets; and wage-and-hour violations. He has successfully tried cases in multiple jurisdictions, and defended one of the largest Illinois-only class actions in the history of the U.S. District Court for the Northern District of Illinois. He also secured one of only a few ex parte seizures orders that have been issued under the Defend Trade Secrets Act, and obtained a world-wide injunction in federal litigation against a high-level executive who jumped ship to a competitor.

Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has testified in federal court. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Steven was recognized as Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers.  Chambers describes Steven as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field.” Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a “Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a Burton Award Winner (U.S. Library of Congress) for “Distinguished Legal Writing.”

Steven has served on Law360’s Employment Editorial Advisory Board and is a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is regularly quoted in leading publications such as The Wall Street Journal.

The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal. He was appointed to serve as a Special Assistant Attorney General for the State of Illinois in employment litigation matters. He has presented with the Solicitor of the DOL, the Acting Chair of the EEOC, an EEOC Commissioner, Legal Counsel to the EEOC and heads of the SEC, CFTC and OSHA whistleblower programs. He is also a member of the Sedona Conference, focusing on trade secret matters.

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