Whistleblower Lawyer Blog

IRS Whistleblower Claims Explored at Heckerling Institute, the Leading Conference for Estate & Trust Lawyers and Estate Planners

Mon, 16 Jan 2012 21:42:31 -0500

The University of Miami's Heckerling Institute last week brought together the nation's leading estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals. For the first time, these estate planning professionals delved into how estate and gift tax issues are the subjects of many IRS Whistleblower claims.

This program was organized by Marty Basson, who recently retired from the IRS Whistleblower Office and hung out his shingle (now providing a wealth of knowledge to the private bar), after a distinguished career as the IRS authority on estate and gift tax issues.

Marty has long served on the Heckerling Institute faculty at the University of Miami. Marty is also a charter member of the IRS Estate and Gift Tax National Advisory Panel, a select group of IRS attorneys who assist in forming nationwide policy decisions in the estate and gift tax area.

Marty asked me to join him and Dawn Applebaum of the IRS Whistleblower Office for a Heckerling panel discussion last week on the IRS Whistleblower Program in the estate and gift tax arena. While a few professionals in attendance had already filed IRS Whistleblower claims, the vast majority had not.

Heckerling provided a first class forum to address many of the "hot" issues in the tax whistleblower program. I was honored to join Marty and Dawn as the private whistleblower attorney who provided the perspective of whistleblowers in the IRS Whistleblower Program.

Once Congress created the new IRS Whistleblower Program in December 2006, the IRS Whistleblower Office was unsure whether it would receive many estate tax and gift tax claims. It received far more estate and gift tax claims than anticipated.

Consider a typical case of a divorced couple who both know that a parent has hidden accounts offshore. When that parent dies, the estranged spouse knows that the offshore accounts will not likely appear on the estate tax return. Such information about tax evasion is very useful to the Service, so that honest taxpayers do not bear more than our fair share of the burden.

Our Heckerling discussion covered many, many aspects of the IRS Whistleblower Program in a spirited discussion that ran out of time. Marty was suddenly free to express his own observations, not simply the official position of the IRS.

Among the topics were recent Tax Court opinions on protecting the confidentiality of whistleblowers and of taxpayer information in appeals, and the protections of taxpayer information in proposed new Tax Court Rule 345.

I was asked to discuss steps to protect whistleblowers from criminal and civil liability, which has been an important issue in past presentations after UBS whistleblower Bradley Birkenfeld found himself prosecuted for a federal offense. Marty also asked me to discuss the view of numerous tax whistleblowers as their claims progress through the process.

How Whistleblowers in Qui Tam, IRS, and SEC Whistleblower Cases Must Protect Email Communications

Sun, 18 Dec 2011 15:24:02 -0500

At the Healthcare Fraud Institute this past week, I was asked to address what steps whistleblowers should take to ensure confidentiality of emails with their lawyers. Although qui tam cases under the False Claims Act were the focus of our discussion, the same principles apply to tax whistleblowers and SEC whistleblowers.

Potential whistleblowers should never use their company's email system, or any email account shared with or accessible to another person, for communicating with their attorney or for gathering information or evidence to report to the government.

Although the law encourages whistleblowers to report fraud, whistleblowers can create unnecessary problems for themselves by not following this rule.

First, emails between whistleblowers and their attorneys are privileged and confidential, but the privilege can disappear and be waived if the communication is disclosed to others.

Second, qui tam whistleblower cases under the False Claims Act are filed with a court order "sealing" the case from public view, while the government investigates. If an email accidentally exposes the case, the whistleblower may have violated the court's "seal" order.

Third, alerting a defendant company that the whistleblower has reported the company's fraud to the government is almost certain to provoke retaliation against an employee who is a whistleblower. Immediate suspension or firing often follows. Although the False Claims Act and the SEC and CFTC whistleblower laws create remedies for retaliation, those remedies take time to achieve. They will not pay the whistleblower's mortgage next month--or this year.

We advise all of our clients that they must protect the confidentiality of their emails. Many people do not realize that emails sent from a company's computer system usually leave some record, even if the employee is accessing a personal Gmail account.

Qui Tam Whistleblower Cases Under False Claims Act Explained

Thu, 01 Dec 2011 15:18:03 -0500

I have been asked to publicize a seminar at which I am speaking on handling qui tam whistleblower cases under the False Claims Act, the nation's primary whistleblower law addressing fraud that steals government funds. Here is the announcement:

AAJ will hold a "Qui Tam" Teleseminar on December 6, 2011 at 2:00 pm EST. With recently amended whistleblower laws and several high profile settlements, lawyers need to understand the procedural complexities and pitfalls in qui tam whistleblower cases. Cosponsored by the Qui Tam Litigation Group of AAJ, this teleseminar will provide an understanding this rapidly developing area of law.

View the agenda, faculty and register at www.justice.org/quitam. Use the promotion code QUITAM at online checkout to receive the special rate of $159.

2011 IRS Whistleblower Boot Camp Hears of Deputy Commissioner Steve Miller's "Desire for the Whistleblower Program to Grow"

Sun, 20 Nov 2011 14:52:33 -0500

At this past week's third annual "IRS Whistleblower Boot Camp," Deputy IRS Commissioner for Service and Enforcement Steven T. Miller spoke of his "desire for the whistleblower program to grow." A major announcement was that he would "push for" the IRS to begin using the expertise of whistleblowers who can help the IRS interpret information obtained in its audits..

In his remarks, Deputy Commissioner Miller described "offshore" tax abuses as a key area. He commented that whistleblower submissions have a "unique place" in "breaking bank secrecy."

With budget reductions, the IRS is looking for ways to "leverage" its efforts. According to Miller, whistleblower submissions in at least three areas can help:

1. Promotion of abusive tax shelters known to potential whistleblowers

2. Tax violations in which sophisticated information technology systems pose a barrier to the IRS, unless a whistleblower can explain them

3. Inadequate information reporting that is required of third parties, and that whistleblowers can address

When it "makes sense" for the IRS to use the whistleblower's expertise, Miller said he would encourage use of disclosure agreements with whistleblowers authorized under section 6103(n) of the Internal Revenue Code, which governs disclosure of taxpayer information. Examples he gave include review of information received in response to the Service's information document requests, or explanation of information technology issues known to the whistleblower.

Sen. Chuck Grassley recently urged the IRS to make better use of expertise and resources that whistleblowers and their lawyers can provide, as the Justice Department does in False Claims Act cases.

This year's IRS Whistleblower Boot Camp also included many other senior IRS officials. Whistleblower Office Director Steve Whitlock and his office's Special Counsel Debra Bowe were major participants.

Once again, the Office of Chief Counsel's Senior Counsel Tom Kane participated and was again very generous with his time, both during and after the program. He addressed various litigation issues that arise in whistleblower matters. Senior Program Analysts Dawn Applebaum and Kathy Onken also provided a great deal of knowledge and insight into how the program is operating.

The most fascinating issues to me were those involving the international and offshore efforts of the IRS, the subject of the session I moderated. On this panel, joining IRS Whistleblower Office director Steve Whitlock and Senior Analyst Dawn Applebaum were Toni Weirauch, Deputy Director of International Crimes in the IRS Criminal Investigation Division; and Donna Prestia of the new Global High Wealth Division. The attendees gained an appreciation of the considerations of representing whistleblowers who may be foreign nationals gathering evidence in ways that comport with U.S. law, but that may be contrary to other countries' bank secrecy laws.

My colleagues Erika Kelton, Paul Scott, Linda Stengle, and Margaret (Peggy) Finnerty deserve thanks for their excellent presentations as well.

Next IRS Whistleblower Boot Camp: Offshore and International Tax Whistleblower Issues and Latest Developments

Thu, 27 Oct 2011 12:05:43 -0500

Each year's "IRS Whistleblower Boot Camp" brings together senior officials of the IRS Whistleblower Office and tax whistleblower attorneys to explore the latest developments in the IRS Whistleblower Program. This year's Boot Camp is November 15, 2011 in Washington.

Of special interest this year is that Deputy IRS Commissioner for Services and Enforcement Steven T. Miller will participate for the first time. Other IRS officials participating include (in order of appearance):

--Stephen Whitlock, Director of the IRS Whistleblower Office
--Debra Bowe, Special Counsel to the Director of the IRS Whistleblower Office
--Thomas Kane, Senior Counsel, IRS Office of Chief Counsel
--Dawn Applebaum, Senior Program Analyst, IRS Whistleblower Office
--Kathy Onken, Senior Program Analyst, IRS Whistleblower Office

Once again, I am looking forward to leading a panel discussion, this time on International and Offshore Issues. Panelists will include Steve Whitlock, Director of the IRS Whistleblower Office; Dawn Applebaum of the Whistleblower Office; and a representative of the IRS Criminal Investigative Division with expertise in international and offshore tax cases.

Other sessions will discuss new developments, including the debate over the IRS "collected proceeds" regulation that was the subject of the May 11, 2011 public hearing; litigation issues; and "hot topics." My friends and colleagues Erika Kelton, Paul Scott, Linda Stengle, and Margaret Finnerty will also moderate panel discussions or serve as panelists.

Does Deputy Commissioner Miller's involvement signal that the IRS as a whole is increasingly recognizing the vast benefits of encouraging tax whistleblowers to come forward?

Anyone interested in closing the "tax gap" should hope so. We certainly welcome his participation in this effort to educate attorneys further about the "best practices" in pursuing IRS Whistleblower claims.

Qui Tam Whistleblower Cases, and the New Financial Whistleblower Programs by the SEC, CFTC, and IRS To Be Discussed at Whistleblower law Symposium

Mon, 26 Sep 2011 14:39:24 -0500

Every two years, attorneys prosecuting or defending qui tam whistleblower cases under the False Claims Act and other whistleblower laws gather for the Whistleblower Law Symposium.

We have written much about “qui tam” whistleblower cases under the False Claims Act. Since last year’s passage of the Dodd-Frank law, whistleblowers who help expose (1) violations of the securities laws or (2) commercial bribery of foreign government officials, now can receive rewards of 10-30% of money sanctions imposed under the new SEC Whistleblower Program. The new IRS Whistleblower program pays whistleblowers 15-30% of amounts recovered. These cases also help stop fraud against taxpayers and investors.

On October 21, an unusual group of national experts on these claims will gather for the Whistleblower Law Symposium, which our firm organizes every two years. Not only do we have senior attorneys from the Department of Justice and experienced whistleblower lawyers discussing qui tam cases, but the Director of the IRS Whistleblower Office Steve Whitlock will participate and explain the tax whistleblower program. Senior SEC attorneys also have stated that they wish to be part of our seminar to discuss the new SEC Whistleblower Program, and are seeking approval to participate.

This conference is broader in scope than any whistleblower law conference in the country of which I am aware, as we have a national faculty of lawyers on both sides of these cases, as well as some of the top government officials involved.

Registration is still open for those who want to register online here:

Please feel free to call or email me with any questions. The Agenda is below.

GAO Report Released on IRS Whistleblower Program: Raising--But Not Answering--the Fundamental Questions of What the Tax Whistleblower Program Needs to Be Most Effective

Fri, 09 Sep 2011 07:16:35 -0500

The promising new IRS Whistleblower Program that Congress authorized in December 2006 is the subject of a long-anticipated GAO Report released this morning.

Disappointingly, the report raised, but did not attempt to answer, fundamental questions that will determine whether the IRS realizes the full potential of the new program in helping close the "tax gap"--or settles for a fraction of what it can accomplish.

Inspired by the dramatic successes of the False Claims Act in combating fraud against the government through rewarding whistleblowers, Sen. Charles Grassley spearheaded the effort to create the first meaningful IRS Whistleblower Program in 2006.

Relying on data showing that whistleblower information had already proved extremely effective for the IRS (four cents invested produced one dollar in recoveries), Congress doubled reward percentages and made awards mandatory for whistleblowers. A small but impressive staff came together to run the program through the first IRS Whistleblower Office, led by Director Steve Whitlock.

Unfortunately, some in the IRS resisted implementing Congress' direction that the IRS expand the number and types of whistleblower claims that the IRS pursues, and are instead creating obstacles and delays that never existed before. Thus, Congress prompted GAO to inquire.

I was one of several attorneys whom GAO contacted, at the IRS Whistleblower Office's suggestion, to discuss these issues. I spent considerable time in more than one interview discussing what has made the False Claims Act so successful, and how the IRS can achieve similar success. We shared our written comments to the IRS at its recent hearing on the IRS Whistleblower rules.

The essential elements of any successful whistleblower program start with predictable and meaningful rewards to whistleblowers that are not left to the government's discretion. In addition, the success of the False Claims Act is in its "public-private partnership" model, which allows the government to leverage its scarce resources by working hand-in-hand with whistleblowers and their attorneys to address fraud. These principles translate to the IRS whistleblower claims process under existing law, and if needed Congress can tweak the privacy statute (26 U.S.C. section 6103) and still preserve appropriate taxpayer privacy.

GAO's report touches on these fundamental questions, but leaves them unanswered. Instead, it focuses on what its title suggests: "TAX WHISTLEBLOWERS:
Incomplete Data Hinders IRS's Ability to Manage Claim Processing Time and Enhance External Communication."

With no offense to the report's authors at GAO, better data collection by the IRS Whistleblower Office will not determine whether the next big tax fraud scheme remains undetected, or is exposed by a whistleblower. These fundamental principles underlying any successful whistleblower program must be incorporated, so that the IRS Whistleblower Office is empowered to do its job most effectively.

Whistleblower Lawyer and IRS Whistleblower Office Staff to Speak at 2012 Heckerling Institute on Estate Planning

Tue, 23 Aug 2011 13:19:34 -0500

The new IRS Whistleblower Program for tax whistleblowers will be featured for the first time at the nation's leading conference for estate planners, the Heckerling Institute on Estate Planning.

The Heckerling Institute is known as the country's "leading conference for estate planners, including attorneys, trust officers, accountants, insurance advisors, and wealth management professionals." This is the 46th Annual Institute, named after late Professor Philip E. Heckerling, founder of the University of Miami Law School’s Estate Planning Institute. The conference will take place from January 9-13, 2012.

The IRS Whistleblower Program will be the topic of a special session, "Anyone Can Whistle--What You Should Know About the Newly Revised IRS Whistleblower Program."

For years, Martin E. Basson, who is an Attorney-Advisor/Senior Analyst for the IRS National Whistleblower Office, has chaired a program for the Institute. I will join Marty and the IRS Whistleblower Office's Dawn M. Applebaum, for what I understand is the Institute's first program discussing the new IRS Whistleblower Program.

Marty Basson is known as the IRS Whistleblower Office's expert on estate and gift tax issues. Dawn Applebaum, a Management Analyst with the Whistleblower Office, has been excellent in other programs such as the Whistleblower Law Symposium and the IRS Whistleblower Boot Camp. I will be the tax whistleblower attorney on the panel, as we discuss this "developing area of tax practice, and the practical realities of developing and pursuing tax whistleblower claims."

Tax whistleblowers are making increasing use of the IRS Whistleblower Program to address tax fraud, tax evasion, and other violations of tax law. The estate tax area is fertile ground for these tax whistleblower claims, so this program should be especially interesting.

How the New CFTC Whistleblower Rules Will Operate

Fri, 05 Aug 2011 10:34:24 -0500

When the CFTC announced its final whistleblower rules yesterday, it answered many questions about how the new CFTC whistleblower program will work.

David Meister, the CFTC's Director of the Division of Enforcement, provided this summary according to the unofficial transcript our firm prepared of yesterday's CFTC public meeting:

The Commission will pay awards to eligible whistleblowers who provide original information to the Commission leading to a successful Commission enforcement action and the imposition of monetary sanctions in excess of $1 million.

Congress provided that the amount of the whistleblower award must be between 10% and 30% of sanctions collected in either the Commission action or related action as defined in the rules. The Commission has discretion in determining the amount of the award within that 10 – 30 percent range.

The rules set forth a number of factors that the Commission will consider in determining the amount of the award. These factors include the significance of the information; the degree of the whistleblower’s assistance; the Commission’s programmatic interest; whether the award enhances the Commission’s ability to enforce the Commodity Exchange Act, protect customers and encourage people to come forward with high quality information; and potential adverse incentives from oversized awards.

To be award eligible, a whistleblower is not required, under our recommendation-- a whistleblower is not required to report his information internally to his employer. Staff believes that such a requirement would deter some whistleblowers from coming forward, which would undermine congressional intent.

CFTC Announces Final Whistleblower Rules, Rejects "Mandatory Internal Reporting" by Whistleblowers

Thu, 04 Aug 2011 07:17:50 -0500

The final whistleblower rules of the Commodities Futures Trading Commission (CFTC) are being announced now at a CFTC open meeting. Like the SEC, the CFTC has rejected any provision that whistleblowers be required first to report internally the violations in question, but will treat internal reporting as a "positive" consideration in its awards.

The alternative pushed by business would have required all CFTC whistleblowers first to risk career suicide by reporting the boss’s wrongdoing to the boss himself.

Industry’s approach would have made the Commission the laughing stock of law enforcement, since no rational person with a career and a mortgage would risk reporting even major fraud with that requirement.

Fortunately, the CFTC put first its responsibility to protect the public, and is taking seriously its law enforcement duties by seeking to root out major frauds.

Madoff, Stanford, and the other major frauds of the past decade prove that internal compliance programs cannot protect the public. That is why Congress in Dodd-Frank demanded the first meaningful SEC and CFTC whistleblower programs.

We applaud the CFTC on this important stand, and look forward to reviewing the text of the final rules when made available.

Qui Tam Whistleblower Cases Produced $97 Million in Recoveries After Being Declined by Justice Department

Wed, 03 Aug 2011 12:35:28 -0500

When qui tam whistleblower cases under the False Claims Act are "declined" by the Department of Justice, the whistleblower or "relator" is authorized to pursue the case on the government's behalf.

The DOJ statistics below show that these declined cases have generated more than $97 million in recoveries for taxpayers since 1987, the year after the modern False Claims Act was born.

These facts dispel any notion that the Justice Department has sufficient resources to pursue all meritorious cases. Some of the more notable False Claims Act recoveries were achieved by private attorneys pursuing these "declined" cases.

A list of these declined cases that have brought almost $100 million into the U.S. Treasury is below. This amount is "larger than the sum of all salaries paid to members of the United States House of Representatives and the United States Senate last year," as observed by Pat Burns of Taxpayers Against Fraud.

Former Credit Suisse Officials Indicted For Assisting U.S. Taxpayers Evade Taxes Since 1953

Thu, 21 Jul 2011 19:42:02 -0500

The IRS emphasis on international and offshore tax violations continues. Today, the government made clear that U.S. prosecutions for cross-border tax evasion did not end with the 2009 landmark UBS settlement, which followed a tax whistleblower's approaching U.S officials.

The Justice Department announced today that three more former Credit Suisse bankers have been indicted for helping U.S. taxpayers evade U.S. taxes.

Credit Suisse has been under U.S. scrutiny for at least the past year. Today's indictments of three former officials bring to seven the number of Credit Suisse bankers charged thus far.

Indicted today were Markus Walder, the former head of North America Offshore Banking and a former senior Credit Suisse official; Susanne D. Rüegg Meier, a former manager; Andreas Bachmann, a former banker at a subsidiary of Credit Suisse; and Josef Dorig, the founder of a Swiss trust company that worked with Credit Suisse.

According to DOJ's announcement, the bank's managers and bankers "engaged in illegal cross-border banking that was designed to assist U.S. customers evade their income taxes by opening and maintaining secret bank accounts at the bank and other Swiss banks. As of the fall of 2008, the international bank maintained thousands of secret accounts for U.S. customers with as much as $3 billion in total assets under management in those accounts. The conspiracy dates back to 1953 and involved two generations of U.S. tax evaders including U.S. customers who inherited secret accounts at the international bank."

The government also alleged that the defendants provided "unlicensed and unregistered banking services to U.S. customers with undeclared accounts." They allegedly concealed their wrongdoing by making false statements and providing misleading information to the Federal Reserve Bank of New York and the IRS.

The indictments are part of a broader U.S. investigation into various Swiss and other foreign banks. They reportedly include HSBC; Julius Baer; and Basler Kantonalbank. Significantly, the Credit Suisse investigation has resulted in more indictments than the UBS investigation.

Tax evasion using international and offshore accounts will continue to be a focus of the IRS's efforts, especially now that the IRS Whistleblower Program is bringing in more and more information about these violations.

Progress with Dodd-Frank's Whistleblower Programs: CFTC and SEC Working to Deter the Next Big Schemes to Harm Investing Public

Thu, 21 Jul 2011 12:06:17 -0500

Too often missing in today's discussions of Dodd-Frank's one-year anniversary is appreciation of efforts by CFTC and SEC leadership to build from scratch the effective new whistleblower programs mandated by Dodd-Frank.

With scant resources, each agency is creating an essential mechanism to protect today's investors from the next fraudulent scheme.

Let's start with the CFTC. When I met with Chairman Gary Gensler and his CFTC staff in March to discuss the CFTC's proposed whistleblower rules, I was struck by Chairman Gensler's focus on what improvements could be made to its "draft" commodities whistleblower rules.

The only non-lawyer in the room, Gensler seemed to grasp more quickly than anyone potential abuses that its draft rules would not correct.

CFTC Commissioner Bart Chilton has also recognized how essential an effective whistleblower program is to protect investors.

More importantly, even the CFTC's initial cut at its rules showed that it would not simply copy the SEC whistleblower rules' approach, but would independently design a meaningful program to protect the public by attracting significant whistleblower information to ferret out frauds.

Likewise, the SEC--whose whistleblower rules have been finalized--has shown a welcome commitment to making SEC whistleblowers welcome. Chair Mary Schapiro, Director of Enforcement Robert Khuzami, and other staff such as Steve Cohen, Jordan Thomas, and Sarit Klein put more than considerable thought and effort in refining the SEC whistleblower rules announced in May 2011.

Some in Congress seek to keep the SEC and CFTC so underfunded that they cannot protect the public effectively. As former SEC counsel Professor Don Langevoort observed, "Congress maintains increasingly tight control over SEC policy largely through the budgetary process, and having the Commission be habitually needy and under-resourced fits well within this strategy. The campaign contributions from various sources with an interest in securities regulation are large, and influential members of Congress hardly maximize their own political advantage by stepping aside and leaving the SEC free to do its work as it sees fit."

SEC Charges FCPA Bribery Scheme--Feds Collect $15 Million

Wed, 13 Jul 2011 14:38:17 -0500

The SEC Whistleblower Program encompasses not only classic securities violations, but also violations of the Foreign Corrupt Practices Act ("FCPA"), a topic we have followed closely.

This past week, the SEC filed and settled an FCPA case against Armor Holdings, Inc., and collected more than $5.6 million, while the Department of Justice added almost $10.3 million in criminal fines.

The SEC charged that Armor Holdings, Inc. engaged in a bribery scheme to sell body armor to U.N. peacekeeping missions. The Commission also alleged that Armor Holdings violated the federal securities laws' books and records and internal controls provisions by failing to account properly for commissions in 2001-2007.

Demonstrating the SEC's increased emphasis on FCPA enforcement, this case is one of 32 FCPA cases the Commission has filed since 2010. Bribery of foreign government officials for business is having increased repercussions.

According to the SEC's Complaint, through a U.K. subsidiary Armor Holdings paid more than $200,000 through an intermediary to a United Nations official who could send it business, and used a sham consulting agreement to disguise its actions. The result was more than $7 million in additional revenues, and more than $1.5 million in additional profits, according to the SEC.

Why the SEC Whistleblower Rules Show A New Seriousness About Using Valuable Whistleblower Information

Wed, 01 Jun 2011 20:12:14 -0500

The suspense over the final SEC whistleblower rules ended with the SEC's release of its final whistleblower rules last week. The CFTC is to follow suit soon in announcing its own commodities whistleblower rules.

We have followed the SEC rules' development, after being part of the small group of pro-whistleblower attorneys who met with the Commissioners and staff and urged changes to the draft rules to make them effective.

In January, I had the opportunity to visit with SEC Chairman Mary Schapiro, Director Khuzami, and SEC staff, and then separately with Commissioners Luis A. Aguilar, Kathleen L. Casey, Troy A. Paredes, and Elisse B. Walter, to discuss changes to the proposed rules for the new SEC Whistleblower program.

The SEC apparently recognized that its draft whistleblower rules already were too slanted toward protecting industry, at the expense of the public.

The Commission wisely rejected business’s attempt to require all whistleblowers first to commit likely career suicide by reporting the boss’s wrongdoing to the boss himself.

Fortunately, the SEC put first its responsibility to protect investors, and is taking seriously its law enforcement duties by seeking to root out major frauds. Madoff, Stanford, and the other major frauds of the past decade prove that internal compliance programs cannot protect the public. That is why Congress in Dodd-Frank demanded the first meaningful SEC whistleblower program.

The SEC also seemed to realize that its initial rules had too many exclusions, which were often vague and complex. Its initial rules created too much uncertainty about rewards, and would have left many major frauds undetected while investors suffer.

The SEC's announcement shows an effort to do what make sense by not excluding so many potentially valuable whistleblowers, who are essential to uncovering and understanding complex schemes.

With more than 300 pages, the SEC whistleblower rules still may be more complex than needed. All in all, however, the rules are an improvement over the first draft, and the SEC is to be commended for putting the public’s interest first.