SEC awards whistleblower $4.5 million

The Securities and Exchange Commission awarded more than $4.5 million to a whistleblower whose tip triggered the company to launch an internal investigation and report the whistleblower’s allegations to the SEC and another agency.

By law, the SEC protects the confidentiality of whistleblowers and doesn’t disclose information that could reveal their identity.

But the Wall Street Journal said Friday that “according to lawyers for the whistleblower,” he’s a former orthopedic surgeon in Brazil who worked for a subsidiary of medical device maker Zimmer Biomet Holdings Inc.

The lawyers didn’t name the whistleblower but “described him as a former surgeon and former president of the Brazilian Orthopedic Sports Medicine Society,” the WSJ said.

In Janaury 2017, Zimmer Biomet paid $30.5 million to resolve DOJ and SEC investigations into the company’s “repeat” violations of the Foreign Corrupt Practices Act. The DOJ said then that Biomet “knowingly and willfully continued to use a third-party distributor in Brazil known to have paid bribes to government officials on Biomet’s behalf.”

Biomet had faced earlier FCPA charges in March 2012. To settle that enforcement action, it paid the DOJ and SEC nearly $23 million in penalites.  As part of the settlement, it entered into a deferred prosecution agreement with the DOJ and retained an independent compliance monitor for three years.

A year after the first FCPA resolution, Biomet learned about more potential anti-bribery violations in Brazil and Mexico and notified the monitor.

Zimmer bought Biomet in 2015 for about $14 billion. The combined company trades on the NYSE under the symbol ZBH.

The whistleblower in Friday’s award sent an anonymous tip to the company alleging wrongdoing, the SEC said. The whistleblower then submitted the same information to the SEC within 120 days.

The SEC said in its redacted award order (pdf) Friday that the whistleblower’s information had led to successful enforcement actions by both the SEC and another agency.

The SEC for the first time used a provision in the whistleblower regulations to credit the whistleblower for reporting the allegations to the company first and then to the SEC.

Jane Norberg, chief of the SEC’s Office of the Whistleblower, said: “The whistleblower gets credit for the company’s internal investigation because the allegations were reported to the Commission within 120 days of the report to the company.”

The SEC has now awarded $381 million to 62 individuals since issuing its first whistleblower award in 2012.

Whistleblowers can be eligible for an award when they voluntarily provide the SEC with “original, timely, and credible information” that leads to a successful enforcement action.

Awards can range from 10 percent to 30 percent of the money collected when penalties are more than $1 million.

Zimmer Biomet hasn’t commented on Friday’s whistleblower award.

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Richard L. Cassin is editor at large of the FCPA Blog.