SEC Gives $300,000 to Whistleblower, BofA Settlement Donates to Legal Aid, and Texas Businessman Confesses to Insurance Fraud

Last week the Securities and Exchange Commission granted its first whistleblower award to a corporate compliance officer who assisted in an insider trading investigation, the Washington Post reported that $30 million of Bank of America’s record settlement will go to legal aid, and a wealth Texas businessman admitted to insurance fraud after driving his $1 million Bugatti Veyron into a lagoon intentionally.

SEC Distributes First Whistleblower Award

This week, the Securities and Exchange Commission (SEC) issued $300,000 to an internal audit compliance officer who reported corporate wrongdoing that led to a $1.5 million penalty paid to the agency.  The case was an SEC investigation of Phillip DeZwirek, former CEO of CECO Environmental Corp, over allegations that he engaged in insider trading by purchasing CECO stock ahead of two press releases issued in 2008.  DeZwirek’s $1.5 million agreement closed the insider trading investigation

The SEC’s whistleblower award policy was designed to encourage auditors and compliance officers to report corporate wrongdoing to the agency to aid the government’s ongoing effort to police insider trading, fraud, theft, and other white collar business crimes. Sean McKessy, the SEC’s whistleblower chief, praised the role of compliance officers in aiding government investigations saying, “Individuals who perform internal audit, compliance, and legal functions for companies are on the front lines in the battle against fraud and corruption.  They often are privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one.”

The agency has not paid out an award until this week, with the unnamed whistleblower receiving 20% of DeZwirek’s settlement.  Another potential whistleblower in the same case was denied a reward.

Bank of America Settlement Includes Legal Aid Funds

We’ve been following the record $16.65 billion settlement paid by Bank of America to close the federal investigation of the company’s involvement in the sale of fraudulent mortgages prior to the 2008 financial crisis.  This week, the Washington Post reported that the settlement will benefit non-profit legal aid programs to the tune of $30 million.  The $30 million will be managed by the Interest on Lawyers Trust Account (IOLTA), which is generally used to fund social justice legal aid.

Across the country, IOLTA funds have paid for legal assistance to victims of domestic abuse, violence, and sexual assault as well as programs designed to help seniors create wills, support tenants take on landlords for illegal activity, and assist other poverty stricken populations as they fight for legal rights.  The donation to legal aid societies across the country represents a fraction of the $7 billion set aside for consumer assistance services.

Texas Businessman Pleads Guilty to Insurance Fraud over Bugatti Veyron Incident

A Texas businessman who drove his $1 million Bugatti Veyron into a lagoon five years ago has pled guilty to wire fraud after admitting his stunt was part of an insurance scam.  Andy House admitted to the fraud in an agreement with US attorneys in Lufkin, Texas, and now faces a maximum penalty of 20 years in federal prison.  In November of 2009, House steered his Veyron into the water while driving along the shoreline, initially claiming that a pelican and his cellphone combined to distract him prior to the accident.

House’s story, however, began to crack after video taken by a passerby revealed that there no birds anywhere near his car immediately prior to the incident.  The video also showed that House had not applied the brakes as he went into the water, and further damage to the vehicle was caused by his decision to let the engine run for 15 minutes after submerging the car.  Police also uncovered that shortly after buying the Veyron in October of 2009, House had it insured for $2.2 million.  In the face of mounting evidence, House confessed to intentionally driving the Veyron into the water, and now awaits his criminal sentence for the poorly conceived insurance scam