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Wednesday, August 31, 2016
The Monsanto Whistleblower
A former Monsanto Co. financial executive who blew the whistle on accounting practices at the Creve Coeur-based seed and agrochemical giant has been awarded a $22.4 million share of the government’s settlement with the company, according to his lawyer.
The executive, who was not named, told the Securities and Exchange Commission about misleading accounting surrounding sales of Monsanto’s Roundup herbicide, attorney Stuart Meissner said Tuesday.
The SEC in February slapped Monsanto with an $80 million civil penalty. Monsanto had been using millions of dollars in rebates to boost sales of Roundup, which was facing heavy competition. From 2009 to 2011, Monsanto booked “substantial” revenue from Roundup sales, the SEC said, but failed to recognize the costs of the rebates in the proper year.
That made Monsanto’s profits look higher than they really were, the SEC said in February.
The SEC announced the amount of the whistleblower’s awardin a press release Tuesday, but did not name the individual or the company involved. The agency tries to keep whistleblowers’ identities secret. An SEC spokesman wouldn’t comment when asked if the company was Monsanto.
The SEC said the whistleblower revealed a “well-hidden fraud.”
Meissner, who is based in New York, said the whistleblower was not in the top tier of Monsanto financial executives. Meissner wouldn’t identify the man or say if he was based in St. Louis.
He left Monsanto on his own accord and was not forced out, Meissner said.
The executive at first brought his complaints to superiors at Monsanto. “He tried to get them to go the right way,” said Meissner in an interview. “He’s a very law-and-order kind of person. He does not believe in looking the other way when he sees something wrong.”
The SEC heaped praise on the unnamed executive.
“Company employees are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing. Without this whistleblower’s courage, information, and assistance, it would have been extremely difficult for law enforcement to discover this securities fraud on its own,” said Jane Norberg, acting chief of the SEC’s Office of the Whistleblower.
As part of February’s settlement with Monsanto, three executives paid penalties of $30,000 to $55,000. CEO Hugh Grant also paid back $3,165,852 in bonuses tied to the company’s financial performance, while former Chief Financial Officer Carl Casale repaid $728,843 in bonuses. Regulators said they found no personal misconduct by Grant or Casale, but the company said securities rules required the repayment.
Meissner said he hoped the government pursues a case against Deloitte, Monsanto’s accounting firm. The lawyer said that Deloitte led the company to overstate earnings and issue “misleading financial statements — not only once, but twice.”
Monsanto and Deloitte did not immediately provide a response.
The whistleblower’s windfall isn’t the biggest such award involving a St. Louis firm. Sherry Hunt of Silex was awarded $31 million in 2012. She revealed that her employer, CitiMortgage of O’Fallon, Mo., was approving faulty mortgages to be guaranteed by the government.
She collected under the federal False Claims Act, which encourages people to reveal when the government itself is being defrauded.
The Monsanto whistleblower acted under a newer — and controversial — provision passed as part of the Dodd-Frank banking reform act of 2010. His payment is the second largest under the program. The largest payment was $30 million awarded in 2014.
Until the new law, the SEC lacked the power to reward whistleblowers financially, noted Hillary Sale, professor of law at Washington University.
They can now reap 10 to 30 percent of settlements of over $1 million. So far, the SEC has awarded $107 million to 33 whistleblowers.
The law does seem to be successful in uncovering wrongdoing, Sale said. “Some of this accounting fraud is really hard to detect,” she noted.
Industry fought against the rule, claiming it would undermine companies’ internal efforts to detect bad accounting.
“Armed with trial lawyers and new large financial incentives to bypass these programs, whistleblowers will go straight to the SEC with allegations of wrongdoing and keep companies in the dark,” the U.S. Chamber of Commerce complained at the time.
To collect, a whistleblower must provide new information, and it must lead to a successful SEC case against a company.