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The Whistleblower Provision is Working: The Story of Bill Lloyd

The Dodd-Frank Financial Reform Act gives protection from retaliatory firings by employers and anonymity to whistleblowers who give the government information regarding instances of possible financial fraud. In cases where the government finds a company liable for financial fraud, the whistleblower receives a portion of the fine that the company must pay to the government.

Bill Lloyd ("Lloyd") worked as an agent for Mass Mutual Insurance Company ("Mass Mutual") for 22 years. He forged many good relationships with Mass Mutual employees and clients. Lloyd is not a stereotypical whistleblower, as he is not a disgruntled employee looking to get back at a company. He very much liked working for Mass Mutual, and he was respected by the company and touted for his high marks.

In 2007, Mass Mutual came out with two new retirement annuity products "that guaranteed that the annuity income stream would grow to a predetermined cap regardless of how the investment itself performed."1 The way the investment vehicles work is complicated, but the problem with these vehicles boiled down to the fact that when the market fell in 2008, the annuity income stream could no longer be guaranteed. Lloyd discovered that these products would not work as guaranteed only after customers had invested over $2.5 billion into them.2

Lloyd worked extensively with Mass Mutual to attempt to resolve the issue internally for his clients. However, the attempt fell apart when his documents regarding this issue were stolen from his office one day and given to the Financial Industry Regulatory Authority ("FINRA"). The issue having been publicized, Mass Mutual stopped working with Lloyd to solve the problem internally, and the false guarantee became a bigger problem when FINRA decided that it did not want to pursue the issue. It was then that Lloyd decided to reach out to the Securities and Exchange Commission ("SEC") as a whistleblower.

The SEC can protect whistleblowers from retaliatory firing by employers, but it could not stop employees and clients from treating Lloyd differently and essentially avoiding him. Additionally, out of fear that Mass Mutual was hatching a plan to fire him, he left the company in 2011. While he became a whistleblower to force Mass Mutual to fix a major problem and to help investment customers, his own life had come under hardship.3

Eventually, the SEC forced Mass Mutual to pay a $1.6 million fine, $400,000 of which Lloyd received for providing the government with invaluable information. Most importantly, Mass Mutual has fixed the investment vehicles that guarantee their annuity income stream. And all ended well for Lloyd, who finds himself working at a new investment company.

If you have any questions regarding this subject or this posting, please contact James E. Miller (jmiller@sfmslaw.com) or Michael Ols (mols@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS also maintains an affiliate office in London, England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

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