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Bounty hunting

July 27, 2010

Another thought on the case we wrote about yesterday, in which Karen Kaiser blew the whistle on her ex-husband David Zilkha, who was indicted by the SEC on insider trading charges as a result.  We speculated — if facetiously — that perhaps Kaiser’s motivation was the prospect of a payoff.  Indeed, Kaiser did earn a $1 million reward for her whistleblowing efforts. This fact was trumpeted by the SEC in Friday’s litigation release.

But not just a reward.  A bounty.  That’s the word the SEC uses in its release, in the context of describing the new powers bestowed upon it by the Dodd-Frank Act: the newly enacted law “authoriz[es] the Commission to award bounties to parties who provide information leading to recovery of monetary sanctions . . . .”

It’s an interesting word choice, for several reasons.  First, the word “bounty” never appears in the Dodd-Frank bill.  Second, “bounty” (unlike a “reward”) is never an afterthought; the word connotes a goal, something sought after.   The bounty-earning action itself is nothing more than a means to an end. Perhaps for this reason, the word bounty has acquired some negative connotations.   We tend to think of bounty hunters as mercenary agents who don’t trouble themselves with what is right or wrong.   Think Boba Fett in the Star Wars trilogy, to name just one of many examples from literature and popular culture.

In other words, the SEC’s use of the word bounty invites the very conclusion we had entertained facetiously: that it was always about the money.  And the logical extreme of that idea — speaking generally now — is that information obtained solely for the sake of a bounty may lack credibility.   Indeed, the SEC itself alludes to this possibility in a different context.  In an October 2009 special investigative report on their failure to crack down on Bernard Madoff for so many years, the Commission notes that the Enforcement team of their Northeastern Regional Office (“NERO”) “questioned [the]  motives” of an informant, “indicating concerns that ‘he was a competitor of Madoffs’ who ‘was looking for a bounty’.” Although the SEC here ultimately takes NERO to task for its skepticism, the passage is nevertheless telling.   It reflects the SEC’s understanding of the full range of implications of the word “bounty.”

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