Smoking out the financial fraudsters is much like the lottery — and more disgruntled Americans are taking their chances.
And just as with Powerball, the payouts are growing.
More whistleblowers are collecting huge rewards as the Feds ramp up their campaign to eradicate financial corruption.
Five years after the Dodd-Frank Act put whistleblower anti-retaliation laws on steroids and went to bat for employees who report financial and corporate misconduct, the number of whistleblowers — along with payouts to tipsters — has grown steadily.
Dodd-Frank specifically states that employers cannot fire, demote, suspend, threaten, harass, or discriminate against an individual who provides information to the Securities and Exchange Commission and grants confidentially through the process.
The tougher new laws have certainly brought out the tipsters — a whistleblower program at the SEC has resulted in more than 10,000 tips since its inception in 2011. And the Commodity Futures Trading Commission picked up more than 600 tips. The SEC is further strengthening its crime-busting program, committing $11 million for a new computer platform.
“The time to be a whistleblower has never been better,” said Dallas Hammer, an attorney representing whistleblowers at the Zuckerman Law firm in Washington, DC.
“The atmosphere for whistleblowers is really receptive — federal agencies are really beginning to understand the value whistleblowers bring to their law enforcement efforts.”
Since Dodd-Frank upended previous programs in the wake of the financial crisis, the SEC rewards program alone has doled out 17 awards totaling $50 million, the agency said.
The SEC this month announced a whistleblower award of more than $3 million, the third-highest in its program so far, to a company insider who provided information involving fraud. The identity of whistleblowers and the companies involved are kept confidential.
The CFTC program has paid out a single award of $240,000. But even that number exceeds the SEC’s previous “discretionary program” paid out over two decades.
Since Dodd-Frank’s passage in July 2010, 200 decisions were reported, more than twice as many as during the previous five years.
One famous Wall Street whistleblower, Haim Bodek, said the Dodd-Frank whistleblower reforms might even prevent the next Bernard Madoff-style Ponzi scheme.
“Unlike other whistleblower programs, it [also] anticipates that the next Madoff might be revealed by a customer or competitor as opposed to an employee,” Bodek said. “We are going to see more of the industry self-policing through the program in the future. That is a good thing.”
Some tipsters, such as Bodek, eventually become public figures. Many others remain anonymous.
“I expect to see bigger cases cracked,” Hammer said. “We will also continue to see more tips and more actions — and when word is out on the big cases, it tends to have a snowball effect; it attracts more tipsters.”
With the aftershocks of the financial crisis lingering — anti-Wall Street screeds are common in political circles — whistleblowing is seen by some as practically a civic duty.
SEC Chairwoman Mary Jo White credits the Dodd-Frank program for finding fraud that the agency otherwise would have overlooked.
Bodek recalls joining the program in July 2011, and he expects to be hanging around the program at least four more years. But he says he is not in it for the big payout, though presumably he wouldn’t say no.
The odds of a big payout?
“The chances are against you,” Bodek said. “It’s basically a lottery ticket.”