Wall Street reform includes a new whistle-blower provision
The Wall Street reform bill has been signed into law by President Obama. Yet the vast majority of those who support the Obama administration’s call for tighter regulation of banking and investment are probably unaware of a whistle-blower provision, reports the Los Angeles Times. This bounty provision entitles private sector individuals who blow the whistle on rule-breaking organizations to receive 10 to 30 percent of money the federal government obtains from fines and settlements.
A whistle-blower provision to catch Ponzi and insider trading schemes
The whistle-blower provision requires that the citizen “provide the Securities and Exchange Commission with original information that reveals the fraud and leads to a successful recovery,” writes the Times. Lawmakers hope the bounty provision will provide the necessary incentive to strengthen Wall Street reform, but some legal experts see potential problems. For instance, if an employee is more likely to go to the SEC rather than to internal management if they spot something suspicious, a potential climate of fear scenario could erode business acumen. Not only that, but there is great fear that the potential pay day for whistle-blowers represented by aggressive law firms will invite a flood of new claims. In both cases, a “society of paid informants,” as Walter Olson of the Cato Institute puts it, would be the result.
‘Fast’ cash for the whistle-blower
Imagine if this whistle-blower provision had been in place when Goldman Sachs settled with the SEC for $550 million. If a whistle-blower had turned in the tip leading to Goldman Sachs’ censure, that whistle-blower would have made at least $55 million in quick cash. That’s money going back to the taxpayer, points out Stephen Kohn of the Washington-based National Whistleblowers Center. Of course, “quick cash” is a relative term. Long legal proceedings will follow, but if whistle-blowers’ tips pay off, they’ll have their pay day when the government collects from the guilty corporation. However, the government must recover at least $1 million for the whistle-blower provision to go into effect for an informant.
An example of whistle-blowing in high government: