David Callahan at the Demos blog has some information that certainly cheered me up about the Dodd-Frank reforms - namely, their new whistleblower program:
One element of Dodd-Frank that hasn't gotten much attention is the new Whistleblower Programestablished by the SEC. The program offers big monetary incentives to people who report securities fraud and such reports lead to financial penalties. Whistleblower statutes have played a huge role in exposing malfeasance in other industries, such as defense contracting and pharmaceuticals. The effects could be even bigger in the financial sector, where large-scale settlements with government authorities are already common.
Thanks to Dodd-Frank, everybody who works on Wall Street now has a financial incentive to call out illegal behavior at their firms. In effect, the new rule has deputized an army of would-be watchdogs. And, as we know, those in finance are always looking for ways to score big.
As I have written here before, Wall Street's lobbyists did their best to stop this whistleblowing rule from ever taking effect. But they failed, in an important victory for the public and a reminder that banks don't always get their way in Washingon.
While the law is still new, finance executives are already acutely aware of its potential. A survey last fall of such executives by the law firm Littler Mendelson found that that 96 percent were at least moderately concerned about the potential for whistleblower claims.
They should be.Given the size of potential rewards, would-be whistleblowers can count on plenty of outside help in reporting illegal conduct. An employee who thinks something is amiss is no longer on their own, but can reach out to a whistleblower advocate to help put together a strong claim of misconduct -- an advocate who in turn can get a slice of the settlement.
Among those who have set up shop to assist financial whistleblowers is Jordan Thomas, a former Assistant Director and Assistant Chief Litigation Counsel in the Division of Enforcement at the SEC who helped draft the whistleblower law. Thomas is now with the law firm of Labaton Sucharow, which has a long history of working on securities fraud cases.
For decades, financial reform has been hobbled by the fact that Wall Street has a huge advantage in intellectual firepower and resources. What the whistleblower law has done, though, is incentivize private sector financial lawyers to turn some of their talents to bringing criminal cases against Wall Street firms.
Let's not forget there was a recent episode of the SEC diming out a whistleblower to their employer, so it may take a little time to build credibility. But it's still hopeful news.
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