Attorney General Eric Holder on Wednesday called on the government to increase rewards for those who blow the whistle on financial crimes, arguing that greater incentives are needed to induce people to come forward with insider information.
Holder said this week that the maximum payout—$1.6 million—for tips under Financial Institutions Reform, Recovery, and Enforcement Act is a “paltry sum in an industry in which, last year, the collective bonus pool rose above $26 billion, and median executive pay was $15 million and rising.”
In this unique environment, what would—by any normal standard—be considered a windfall of $1.6 million is unlikely to induce an employee to risk his or her lucrative career in the financial sector, he explained
Many financial criminals are savvy enough to avoid using email, which may leave a trail for investigators to follow, Holder said. “And intent may only be evidenced sometimes in the form of verbal instructions—evidence that can provide the sort of “smoking gun” that is needed to secure a conviction, but that can only be attained from a cooperating witness.”
The False Claims Act provides hefty payouts for whistleblowers who report fraud against the government—last year, for example, whistleblowers who alerted the government to wrongdoing at Johnson & Johnson split $168 million—but the law doesn’t cover fraud against shareholders, consumers or banks.
As for civil securities law violations, U.S. Securities and Exchange Commission has a new division which can also pay large bounties, including $14 million to one person in 2013.
Jeffrey Newman represents whistleblowers