Under a new law, whistle-blowers can earn up to 30 percent of the funds the government recovers in fraud. For Wall Street whistle-blowers, that can mean big payouts.
Phil Marden/The Christian Science Monitor
Whistle-blowing is about to get more profitable.
Under proposed federal rules, now under review, whistle-blowers could collect as much as 30 percent of what the government recovers from violators. Payouts could be eye-popping: a $1 billion fraud, not unthinkable on Wall Street, could net $300 million for one whistle-blower.
Will fatter bounties for turning in one's co-workers and bosses improve the ethics of corporate America – or undercut them? The answer depends, in part, on whom you ask; in part, on how the new regulations are written; and, in part, on how one balances pragmatism and ethical ideals.
Substantial bounties are necessary to uncover fraud, according to Stephen Kohn, executive director of the National Whistleblowers Center in Washington and author of "The Whistleblower's Handbook" (2011). It's not that whistleblowers are motivated by money, Mr. Kohn says. Rather, they need to know compensation is waiting because they'll probably never work again in their field.
"It moves somebody from a concern to actually taking the risk," Kohn says.
Supporters of the proposed rules, which were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, have high expectations for the added incentives. As a model, they cite the False Claims Act, which has been compensating whistle-blowers since 1986 for tips leading to recoveries in government-contracting fraud cases. Whistle-blower tips have accounted for 67 percent of recoveries, worth $18.2 billion, under the False Claims Act. An expanded bounty program under the Securities and Exchange Commission might bear as much fruit or more, according to Kohn, who worked with the SEC to draft the proposed rules.
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