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What the government needs to do to stop Wall Street crime seems pretty obvious
(Reuters ) Loretta Lynch needs her whistleblower initiative to have the same punch as Mary Jo White's.
While the Department of Justice and its new attorney general appear ready to crack down on Wall Street crime, some in the legal community say Congress could give them more help getting others to drop the dime on crooks.
By expanding whistleblower protection scope and cash payouts of a law that's already on the books, Wall Street professionals could finally be enticed to provide investigators the information they need.
Right now they have little incentive to talk. A decades-old DOJ whistleblower program has payouts capped at just $1.6 million for banking violation tipsters. For comparison, the biggest payout by the SEC for a tip was $30 million.
Already, the SEC whistleblower program has paid out $50 million to Wall Street whistleblowers and its fund has hundreds of millions more for payouts to Wall Street professionals who tip them off on securities violations.
The DOJ doesn't have that kind of money and has struggled to get banking sector employees behind bars. Wrongdoers just end up paying fines.
Paying whistleblowers more could change that though, says Jordan Thomas, chair of the whistleblower representation practice with Labaton Sucharow, a New York law firm.
Providing similar incentives for bankers could yield the kind of in-the-know tipsters needed to generate convictions for criminals on Wall Street, rather than fines and vague admissions of wrongdoing.
Thomas isn't alone in seeking broader scope for investigators' whistleblower resources at the Department of Justice.
In a speech not too long before his resignation, former United States Attorney General Eric Holder offered one solution.
He suggested that another program's whistleblower capacity be substantially expanded. In a September 2014 speech, Holder said:
“[W]e should think about modifying the FIRREA whistleblower provision — perhaps to False Claims Act levels — to increase its incentives for individual cooperation. This could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress — making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis."
Later in his speech, Holder acknowledged the DOJ’s $1.6 million-capped payout for banking tipsters was “paltry."
The SEC's Wall Street whistleblower program yields thousands of tips annually, many of which go unused because they are irrelevant to the agency's mission. The SEC cannot dish out fees for whistleblowers in the banking sector of finance — only securities.
Arming the DOJ to better confront banking violations would give tipsters the opportunity to change that.
"There's no incentive to underpay corporate whistleblowers, they are leading a quiet revolution in white-collar law enforcement,” Thomas said.
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