The U.S. Securities and Exchange Commission has been running a new bounty program for about a year, promising cash pay outs to those who submit valid tips against fraudulent business practices. Those that alert the SEC – whistleblowers – could make hundreds of thousands of dollars for alerting the SEC of wrongdoing.
The new bounty program is helping the SEC to redeem itself after the 2008 financial crisis and for not stopping the Ponzi scheme run by Bernard Madoff. Incidentally, according to the L.A. Times, one whistleblower notified authorities of Madoff’s indiscretions, but nothing was done before the scheme blew up.
The director of the SEC’s whistleblower office said that his office was receiving quality tips. Furthermore, whistleblowers are turning in audio recordings and emails that refer to alleged fraud and illegal overseas bribery. The SEC hopes to stop fraudulent schemes such as Madoff’s before the schemes take advantage of investors.
As of August 12, 2012, program has seen 2,870 tips, averaging eight tips per day. In August, one of the tips led to a $50,000 payout to a whistleblower who reported investment fraud.
Whistleblowers trying to keep others from being burned could get from 10 to 30 percent of the penalties collected as long as the penalties are over $1 million. SEC set aside $452 million from previously collected penalties so that they could pay out on tips that lead to the abatement of investment fraud.
Source: Los Angeles Times, “SEC whistle-blower program starts paying off for agency, tipsters,” Andrew Tangel, August 22, 2012
Our office handles similar whistleblower issues to the ones mentioned in this article. For more information, please visit our whistleblower/qui tam page.