The Wall Street Journal is reporting today on the hurdles that whistleblowers face when they provide tips about financial fraud to the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Called "Whistleblower Bounties Pose Challenges," the article says that, "collecting the bounty could be a challenge." According to the article, the SEC is predicting that it will get 30,000 whistleblower tips each year, and half of them could lead to claims for rewards. The mismatch between the number of reports to process and the funding provided to investigate them could lead the SEC to ignore many valuable tips, just as it ignored the tips about Bernie Madoff's scheme.
The article notes how the IRS has had a bounty program for four years, but has yet to pay the first penny of any reward. Of the 5,678 tips the IRS received last year, 460 appear to qualify. "It's time to start moving," Stephen Kohn, told the Journal. He is Executive Director of the National Whistleblowers Center and a lawyer representing Bradley Birkenfeld. The Journal explains the Brad Birkenfeld case as follows:
Mr. Birkenfeld tipped off the IRS about the tax fraud that led to last year's agreement by UBS to pay $780 million to the U.S. government and hand over names of suspected tax cheats. Mr. Kohn said his client deserves between 15% and 30% of the $580 million recovered by the IRS. ($200 million went to the SEC.) According to Mr. Kohn, Mr. Birkenfeld also is entitled to a percentage of the money recovered from individuals as a result of his whistleblowing, though the final tally on that amount isn't known.
Dean Zerbe is special counsel at the National Whistleblowers Center. He told the Journal that before a federal law increased the size of IRS awards, the agency got just a "handful of legitimate claims" every year. "The new scheme has already proved a huge success in terms of producing very good information." More information about the Birkenfeld case is available here.