Yesterday's conviction of Ponzi schemer Allen Stanford generated much news. Most of the coverage, however, is missing the role of whistleblower Leyla Wydler. Two weeks ago on Honesty Without Fear, I interviewed Eyal Press about his new book, Beautiful Souls: Saying No, Breaking Ranks, and Heeding the Voice of Conscience in Dark Times. We discussed his chapter about Wydler's resistance to Stanford's pressure to get clients to invest in his scheme. Eventually, Wydler concluded that it was a Ponzi scheme, and she refused to sell the scheme to her clients. Stanford fired her. She reported the fraud to the authorities. The Securities and Exchange Commission (SEC) ignored her warnings. She could not sue Stanford in court because of a forced arbitration agreement. The securities arbitrator not only rejected her whistleblower retaliation claim, but also ordered her to repay her $100,000 signing bonus. (Under the 2010 Dodd-Frank Act, whistleblowers like Wydler are no longer bound by forced arbitration agreements.)
Yesterday, Eyal Press posted an article on Counterpunch and Middle East Online about Wydler and Countrywide whistleblower Eileen Foster. It is called Chilling Dissent on Wall Street. He contrasts the way the federal government has become hot to prosecute national security whistleblowers, but the concerns of financial fraud whistleblowers can be ignored. In Stanford's case, the SEC failed to act on Wydler's reports for years as Stanford continued to rake in money from more now-victimized investors.
As if being ignored is not bad enough, Press also notes how some members of Congress want to make it harder for whistleblowers to win their claims under the Dodd-Frank Law. The bill by Rep. Michael Grimm would require whistleblowers to raise their concerns with their employer before going to the SEC, and would require the SEC to disclose whistleblower claims to the company alleged to be violating the law. Really. How is tipping off the crook to the impending federal investigation a good law enforcement strategy? Follow this link to TAKE ACTION against the Grimm bill.
Bloomberg News reports on Wydler's role in reporting Stanford's scheme. Insurance Journal is reporting that Stanford's conviction will be a boost to several civil lawsuits seeking to hold attorneys and others responsible for covering up the fraud. Hopefully, with the new whistleblower protections and rewards for whistleblowers in the Dodd-Frank Act, schemes like Stanford's will become less common, and will be stopped more quickly when whistleblowers file claims with the SEC and CFTC.