On Tuesday, Martha Gill revealed the new rewards enabled by the Dodds-Frank act for American whistleblowers.
As she wrote:
A change in whistle blower regulation now has employees rushing about making secret recordings and photocopying internal documents… The new law potentially offers multimillion dollar payouts for those who uncover cases of fraud…
That said, the Securities and Exchange Commission (SEC) is not exactly rushing to reward its informants.
The Dodds-Frank act has yet to pay out, but the major change it introduced was the ease with which whistleblowers could get paid, rather than the concept of paying whistleblowers per se. America has a longstanding tradition of financial rewards to those prepared to go through the arduous process of revealing an employer’s illegal actions, and on Wednesday, two Georgia mortgage brokers, Victor Bibby and Brian Donnelly, received $11.7m for doing just that.
The pair, who worked for U.S. Financial Services Inc, a mortgage brokerage firm in Alpharetta, Georgia, said they became suspicious when lenders told them not to show an amount charged for attorneys fees on loan documents, but instead add the sum to the charge shown for “title examination fee.”
After lenders ignored their concerns, Bibby and Donnelly hired an attorney and filed a whistleblower suit.
In the end, the information they supplied was instrumental in forcing JP Morgan to pay a $45m settlement to the government, of which the pair – and their attorneys – received 26 per cent. The case was one of five settlements instituted by whistleblowers which came to light this week, for a combined payout of $227m.
They had to work hard for their money, however, and it is this disincentive which the SEC will be hoping to remove:
The suit remained under seal to give the government time to investigate. Bibby and Donnelly had to keep mum for more than five years and try to find ways to avoid charging the hidden fees.
“For both our families being hushed for such a long time and holding this inside was unbearable,” Donnelly said in an interview. “It puts a lot of stress on you.”
Being able to get the payout without the five years of living a lie could indeed markedly increase the number of tips. The next concern will be weeding the cranks from the pile.