The Wall Street snitch pitch
Monday, November 22, 2010; 12:59 AM
An unlikely ad has been getting screen time in Manhattan movie theaters that cater to a Wall Street crowd.
Alluding to "the new Dodd/Frank banking reform law," it informs viewers that by exposing financial fraud they can earn substantial rewards - 10 to 30 percent of the money recovered by the Securities and Exchange Commission.
Sponsored by a New York lawyer, the ad encourages potential whistleblowers to visit his Web site, secsnitch.com.
As the snitch pitch suggests, a new high-stakes drama is playing out at the SEC, driven by the lure of jackpot payouts and an effort to stamp out the kind of corporate cons - or alleged cons - that have propelled Enron, Bernie Madoff and Goldman Sachs to infamy.
Legislation enacted over the summer in response to the financial crisis requires the SEC to pay rewards for information that leads to enforcement sanctions of at least $1 million.
But it falls to the SEC to translate the language of the Dodd-Frank Wall Street Reform and Consumer Protection Act into detailed regulations, and the rulemaking process is becoming a battle.
Corporations are pushing for restraints on what they fear could become an open season for bounty hunters. They have said the SEC should defer to corporations' internal programs for investigating employee tips.
"Instead of allowing companies to identify and fix problems, we are just creating a lottery," David Hirschmann, president of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness, said in a recent news release.
Lawyers who specialize in representing whistleblowers say the SEC shouldn't count on companies to investigate themselves. If employees are forced to complain internally, it could be harder for them to remain anonymous, lawyers say.
"[I]t appears the companies are attempting to create so many obstacles for whistleblowers to overcome so as to render the historic statute useless for the very cases the SEC hopes to bring, involving what would be top management," Stuart D. Meissner, the lawyer and former prosecutor who is the sponsor of the movie theater ads, wrote in a letter to the SEC.
The first draft of the SEC plan, a 181-page opus, is getting two thumbs down from Stephen M. Kohn, executive director of the National Whistleblowers Center. "My analysis is that 95 percent of all good claims will be denied under this rule," said Kohn, a Washington lawyer.
"We will not file claims under this rule," he added