Corporate whistleblowers take note: You might actually get a little cash for putting your job at risk to report fraud.
The Securities and Exchange Commission paid out its first award to a whistleblower as part of a year-old program aimed at rewarding people who step forward to provide the agency with evidence of fraud. The recipient of the $50,000 reward, who asked to remain anonymous, helped the SEC “to move at an accelerated pace and prevent the fraud from ensnaring additional victims,” according to an SEC press release.
Although $50,000 may seem a relatively small sum, the award is 30 percent of what the agency has collected in the case so far -- the maximum share the SEC can grant a whistleblower. If the agency goes on to collect more, the whistleblower’s award will increase, according to the press release.
The announcement comes amid criticism of the SEC’s handling of the Bernie Madoff scandal and prosecutions resulting from the financial crisis. Even after receiving many tips, the agency failed to catch Madoff’s Ponzi scheme, costing his victims about $18 billion total. In addition, critics have derided financial regulators, including the SEC, for the lack of criminal prosecutions related to the financial crisis.
“In absolute dollars this happens to be a relatively small matter,” Stanley Bernstein, a partner at Bernstein Liebhard, a firm that represents whistleblowers, told The Huffington Post of the payout. “This was meant to be a shot across the bows that we’re here, we’re prosecuting and we’re not going to be stingy.”
Yet despite the agency’s arguably soft touch in the past, the first whistleblower payout may spark concern for corporations, Bernstein said. When the SEC first announced the whistleblower program last year, businesses criticized the plan, saying they were worried employees would go to the SEC before dealing with the matter internally, according a Washington Post article at the time.
“People are not motivated by getting gold star,” Bernstein said. “Now that there is money, I think companies will have to be a lot more careful with corporate fraud.”
And the SEC program, which gets around eight tips per day, according the press release, may be a potential whistleblower’s most lucrative option. Whistleblowers that take tips to the FBI are likely not to get any money for their troubles, and whistleblowers that take their cases to the IRS have a 0.2 percent chance of getting compensation for their tips.