It’s a new world for the whistleblowers who want to fight financial fraud.
The Dodd-Frank reform act is not even three years old.
In fact, the first collection for a whistleblower action created by the Dodd-Frank reforms is not even a year old. It isn’t even fully collected yet, at least according to the Securities and Exchange Commission which levied the first such fine.
Up until very recently lawyers who handle False Claims Cases, the professionals who consider themselves to be experts in fighting fraud, had far fewer tools to use in the world of finance.
Class action shareholder cases are always in the news, but to make a traditional False Claims case government money has to be at risk. Every 30 years or so the government bails out a big car company like General Motors or Chrysler and takes an equity position, but generally speaking the U.S. Government’s involvement in buying securities is limited. As a result, the United States does not usually become a victim of the kind of financial fraud that would lead to a False Claims case.
If you called a bunch of lawyers about a case of financial fraud, five or even three years ago, they may have had a lot of ideas, but most likely not many would have told you about filing any kind of qui tam action.
Now, With the Dodd-Frank Reform Act, It’s Different
There are many important options available for Whistleblowers who want to fight fraud and earn a share of a government recovery.
Now we have multiple State False Claims Acts and most of those state laws do allow us to file a case of financial fraud. States and municipalities hold large investments in their pension funds and are potential victims of this kind of fraud. Whistleblowers who know about it can file cases in appropriate state courts, when the pension funds lose money as a result of fraud. Whistleblowers can even bring a case in more than one state court at a time, if more than one state, has been affected by the fraudulent scheme.
New Whistleblower Offices in Federal Agencies
Now we do have the Dodd-Frank reforms which created two new whistleblower offices one at the Securities and Exchange Commission (SEC) and another at the Commodities Future Trading Commission (CFTC). They each have websites and federal officials who are required to help and investigate reports of fraud in their industries.
The SEC announced its first award to a whistleblower on August 21, 2012. The case involved a multi-million dollar fraud and a million dollar fine. The fine had not even been fully collected when the SEC granted its first award to the whistleblower who provided the agency with the information needed to take action.
The Federal Government’s direct involvement in the mortgage industry has increased over the last few years which has also provided a new area of fraud to pursue. The Troubled Asset Recovery Program as well as U.S. Government investments in Fannie Mae and Freddie Mac, means that there is much more direct involvement by the government in the Mortgage industry and that makes it more possible for whistleblowers to file a federal fraud case regarding Mortgage fraud.
Whistleblowers who want to report fraud occurring within these industries also benefit from an amended and strengthened Federal False Claims Act. The law underwent key improvements in 2009 and 2010 which help expand the kinds of claims which can be filed.
Implications of Financial Fraud Whistleblower Law Changes
Government investments, as well as the advances in whistleblower law have made it much more possible for someone in finance to file a case and make a difference. So, whistleblowers are beginning to take advantage of this new environment.
There have already been major recoveries against large lending institutions accused Mortgage fraud and whistleblowers have already collected millions of dollars for reporting these cases.
Hopefully, all the new whistleblower activity in the financial industry and the new ways to fight fraud in finance will help reform the industry as a whole. If you know of financial fraud being committed either by an individual or by a corporation, please contact us to learn more about our firm or to schedule a free initial consultation.