U.S. Attorney General Eric Holder was at NYU law school Wednesday, urging Congress to raise rewards for whistleblowers who report financial crimes.
Under the Financial Institutions Reform, Recovery, and Enforcement Act — or FIRREA — a law passed after the savings and loan crisis of the 1980s, whistleblower awards are capped at $1.6 million.
That’s not enough of an incentive for a Wall Streeter to give up a career, Holder said. He urged Congress to raise the limit or take the cap off the law.
Why pay more for Wall Street whistleblowers? Because, Holder said, after September 11, 2001, the FBI shifted its focus from “white-collar agents, experts, and analysts” to counter-terrorism resources.
After 9/11, the FBI undertook a historic transformation — becoming an agile, threat-focused agency devoted to detecting, investigating, and preventing attacks, while holding would-be terrorists accountable. This was a laudable, logical shift that has led to tremendously effective counter-terrorism work — and it is not going to be reversed anytime soon, given the current threat environment we face.
But since 9/11 there’s no less fraud on Wall Street. That means the FBI needs to find more civilians willing to blow the whistle on financial crimes. Pay the whistleblowers big bucks, Holder said, because you’re competing with Wall Street salaries, where median executive pay last year hit $15 million.
The False Claims Act, by the way, doesn’t cap awards for whistleblowers and has worked as hoped. The DOJ has recovered more than $22 billion since 2009 under the FCA, Holder said. But that law only targets companies and people who have defrauded the government and doesn’t apply to typical financial crimes against investors.
And the whistleblower provisions under Dodd-Frank that cover complaints about FCPA violations, among other things, don’t limit awards and are generating thousands of tips a year to the SEC.
* * *
At about the time Holder was at NYU talking about how busy the FBI is fighting terrorism, 800 police in Australia were conducting anti-terrorism raids in Sydney and Brisbane.
They said Operation Appleby disrupted a gruesome plot by home grown Islamic radicals to “commit violent acts” in Australia, including the beheading of a random member of the public.
Some of the 15 men detained by Australian police are accused of helping to recruit, facilitate, and fund people to travel to Syria.
Documents seized during the raids “are expected to say that the plan involved snatching a random member of the public in Sydney, draping them in an Islamic State group (IS) flag and beheading them on camera,” the Australia Broadcasting Corporation said.
Although Australia and New York City are half a world apart, nothing could have better illustrated Holder’s point. Terrorism is now the big fight.
So expect more federal whistleblower programs and higher rewards for those who help expose fraud, securities violations, and financial crimes.
* * *
And don’t expect any slowdown in global anti-corruption enforcement.
Events Wednesday in Australia and Holder’s words at NYU reminded us that terrorists rely on both violence and corruption to subvert regimes, gain support, and create safe havens.
In March, days before Mythili Raman left the DOJ, where she ran the criminal division, she warned about the threat to the U.S. and the rest of the world from corrupt regimes. The hallmarks of those regimes are illegal arms flows, money laundering, human smuggling, and a refusal to cooperate with law enforcement agencies anywhere that are trying to fight criminal gangs and terrorists.
“For all of these reasons,” Raman said, “fighting foreign corruption is not just a choice we have made; it is a necessity.”
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.