Thursday, December 16, 2010

Will Wall St. undermine SEC whistle-blower program?

Business lobbyists are working overtime to kill the new Securities and Exchange Commission whistle-blower program in a tried-and-true Washington way: Convince the agency to issue regulations that render the program ineffective. This warning comes in an article by attorneys Erika Kelton and Eric Havian, published in the Washington Post.

Comments on the proposed rules are due by December 17th but even before they were released, defense firms were issuing dire warnings and meeting with SEC officials to try to eviscerate the whistle-blower provisions of the Dodd-Frank financial reform law.

In a separate article posted on Truth-Out, Mr. Havian details the history of the False Claims Act whistle-blower program, which has achieved enormous success by promoting a partnership between qui tam whistle-blowers, their attorneys and government lawyers. He contrasts this with the IRS tax whistle-blower program, which does not promote (or allow) collaboration. The tax whistle-blower program is awash in a backlog of cases and has yet to pay a single whistle-blower award, despite the filing of thousands of submissions in the past four years. These two models provide a stark choice for the SEC as it sets up its program.

Don't Let Wall Street Get Away With It: Protect and Reward SEC Whistleblowers notes that corporate lobbyists and bureaucrats have predicted woeful consequences for whistle-blower programs in the past. The proven success of whistle-blower cases under the FCA is more persuasive than their doomsday rhetoric.