Harry Markopolos, call your office.
Under little-noticed new provisions of the Dodd-Frank Wall Street reform law, whistleblowers like Markopolos who alerted the SEC to Bernard Madoff's Ponzi scheme will for the first time be entitled to collect between 10- and- 30 percent of the money recovered by the government.
And that could turn a new wave of whistleblowers, those insiders with proof of financial wrongdoing on Wall Street, into millionaires.
"If the law works, whistleblowers should be rewarded with millions of dollars," said Stephen Kohn, executive director of the National Whistleblowers Center. "Those whistleblowers will save investors billions and billions of dollars."
And the promise of so much money changing hands has plaintiff's lawyers chomping at the bit. On July 23rd, Kohn's center held a briefing for lawyers seeking to understand how to bring the new cases. One attorney familiar with the law says he already has cases in the pipeline ready to go now that the new law has passed.
"The beauty of this law is essentially it uses greed to fight greed.""
The new law will allow whistleblowers who bring "original information" to the Securities and Exchange Commission or the Commodity Futures Trading Commission to remain anonymous— even to the government. Working with an attorney as an intermediary, insiders with information about fraud can bring allegations to the government without fear that the government will somehow reveal their identity.
The new provision comes into law even as the SEC has become more aggressive in awarding tipsters.
On July 23, the commission announced the award of $1 million to Glen Kaiser and Karen Kaiser of Southbury, Conn., who provided information and documents that were crucial to the SEC's insider trading case against Pequot Capital. That award, which was the largest paid by the SEC for information in an insider trading case, was paid out under earlier authority.
Experts familiar with the new Dodd-Frank provisions expect that the dollar awards paid to informants in insider trading, securities and commodities fraud cases will grow much higher than $1 million.
In the Pequot case, whistleblower Karen Kaiser is the ex-wife of David Zilkha, a Microsoft employee who took a job offer from Pequot. Kaiser and her new husband found a key email between Zilkha and another Microsoft employee.
Experts don't expect the next wave of whistleblowers to consist entirely of ex-wives, but they do expect that people very close to the fraud will now have enormous financial incentives to go to the government.
"It won't take very many whistleblowers in the large brokerage houses to win their cases," said Kohn, "in order for people to get the message that anyone sitting in that room with you may become a multimillionaire by turning in your fraud. The beauty of this law is essentially it uses greed to fight greed."
The National Whistleblower Center has posted a summary of the provisions of the Dodd-Frank law. Read it here.