When President Barack Obama signed the Dodd-Frank Wall Street reform act into law last summer, very few in the financial industry knew that the bill included a massive change in the way whistleblowing law works in this country.
But they know it now. Welcome to the new world of Wall Street whistleblowing.
At the National Whistleblowers Center, Stephen Kohn helps connect whistleblowers with the lawyers who can bring their cases to the government’s attention. And he says he’s looking forward to a bonanza of Wall Street cases under Dodd-Frank.
“I need everyone in those board rooms to be looking at everyone else and saying, ‘Is this guy gonna turn me in? Or am I gonna turn them in?'” Kohn said. “You need that level of fear, of an understanding that the world has changed. And people that you work with can become multi-millionaires by turning you in.”
Under the previous laws, whistleblowers only got a payout if the fraud was against the government. But the new Dodd-Frank law okays payouts to tipsters of fraud on Wall Street, even if the government wasn’t the entity defrauded.
"You should be terrified about the people around you if you're doing something wrong."
And on Wall Street, the size of those frauds could be huge: “Hundreds of millions of dollars, if not larger. In the billions,” says attorney Stuart Meissner, who says he has already gone to the SEC with seven new cases under the Dodd-Frank rules.
The size of the fraud estimates on Wall Street are based on a precedent: What happened to Big Pharma when whistleblowers began to take advantage of a late 1980s update to the False Claims Act. According to the Kaiser Family Foundation, the drug industry gets 37 percent of its revenue from the federal government, making it a prime target for whistleblowers who can prove that some of that money was obtained fraudulently.
Since December of 2000, the industry has paid out more than $9.5 billion in whistleblower settlements, says the non-profit group Taxpayers Against Fraud.
To the US Chamber of Commerce, the new Wall Street rules will send a signal to Wall Street insiders that they should hire a lawyer and go to the government, rather than try to use their firms’ internal compliance offices.
“What the Dodd Frank bill does is, it incentivizes people to go directly fto the SEC because they may hit the lottery,” says Tom Quaadman, Executive Director for Financial Reporting Policy and Investor Opportunity at the Chamber.
Attorney Stuart Meissner says the frauds he’s already reported came at some of the biggest players on Wall Street, including Bank of America , Oppenheimer & Company, Wells Fargo , and Morgan Stanley .
Oppenheimer spokesman Brian Maddox said of Meissner's complaint, “These allegations are false. Federal regulators reviewed Meissner's allegations about the 2004 audit report and have taken no action and Oppenheimer's public disclosure was and remains accurate."
A spokesman for Bank of America said the bank does not comment on the existence of regulatory inquiries. Morgan Stanley declined to comment. And Wells Fargo did not respond to requests for comment.
- Watch Eamon Javers' Video Report Here
Those are just a few of the 30,000 tips per year that experts expect the SEC will receive as a result of the new Dodd-Frank rules.
And Meissner says his message to Wall Street is simple: “You should be terrified about the people around you if you're doing something wrong. If you're not doing anything wrong, you have nothing to worry about.”
Watch Eamon Javers' special series, "Bounty Hunters," all week on CNBC. On Tuesday, February 8 and Wednesday, February 9, he will report on "Squawk Box", "Squawk On The Street", and "Power Lunch. On Thursday, February 10 and Friday, February 11, he will report on "Squawk Box" and "Squawk On The Street."