Fraud Whistleblowers: Uncle Sam Wants You

Scott Cohn|CNBC Senior Correspondent

U.S. authorities are ratcheting up their investigation of residential mortgage-backed securities — the bundles of mortgages that were at the heart of the 2008 financial crisis. And they are appealing to the public for help.

Department of Justice
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The Justice Department on Thursday announced new resources for the so-called “RMBS Working Group,” a multi-agency task force formed in January that includes federal prosecutors, the Securities and Exchange Commission and the New York state attorney general’s office.

The defaults of millions of home mortgages that had been packaged together and sold as residential mortgage-backed securities or RMBS helped plunge the world into a deep recession, but there have been few prosecutions, in part because insiders have not been willing to step forward. So now, the group has launched a "stopfraud" website to get their attention.

“We are particularly interested in information from corporate insiders — that is, people who worked with RMBS in the financial industry and witnessed the misconduct,” the site says. “Fraud can be hard to uncover without help from whistleblowers who were corporate insiders.”

The website highlights the difficulty authorities have faced in tackling the crisis. Few insiders have been willing to step forward, particularly after two former Bear Stearns hedge fund managers, Ralph Cioffi and Matthew Tannin, were acquitted of fraud charges in 2009 in a case that revolved around mortgage-backed securities. In addition, law enforcement sources have told CNBC, so much of Wall Street’s conduct was vetted by attorneys as well as on-site regulators that criminal cases have been difficult to make.

So the website appeals to the insiders on another level, pointing out that the Dodd-Frank financial reform law includes new and substantial rewards for whistleblowers, as high as 30 percent of any money the government recovers.

The Justice Department does not say what new resources are being devoted to the investigation beyond the website, but says the working group will hold a two-day meeting in Washington next week, with more than 180 agents, attorneys and investigators expected to attend.

While authorities are working against a five-year statute of limitations for some offenses, the website says “it is not too late” to act.

“The working group has the ability to pursue fraud even when it occurred several years ago,” the site says, but adds that the task force “needs your help to hold wrongdoers accountable.”