Why Cash Incentives for Whistleblowers are so Useful against Control Frauds

[FreakinDJ]

Why Cash Incentives for Whistleblowers are so Useful against Control Frauds

Marty Robins' December 15, 2010 column “Blow the Whistle on Pointless Whistleblowing” in the Huffington Post opposed the SEC implementing the Dodd-Franks Act's provision that the SEC should develop a system of financial incentives for whistleblowers.

Mr. Robins is a former corporate counsel with strongly conservative anti-regulatory views. His purpose in writing was to enlist support for businesses lobbying the SEC to adopt a weak rule undercutting the Dodd-Frank's whistleblowing provision. I'm interested in the SEC rule on its merits and as a serial whistleblower, but Mr. Robins' primary arguments as to why this provision of the law was “pointless” is that fraud is trivial and played no material role in the crisis. As a white-collar criminologist and former senior financial regulator I find his claim as dangerous as it is astounding.

Mr. Robins does not evince any expertise in investigating sophisticated financial frauds, but he has strong views on such frauds.

"In the first instance, this effort is totally unrelated to financial stability. While the 2008 crisis and Great Recession were undoubtedly the result of terrible decisions on Wall Street, by mortgage originators and by borrowers on Main Street, in lending and borrowing beyond ability to pay, virtually none of this activity was even arguably illegal. As indicated by the absence of criminal prosecutions, there is nothing illegal about doing things which are really dumb. These new provisions in the law will do nothing to deter abject stupidity on the part of private actors which imperils the broader economy. As noted, doing the latter requires significant reform of corporate governance law. There is no credible evidence that illegality had anything to do with the financial meltdown."


http://www.benzinga.com/life/politics/10/12/732189/why-cash-incentives-for-whistleblowers-are-so-useful-against-control-frau