Today, Taxpayers Against Fraud delivered its Harry Markopolos for years despite the fact that he had crystal-clear proof of Bernie Madoff’s fraud. So you take the human nature factor above and multiply it times ten, or maybe even twenty.
Yes, the SEC is now under new management, and yes an awful lot of the old management “resigned to spend more time with family,” but I think it will take time for the new SEC folks to prove themselves.
And consider this, target audience for the whistle blower provisions includes financial professionals–and by and large these people not only do not trust the SEC, they think the SEC is something of a joke. No doubt, putting the SEC in charge of the program with so much authority will kill this idea in its infancy.
In an academic sense, I also wonder whether the incredibly successful qui tam model of the Federal False Claims Act and the Virginia Fraud Against Taxpayers Act will apply to other contexts like Wall Street. Just putting money on the table certainly won’t make this program successful, because the exact people the government is targeting already make enormous salaries and bonuses.
Moreover, for better or for worse, money is not the be all and end all of human behavior. IMHO, the False Claims Act works well for a number of reasons, not the least of which is because the ranks of defense contractors, the health care industry and others have a disproportionate share of patriotic Americans who know right from wrong and are not afraid to speak out about it.
In other words, the Federal False Claims Act depends on individuals who have a healthy, working, moral compass. Only time will tell if there are enough individuals in the financial industry with a healthy, working moral compass to make a difference, but some of us have our doubts…..