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September 17, 2014

Holder to Recommend Big Rewards for Wall Street Whistleblowers

The Wall Street Journal reports that Attorney General Eric Holder will announce a new Justice Department proposal this Wednesday at New York University. He is expected to call for increased cash rewards under the Financial Institutions Reform, Recovery and Enforcement Act, or Firrea, for whistleblowers who provide evidence of wrongdoing on Wall Street.

Mr. Holder will argue that the Firrea whistleblower provision ought to resemble the False Claims Act—which offers as much as 25-30% of the amount recovered on the basis of a tip— in order to make it an attractive option in an environment where large salaries and bonuses can coopt would-be informants.

Lawmakers have warned that such provisions “prompt people to falsely accuse corporations of wrongdoing in the pursuit of payout”; taking the unprecedented recent settlements extracted from J.P. Morgan, Citigroup, and Bank of America for unspecified charges, a single whistleblower would have received hundreds of millions of dollars had those cases been eligible under the proposed rewards scheme.

Mr. Holder also plans to call for ramped-up hiring of FBI agents to investigate white-collar crime, and will likely “signal publicly for the first time” that the DOJ intends to file criminal charges in financial fraud cases, ratcheting up what some have called an unfair demonization of Wall Street.

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