There is No Cap on Fraud-Part I

By Attorney Tony Munter

The Washington Post and Bloomberg printed an opinion asking: “Is Whistle-Blowing really worth $200 Million?

The answer is yes. It really is worth it, especially to fight fraud.

The Commodity Futures Trading Commission or CFTC recently paid that amount to a whistleblower, and in reaction this article said, $200 Million was a “Hell of a big prize,” (sure), “a mind blowing amount of money” (yes), and finally “a crazy amount of money, for essentially just doing the right thing.”

Nope, not crazy at all, and not “just” anything.

Of course, $200 million is a lot of money. But that is the only real basis for the objection…It’s big. Maybe it could be smaller. This kind of economic theory is usually reserved for Sesame Street or determining amounts subject to varying income tax rates. As usual, the article completely ignores the size and scope of the Fraud the whistleblower reported. These attacks on whistleblower awards use jealousy to try to make awarding a whistleblower the issue when the issue is, our ought to be, what on earth were people doing that created such a huge scam that generated that kind of an award. They want to cap whistleblower awards…

Meanwhile, there is no cap on fraud.

If you commit fraud your goal is to make an infinite amount of money, and there is no concern about anyone getting hurt. Fraudsters are not trying to make money by “just” doing the right thing, (something nobody else did until this whistleblower came along by the way) but by doing the wrong thing.

This whistleblower reported on Deutsche Bank’s role in LIBOR fraud. That was an effort to manipulate an international bank lending rate which effectively meant manipulating the value of money loaned almost everywhere. An incomprehensible amount of money, was subject to this. LIBOR fraud was committed for one reason: greed. It was done to make money by doing the wrong thing. Yet op-ed writers want to make the issue a whistleblower getting an award. The whistleblower was awarded a share of the multi-billion dollar fines levied against Deutsche Bank.

Deutsche Bank reported a pre-tax profit of 1.2 Billion Euros on total revenue of 6.2 Billion Euros for the second quarter of 2021 and who knows how much money since being fined for LIBOR in 2015, or more importantly, while it was involved in LIBOR.

Nobody would dare suggest that’s too much money for a bank to make by loaning money. Nobody urges a cap on income as too big an incentive for a bank to be a bank. Banks making money legitimately is good news, but so is a whistleblower award.

Whistleblowers are awarded based on a percentage and sticking to that is fair. It provides an incentive commensurate with the size and scope of the fraud. So yeah, if you uncover the biggest international financial fraud in history, which likely will take years to unravel, (it took almost ten years for the CFTC to award anything to this whistleblower) your award will be bigger.

Capping the award as this op-ed advocates, means the size of the fraud doesn’t matter and the incentive gets reduced over time. Just as important, maybe more important, when the government pays on a percentage basis, it creates a partnership between the whistleblower and the government in the fight against fraud. It is the dream of the pro-fraud lobby to undermine that partnership.

The partnership between those who have real information and those in a position to do something with it works. News made when it works also encourages more whistleblowers, both are results worth paying real money to get.

Whistleblowers only get paid based on positive results. Another reason a percentage is fair. When the government has no success collecting anything, the whistleblower also gets nothing, zero, zip, nada. There is no floor that says a whistleblower must get a million dollars regardless of the success of the fraud enforcement. Nobody ever complains that a whistleblower getting nothing is unfair, even when that whistleblower also did the right thing.

Most importantly, those of us who want to make money in the markets, who want to invest real money in real financial opportunities, we should be the most happy to have this award paid. Otherwise we would be investing in a market designed to be crooked and designed to make it easier for fraudsters to steal money. Pay that percentage and be happy whistleblowers have a real incentive to stop fraud.

Real awards, commensurate with the collection, put the government and whistleblowers on the same side fighting fraud.

That is the best protection your investment can get.

Congratulations to the CFTC and the whistleblower.

It was worth $200 Million and then some.