Fraud and corruption are too common in business and government. Rare is the person who will stand up against the powers-that-be when they engage in illegal activities, but one whistleblower program may be a victim of its own success. What happened?
Whistleblower cashes in
A big payout is causing big problems for the Commodity Futures Trading Commission’s (CFTC) whistleblower program. A possible $100 million-plus payout to a former Deutsche Bank AG executive threatens the very existence of the agency.
The whistleblower in question aided investigations that led to about $2.5 billion in settlements with Deutsche Bank in 2015, including $800 million with the CFTC. A unit of the German bank pleaded guilty to U.S. criminal charges that it had manipulated the London interbank offered rate, Libor, a benchmark interest rate used to establish short-term loans for global banks. The bank admitted not adequately policing its employees.
Some CFTC officials support the $100 million payout, which is calculated using a formula based on the legal settlement. Not everyone agrees, however, and some question whether the agency can afford to continue the program if it pays the whistleblower.
The problem? The fund, which is financed through the collection of monetary penalties, was capped at $100 million, with the excess money going to the U.S. Treasury because no one anticipated a payout the size of the Deutsche Bank case. With most penalties amounting to $5 million or less, replenishing the account would take a long time. In fact, other whistleblower applications have languished for months because of doubts about the program’s viability.
The collected monetary penalties also pay for the program itself. Virtually emptying the account for the Deutsche Bank payout could mean the furlough of employees.
Program cashing out?
The CFTC, in response to questions about the program's future, has turned to Congress for emergency help. A bill sponsored by Iowa Sen. Chuck Grassley, the ranking Republican on the Judiciary Committee, would increase the CFTC cap to $150 million while creating a separate, temporary account to fund the whistleblower program. Unfortunately, the bill has yet to be considered by the Agriculture Committee, which oversees the CFTC.
Grassley’s office said it is pressing for a bipartisan solution to rescue the program. Democrats said they are working with the CFTC on a possible answer. Within the CFTC, some say legal options remain, an argument rejected by the agency’s leadership.
In the meantime, the program is in limbo, largely because it participated in the successful prosecution of Deutsche Bank. Jeb White, president of Taxpayers Against Fraud, said there is “hyper-concern” about whether future whistleblowers will step forward if they think the program is in financial trouble.
A partner in fighting corruption
While whistleblowers have been, as the CTFC says, “critically important” to rooting out fraud and corruption, they also take tremendous risks. Even though they are protected by federal, state, and municipal laws, whistleblowers are putting their livelihoods, reputations – and sometimes their lives – on the line if their identity becomes known. Unfortunately, courage alone is not enough if you attempt to navigate the complex legal issues on your own. A single innocent mistake could jeopardize your legal case and your professional career.
For over 30 years, Brewer & Pritchard, P.C., based in Houston, Texas, has been helping professionals and businesses throughout Texas and nationwide. It has been here to help its clients deal with fraud and corruption. J. Mark Brewer knows how to treat you with the respect that you deserve while aggressively pursuing your case. He will work with you every step of the way to secure justice. Contact J. Mark Brewer today to see how we can help you.