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U.S. Attorney General Eric Holder would like to see the government boost rewards given to whistleblowers in the financial sector who come forward with inside information on corporate wrongdoing. Holder gave a speech last week at New York University in which he called the current maximum payout for a financial whistleblower under the Financial Institutions Reform, Recover and Enforcement Act (FIRREA) a “paltry sum.” Larger rewards are needed, according to A.G. Holder, in order to induce high paying executives to come forward.

usa-dollar-bills-1431130-mAt present, financial whistleblowers that come forward with fraud tips can only receive a maximum payout of $1.6 million, which is a far cry from what whistleblowers are eligible to receive under False Claims Act lawsuits, which reward whistleblowers with 15 to 25 percent of any recovered money. When one considers that the median pay for an executive in the financial sector is upwards of $15 million per year, it doesn’t take a genius to see that $1.6 million simply isn’t enough for someone to risk such a lucrative career.

Despite the Department of Justice (DOJ) bringing over 60 fraud cases against financial firms over the last five years resulting in recoveries of roughly $85 billion, DOJ realizes the need to go after individuals responsible for fraud rather than just going after the companies that employ them. This, according to Holder, enhances accountability because companies don’t exclusively commit corporate fraud by themselves, company officials who engage in misconduct commit corporate fraud, and they need to be held responsible for their decision-making.

This is where the Justice Department finds itself hamstringed: discovering prosecutable evidence of an individual’s intent to deceive in a financial fraud case is usually only possible if there are cooperating witnesses, and cooperating witnesses are only going to come forward if they have incentive to do so. “Many financial criminals are savvy enough to avoid using email, which may leave a trail for investigators to follow,” said Holder in his speech. “And intent may only be evidenced sometimes in the form of verbal instructions – evidence that can provide the sort of “smoking gun” that is needed to secure a conviction: but that can only be attained from a cooperating witness.”

Holder closed his speech by highlighting the need to change the whistleblower provision in FIRREA (“perhaps to False Claims Act levels”) in order to incentivize financial whistleblower cooperation. “This could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress – making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.”

The Securities and Exchange Commission (SEC) announced today that a whistleblower will receive a $30 million reward for providing valuable information that led to a successful enforcement action. The action in question and the whistleblower’s identity have not been made public, though the SEC noted Monday that the reward was the fourth for an international whistleblower participating in the SEC program. The $30 million total is more than double the previous record for highest reward given to an SEC whistleblower.

whistle freeAccording to Andrew Ceresney, director of the SEC’s enforcement team, the unidentified whistleblower came forward with valuable information about ongoing fraud that would have been exceedingly difficult for the SEC to detect. He added that such a large reward should go a long way toward demonstrating the SEC’s “commitment to whistleblowers and the value they bring to law enforcement.”

The total reward for SEC whistleblowers commonly falls between 10 and 30 percent of any money recovered by the government in their case against the fraud perpetrator. If the government later recovers additional money from the defendant, the whistleblower could be eligible to receive future payments.

In this particular case, the percentage allotted to the whistleblower was not disclosed, though according to Fortune, the whistleblower challenged the percentage claiming that it was below average for an SEC whistleblower reward. In response, the SEC said the award percentage would have been higher had the whistleblower brought the information to the government’s attention in a more timely fashion

Detroit Doctor Admits to Administering Chemotherapy to Patients Who Didn’t Need the Treatment

September 16, 2014

A Detroit doctor is facing a statutory maximum of 175 years in jail for administering unnecessary chemotherapy to patients and submitting false claims to government health care agencies and private health insurance companies. Dr. Farid Fata of Oakland Township, Michigan today pleaded guilty before U.S. District Judge Paul Borman for his role in a health [...]

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Owner of X-Ray Company to Pay $7.5 Million in Forfeiture For Role in Health Care Fraud Scheme

September 15, 2014

The owner of an X-ray company has been accused of bilking over $7.5 million from government health care agencies. Rafael Chikvashvili, the 67-year-old owner of Alpha Diagnostics, allegedly overbilled Medicare and Medicaid by submitting false claims for services that were not performed by licensed doctors, among other illegal activities. According to a federal indictment unsealed [...]

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Owner of Shreveport Outpatient Program Faces Up to 30 Years Behind Bars Over Health Care Fraud and Wire Fraud Charges

September 11, 2014

A 43-year-old woman who owns and operates a Shreveport, Louisiana-based intensive outpatient company is facing 30 years of jail time over charges of health care fraud and wire fraud. Sharon Monroe, the owner of Monroe Medical Management LLC (MMM), pleaded guilty today before U.S. District Judge S. Maurice Hicks Jr. to charges of bilking money [...]

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Owner of Miami Health Care Company Gets 75 Months Jail Time for Role in Medicare Fraud Scheme

September 8, 2014

The owner of a Miami home health care company was sentenced to 75 months behind bars for her role in a Medicare fraud scheme worth over $6.5 million. The Justice Department announced the sentencing of 64-year-old Cruz Sonia Collado in a press release issued Monday. In addition to prison time, Collado will serve three years [...]

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California Nursing Homes Accused of ‘Severely Overmedicating’ Patients

September 3, 2014

Two northern California nursing homes, owned by Arba Group, are the subjects of a False Claims lawsuit that claims they “severely overmedicated” their patients, causing injuries and death. The two homes allegedly received over $20 million in Medicare and Medicaid reimbursements between 2007 and 2012. During this time, the both homes allegedly overmedicated their patients [...]

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San Diego Hospice Whistleblower Lawsuit Settles for Millions

September 2, 2014

The whistleblower law firm of Baum, Hedlund, Aristei & Goldman has announced a multi-million dollar settlement with San Diego Hospice & Palliative Care Corporation. The settlement resolves a 2012 qui tam lawsuit filed by whistleblower attorneys Mark H. Schlein and Diane Marger Moore on behalf of a former hospice nurse who claimed that San Diego [...]

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SEC Whistleblower to Receive $300,000 for Role in Exposing Alleged Fraud

August 29, 2014

The Securities and Exchange Commission (SEC) has awarded more than $300,000 to an audit and compliance whistleblower who filed a claim in connection with allegations of high-level insider trading. The SEC whistleblower reward is the first given out to an audit and compliance professional. Under SEC rules, potential whistleblowers working in audit and compliance functions [...]

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Nursing Home will Return $2.2 Million for Submitting Thousands of False Claims

August 25, 2014

The Justice Department announced last week that a New Rochelle, New York nursing and rehabilitation facility submitted over 62,000 false claims for Medicare reimbursement between 2002 and 2006. Relax Services Inc. and its owner, Leah Friedman, have been ordered to return the $2.2 million the company made by submitting false claims over the span of [...]

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