Holder wants to sweeten the pot for Wall Street whistleblowers

Attorney General Eric Holder called on Congress Wednesday to raise the limit on rewards for whistleblowers who expose bad actors on Wall Street.

In a speech at New York University, Holder signaled the start of crackdown on white-collar criminals who have avoided criminal prosecution, as federal investigations focus on patterns of malfeasance at large institutions.

{mosads}“[W]hen it comes to financial fraud, the department recognizes the inherent value of bringing enforcement actions against individuals, as opposed to simply the companies that employ them,” Holder said. “Despite the growing jurisprudence that seeks to equate corporations with people, corporate misconduct must necessarily be committed by flesh-and-blood human beings.”

Holder’s Justice Department has come under fire for agreeing to settle major cases related to the 2008 economic crisis without criminal charges. Few, if any, individuals have been convicted in connection with the risky and predatory practices seen as contributing to the financial crisis.

Holder said his agency is resolved to bring individuals up on charges but lamented that proving criminal intent is increasingly difficult as people willing to skirt the law become more savvy in covering their tracks.

Whistleblowers, Holder said, often provide investigators with the best chances of building a chargeable case. But he argued the incentive to bring them out of the shadows is often insufficient.

Under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), individuals can receive up to $1.6 million in exchange for coming forward. Holder called the figure “a paltry sum” in an industry that shelled out more than $26 billion in bonuses last year.

“In this unique environment, what would — by any normal standard — be considered a windfall of $1.6 million, is unlikely to induce an employee to risk his or her lucrative career in the financial sector,” he said.

Holder urged Congress to consider amending FIRREA, potentially bringing the statute’s whistleblower provisions in line with the False Claims Act. That law allows citizens to receive as much as a third of the funding recovered by federal investigators in fraud cases, though it only applies to government-funded programs.

Urgency is necessary, Holder said, pointing to a “troubling return” to the same brand of questionable, profit-driven behavior that he said helped bring on the recession.

“As this conduct begins to reemerge on Wall Street, it raises questions anew about the extent to which these activities may involve criminality — and may be prosecutable as fraud. Or, if these activities do not constitute illegal conduct, whether they should,” Holder said.