New York AG Proposes Financial Frauds Whistleblower Act
By the C|C Whistleblower Lawyer Team
New York Attorney General Eric T. Schneiderman announced today proposed legislation to protect and reward whistleblowers who report on fraud or misconduct in the banking, insurance, and financial services industries. Titled the Financial Frauds Whistleblower Act, the law would be modeled after the Dodd-Frank Whistleblower Program and provide whistleblower rewards of 10-30 percent of any government recovery and offer concrete protections against whistleblower retaliation. It would fill a gap in New York’s whistleblower system by for the first time offering to protect and incentivize financial frauds whistleblowers. It would also be the first state to offer any kind of “mini” Dodd-Frank whistleblower program. See New York Attorney General Press Release.
In announcing the proposed legislation, Attorney General Schneiderman made a strong case for why this law was needed and the important function it would serve in helping New York combat financial crime:
From holding the banks accountable for the collapse of the housing market, to taking on unfair advantages for high-frequency traders, this office has committed to promoting fairness and a level playing field for all investors. And yet, a valuable tool for building these cases is rarely at our disposal. New York has a unique opportunity to set the gold standard for states seeking to expose and hold individuals accountable for financial crimes. This law will be the strongest, most comprehensive in the nation, and is long overdue for a state with the world’s most important financial markets.
As Attorney General Schneiderman sees it, providing incentives and protections to financial frauds whistleblowers “is essential for detecting and prosecuting a wide array of financial frauds.” And at no cost to the taxpayers as the contemplated whistleblower rewards would be covered by those engaged in the wrongdoing and not come out of any state funds. For proof in the pudding, the Attorney General pointed to the major success of the New York State False Claims Act since it was amended in 2010 to increase the incentives and protections afforded whistleblowers: “since then, financial recoveries in cases brought to the office’s Taxpayer Protection Bureau by whistleblowers have paid out 80% more than cases that originated from other investigative means within the same Bureau.