Are we experiencing whistleblower fever?
If you haven’t seen it yet, a former executive director at Goldman Sachs left his job this week but decided to take the firm down with him in a scathing letter about alleged illegal practices at the financial powerhouse.
Greg Smith, who had worked for the company for 12 years, wrote in an Op-Ed in the New York Times yesterday:
“I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.”
He goes on to say how corrupt and greed focused the company has become, and Goldman came out swinging against his claims. But the letter has become an internet sensation, potentially inspiring others to get on the whistleblower bandwagon.
A tip I just received today from a Wall Street source directed me to U.S. Commodity Futures Trading Commission’s website and a comment on an open forum on the page created to solicit public comment related to financial filings under the “Wall Street Reform and Consumer Protection Act.” aka,“Dodd-Frank Act'’.
The comment my source wanted me to read was one supposedly written by a JPMorgan employee who claims to have information on chicanery at the firm:
((UPDATE: The CFTC has pulled the comment from its site. Since no one at the agency has returned my request for information, it’s difficult to pinpoint why they removed the comment. My first thought is they’ve deemed it a fake. The comment:))
“I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk.”
Apparently, the writer was motivated by Smith’s open letter about corruption at Goldman:
“With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well.”
Clearly, this could be phony. There’s no name attached to the posting, which is signed, “Kind Regards, The 1st Whistleblower of Many.”
I emailed JPMorgan for comment on the comment and will update this post if I hear back. I also left a message for CFTC spokesman David Gary to find out if the agency has looked into the comment and what the process is when this type of thing occurs.
Already, industry insiders are speculating that the comment could be a fake.
This from ZeroHedge.com:
“… this letter is either a complete fraud or simply a total mockery, as it provides absolutely nothing new, and merely regurgitates existing manipulation claims already out in the public domain, and backed by precisely zero evidence.”
Or, to look on the bright side, maybe Smith is inspiring people to get their ethics glasses on.
Either way, whistleblowing ain’t easy folks, but it has gotten more lucrative and more prevalent recently.
Since 2005, there’s been a spike in whistleblower cases filed with the federal government, according to the Department of Labor’s Occupational Safety and Health Administration, or OSHA. And one of the biggest labor law firms in the country, representing employers, has experienced such a big increase in worker snitching that it has created a special whistleblower practice to handle the extra workload.
“Any uptick is a good sign,” said Geoffrey Rapp, the Harold A. Anderson Professor of Law and Values at the University of Toledo’s College of Law, about an increase in whistleblower charges. “The goal here is to get information about fraud before it becomes so serious, as in the collapse of [Bernard] Madoff and Enron, where the whole company falls apart, or the economy falls apart.”
It’s a trend that labor and shareholder advocates applaud, but corporations dread, and it’s intensified in recent months for a host of reasons, according to legal experts.
OSHA, which administers a host of whistleblower protections under 21 different laws, including not only labor safety laws, but also those under Sarbanes-Oxley Act and the Consumer Financial Protection Act, has seen a jump in whistleblower charges, reaching 2,339 through Sept. 14 of this year, compared to a total of 2,319 for all of 2010, and 2,158 in 2009.
A new law providing monetary rewards for whistleblowers kicked in last year (in addition to scores of federal and states whistleblower protections put in place in recent years). There’s also a growing desire on the part of citizens to step up when they see wrongdoing following an economic downturn largely caused by malfeasance in corporate America. And there has been a beefing up of government enforcement to protect citizens who come forward with their accounts of misconduct from retaliation.
The Dodd-Frank financial reform law created more incentives, including a whistleblower reward that went into effect in August, for employees to step forward, something that’s very difficult for them to do because they can lose their jobs as a result, and many have. The legislation actually calls for financial incentives of up to 30 percent of funds recovered for information employees give regulators that leads to prosecution of securities fraud. (Click here for information from the U.S. Securities and Exchange Commission on how the bounty works.)
The question is, will this all lead to change? A good sign is Smith’s look in the mirror may be getting us all thinking about picking up that whistle…hopefully.