5 ms·

Not sure how to feel about that, this is a lot of money... The cobra effect comes to mind[0]. Not to mention that this is all done behind closed doors. [0] htt

Not sure how to feel about that, this is a lot of money... The cobra effect comes to mind[0]. Not to mention that this is all done behind closed doors. [0] https://en.wikipedia.org/wiki/Perverse_incentive#The_original_cobra_effect https://en.wikipedia.org/wiki/Perverse_incentive#The_origina...

nullspace 4y ago
My understanding is that doing the things that gets you rewarded for whistle-blowing is flat out illegal. You will get into a world of trouble if you go for the cobra effect. In that way, there's both a carrot and a stick right?
- olalonde 4y ago
  What I had in mind was something more innocent like: mid-level employee engages in illegal activity (e.g. misrepresents some critical data in a report, engages in anticompetitive behavior, etc.), blows the whistle on company and puts blame on management. Whistleblower is granted immunity, company is fined large amount and employee collects a large payout. I'm not saying this actually happened but it seems that large rewards may create such incentives. I might also be way off here, but it's really hard to know given the lack of information surrounding the rewards.
  - xenadu02 4y ago
    You cannot receive an award for activities for which you have decision-making authority. "Whistleblower" in a legal sense has to mean that someone _above_ you asked you do to the illegal activity.
    - olalonde 4y ago
      That's what I meant by "blaming management", e.g. claiming you were just following orders from above.
      - manquer 4y ago
        Your boss/company is responsible for your actions , if they have not put enough controls that is their problem. For example there is personal phone/messaging app use in finance industry resulting in fines that is doing the news rounds now. if you are communicating finance industry information outside the work devices provided and your company is not put enough controls and disciplined staff etc , they are liable for it .
        macintux 4y ago
        > Your boss/company is responsible for your actions , if they have not put enough controls that is their problem. I won’t argue they’re not accountable, but are you not yourself also responsible? If you knowingly commit fraud, “my boss didn’t stop me” is an unconvincing defense.
      - xenadu02 4y ago
        OK sure: If you are sophisticated enough to completely fool the SEC investigators without leaving a paper trail, email, or text message anywhere that points back to you. If you are amoral enough to steal money this way. And smart enough to pull it off while dumb enough to do something so risky. Then yes in theory you might be able to do what you propose. Perhaps you highlight a good point though: make sure to CYA if someone is pressuring you to do something borderline. Make sure there is an email or text message trail where you highlight your concern about the legality of the operation, ask if we should consult a lawyer, etc. If someone above you only speaks in person and insists that you are the originator of all documents/proposals that may be a sign they're trying to make it look like it was your idea.
        bluGill 4y ago
        Even then, go to the SEC right away. They will provide legal advice. Sometimes you should quit, sometimes gather evidence.
      - vkou 4y ago
        You can try, just like how you can try to steal your own car for the insurance money, but you'll be in a lot of shit when it doesn't work out. Without a paper trail, without coworkers collaborating your story, the investigations might not have the outcome you desire. Also, if the firm is well run, internal audits can catch you, and then you'll be in a lot of trouble.
arnaudsm 4y ago
The obvious solution is to award a percentage of the fine. They give between 10 and 30% of the money collected [1] [1] https://www.sec.gov/news/press-release/2022-40 https://www.sec.gov/news/press-release/2022-40
- codemac 4y ago
  That's what they do: https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml
bityard 4y ago
I can't tell if you're joking or if you actually believe someone might go out of their way to set up a successful but shady business, just so they can blow the whistle (on themselves?) in order to collect the whistle-blowing reward?
- olalonde 4y ago
  See my reply here: https://news.ycombinator.com/item?id=32157456 https://news.ycombinator.com/item?id=32157456
WaxProlix 4y ago
Are people going to start creating fraud just to expose themselves and get 10-30% of the take?
- stefan_ 4y ago
  No, the frauds are regularly fined less money than they made and they never seem to pursue criminal charges either.
  - joshcryer 4y ago
    So we can't put a corporation in prison even though it's a person, and it's a notoriously difficult process to get CEOs and upper management indicted, so we fine them because it just gets things over with. What if we took "corporations are people" a bit further though. What if we "imprisoned" the corporation by not permitting it to do whatever line of work it was doing during the fraudulent phase for a period of years?
- deleted 4y ago
  [deleted]
blitzar 4y ago
Given most members of the public assume that everyone in the financial sector is party to billion if not trillion dollar frauds, it is important to realise that if you blow the whistle - you get a chunky cut of the settlement. So either the system is not quite as riddled with fraud as most believe or many people making 500k a year are passing up >$100mil to hide the fraud.
matrix_overload 4y ago
From the original article: >Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. The incentives work fine in this case. The whistleblower gets a fraction of the fine recovered from the perpetrator, so the net effect for the government is still positive.

nullspace 4y ago

My understanding is that doing the things that gets you rewarded for whistle-blowing is flat out illegal. You will get into a world of trouble if you go for the cobra effect. In that way, there's both a carrot and a stick right?

olalonde 4y ago
What I had in mind was something more innocent like: mid-level employee engages in illegal activity (e.g. misrepresents some critical data in a report, engages in anticompetitive behavior, etc.), blows the whistle on company and puts blame on management. Whistleblower is granted immunity, company is fined large amount and employee collects a large payout. I'm not saying this actually happened but it seems that large rewards may create such incentives. I might also be way off here, but it's really hard to know given the lack of information surrounding the rewards.
- xenadu02 4y ago
  You cannot receive an award for activities for which you have decision-making authority. "Whistleblower" in a legal sense has to mean that someone _above_ you asked you do to the illegal activity.
  - olalonde 4y ago
    That's what I meant by "blaming management", e.g. claiming you were just following orders from above.
    - manquer 4y ago
      Your boss/company is responsible for your actions , if they have not put enough controls that is their problem. For example there is personal phone/messaging app use in finance industry resulting in fines that is doing the news rounds now. if you are communicating finance industry information outside the work devices provided and your company is not put enough controls and disciplined staff etc , they are liable for it .
      - macintux 4y ago
        > Your boss/company is responsible for your actions , if they have not put enough controls that is their problem. I won’t argue they’re not accountable, but are you not yourself also responsible? If you knowingly commit fraud, “my boss didn’t stop me” is an unconvincing defense.
    - xenadu02 4y ago
      OK sure: If you are sophisticated enough to completely fool the SEC investigators without leaving a paper trail, email, or text message anywhere that points back to you. If you are amoral enough to steal money this way. And smart enough to pull it off while dumb enough to do something so risky. Then yes in theory you might be able to do what you propose. Perhaps you highlight a good point though: make sure to CYA if someone is pressuring you to do something borderline. Make sure there is an email or text message trail where you highlight your concern about the legality of the operation, ask if we should consult a lawyer, etc. If someone above you only speaks in person and insists that you are the originator of all documents/proposals that may be a sign they're trying to make it look like it was your idea.
      - bluGill 4y ago
        Even then, go to the SEC right away. They will provide legal advice. Sometimes you should quit, sometimes gather evidence.
    - vkou 4y ago
      You can try, just like how you can try to steal your own car for the insurance money, but you'll be in a lot of shit when it doesn't work out. Without a paper trail, without coworkers collaborating your story, the investigations might not have the outcome you desire. Also, if the firm is well run, internal audits can catch you, and then you'll be in a lot of trouble.

arnaudsm 4y ago

The obvious solution is to award a percentage of the fine. They give between 10 and 30% of the money collected [1] [1] https://www.sec.gov/news/press-release/2022-40 https://www.sec.gov/news/press-release/2022-40

codemac 4y ago
That's what they do: https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml

bityard 4y ago

I can't tell if you're joking or if you actually believe someone might go out of their way to set up a successful but shady business, just so they can blow the whistle (on themselves?) in order to collect the whistle-blowing reward?

olalonde 4y ago
See my reply here: https://news.ycombinator.com/item?id=32157456 https://news.ycombinator.com/item?id=32157456

WaxProlix 4y ago

Are people going to start creating fraud just to expose themselves and get 10-30% of the take?

stefan_ 4y ago
No, the frauds are regularly fined less money than they made and they never seem to pursue criminal charges either.
- joshcryer 4y ago
  So we can't put a corporation in prison even though it's a person, and it's a notoriously difficult process to get CEOs and upper management indicted, so we fine them because it just gets things over with. What if we took "corporations are people" a bit further though. What if we "imprisoned" the corporation by not permitting it to do whatever line of work it was doing during the fraudulent phase for a period of years?
deleted 4y ago
[deleted]

blitzar 4y ago

Given most members of the public assume that everyone in the financial sector is party to billion if not trillion dollar frauds, it is important to realise that if you blow the whistle - you get a chunky cut of the settlement. So either the system is not quite as riddled with fraud as most believe or many people making 500k a year are passing up >$100mil to hide the fraud.

matrix_overload 4y ago

From the original article: >Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million. The incentives work fine in this case. The whistleblower gets a fraction of the fine recovered from the perpetrator, so the net effect for the government is still positive.