Survey Says "Wall Street Is Facing An Ethical Crisis"

July 18, 2013

Jordan A. Thomas discusses ethical crisis on Wall Street

According to Labaton Sucharow partner and Chair of the Whistleblower Representation Practice, Jordan Thomas, "Internal reporting of wrongdoing depends on one thing, 'trust,'" he said in an interview. "If the employees cannot trust their organization then the system fails."

"There are plenty of good people on Wall Street, but for those who are not, we have to get the good people to speak up when they see something wrong." The results of his firm's survey suggest that there is work to be done in this area. However, Thomas points to the SEC's new Whistleblower program, enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as one solution … and in Thomas's opinion, one of the most powerful solutions to combat fraud. The program encourages those who see wrongdoing to come forward and share in any reward (fine levied against a company) the government receives as a result of a settlement.

"Corporate fraud is a lot like a bank robbery. Rarely is the heist a one-man job and there are always a lot of witnesses," Thomas said making reference to whistleblowers. The whistleblower program recognizes that law enforcement cannot police financial institutions on its own, it needs people, experts, to come forward with information. One concern that financial institutions had about the whistleblower program was that employees would bypass internal policies to report bad behavior and would instead run to the SEC in hopes of getting a reward for their efforts (Pay Day!). "That has not been the case," Thomas said, citing that over half of the whistleblower clients his firm currently represents had tried to report wrongdoing internally. Compliance departments should take note.

On the power of the whistleblower provision in deterring criminal behavior Thomas told me, "If we can engage those good people out there to get involved and report wrongdoing, then we have dramatically increased the probability of [fraud] detection."