[HN Gopher] Whistleblower thought he would get a big payout, but...
___________________________________________________________________
Whistleblower thought he would get a big payout, but got nothing
and went broke
Author : psim1
Score : 151 points
Date : 2021-07-01 14:35 UTC (8 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| hackettma wrote:
| What is less clear to me is why he borrowed so much money to
| setup this business? The debt had as much or more to do with his
| going broke than the flawed whistleblower process. As with many
| things in life this is a cautionary tale about not counting on
| something before it's done.
| fivestarman wrote:
| * "this is a cautionary tale about not counting on something
| before it's done." *
|
| The story, to me, is about a flaw in the whistleblower program
| that disincentivizes people from using it, and thus makes it
| less effective.
| mcguire wrote:
| Is it a flaw that, in bankruptcy, fines come after other
| classes of debts?
| londons_explore wrote:
| Or... to look at it another way, when there isn't enough money
| left in a company, harmed investors are paid first, then
| whistleblowers/government fines.
|
| That seems right to me...
| sombremesa wrote:
| It's not right, because now it's in the whistleblowers' best
| interest to get in on the scam and enrich themselves instead of
| reporting anything, since the act of whistleblowing is
| equivalent to shooting yourself in the foot while biting the
| hand that's feeding you.
|
| I suppose it is right depending on who's side you're on.
| milesvp wrote:
| I think you are in agreement with the parent post. There was
| an implied /s in the tone.
|
| Systemically it's a huge problem to favor investors over
| whistleblowers and fines. You want incentives to be aligned
| wherever possible, and being able to declare bankruptcy in
| order to protect the very people benefiting from unscrupulous
| acts just leads to more unscrupulous behavior.
| sombremesa wrote:
| > There was an implied /s in the tone.
|
| I strongly disagree with this, because the GP has used the
| term "harmed investors". I think it's a dangerous practice
| to go around claiming other people's posts are tongue in
| cheek. That's how we come to allow 'locker room talk'.
| milesvp wrote:
| The heavy use of ellipses is a common giveaway for
| sarcasm in casual writing in the US. But I agree, part of
| what makes "good" sarcasm is that it's easy to interpret
| as being either for or against something depending on the
| audience, and this leads to issues like "locker room
| talk", allowing some unfortunate ideas to persist because
| it appears people agree with them. I also think sarcasm
| should be used sparingly on this particular forum, it's
| important to try to limit the possibility of ambiguity in
| order to foster better discussions.
| OGforces wrote:
| It's not in the best interest of a whistleblower to get in on
| the scam. The trope of "incentives" is overblown. People
| don't directly respond only to a single incentive. It's in
| the best interest of the whistleblower to keep his head low
| instead of report.
| mcguire wrote:
| " _...it 's in the whistleblowers' best interest to get in on
| the scam and enrich themselves..._"
|
| That has always been the case.
| mandmandam wrote:
| It seems right to you that investors in a company caught
| running a $1.4 billion scam should receive a billion dollars -
| while the whistleblower loses his career and gets nothing?
|
| ... Really?
|
| Like, do you know how big a billion :is:?
| cobookman wrote:
| The investors ONLY saw a 28.5% loss (1B/1.4B). In the scheme
| of things it could have been way worse if the whistleblower
| didn't speak up. If they gave say 1% of the assets to the
| whistleblower (10 Million), it wouldn't have really changed
| the investor payout all that much. BUT it would encourage
| future whistleblowers. Especially when the whistleblower
| speaking up earlier prevent further losses to impacted
| investors.
| londons_explore wrote:
| I wonder what the _expected_ change in the loss to
| investors is compared to the delay in a whistleblower
| coming forward.
|
| I suspect a lot of companies which have illegally covered
| up losses have later managed to recoup losses to make
| investors whole again, and have never been discovered. In
| these cases, investors end up better off without a
| whistleblower.
| [deleted]
| ivalm wrote:
| I guess seems partially wrong to me. While I agree government
| should collect after aggrieved investors, I think
| whistleblowers should come first as they are the ones enabling
| fraud detection.
| irjustin wrote:
| I think there's something to be said that investors who
| recouped funds should have a portion allocated to the
| whistleblower program if that's how investors got their money
| back.
|
| Seems more fair.
| 3pt14159 wrote:
| You surely must be joking!
|
| Harmed investors are the ones that should have done the due
| diligence in the first place. That they got anything back at
| all was due to the diligence of the whistle blower. People
| should be rewarded for calling out white collar crime and the
| fees should extend to the people actually operating the fraud.
| fastball wrote:
| The investors weren't operating the fraud, they were being
| defrauded...
| jeltz wrote:
| I am prerty sure he was sarcastic. Obviously investors should
| be last.
| bidirectional wrote:
| Why? It doesn't read as sarcastic to me -- investors are
| the ones being harmed by the scam. Obviously the current
| system needs to support whistleblowers more, but I don't
| get why one would make a sarcastic comment about helping
| the victims.
| gowld wrote:
| Investors got their compensationin advance -- their loses
| are limited to the amount invested, regardless of
| liability incurred. Thus additional compensation should
| be below the rights of creditors who performed work on
| their behalf.
|
| If it's the other way around, then you could go around
| investing in companies that never pay their bills,
| ripping off everyone you do business with.
| dantheman wrote:
| The investors were defrauded - that's why the SEC was
| investigating...
| Spooky23 wrote:
| The problem is the government made a policy decision to use
| whistleblowers as a tool to police malfeasance, rather than
| hire and pay civil servants to do the same.
|
| As implemented, the law takes away the financial incentive for
| whistleblowers to take action on the most egregious cases. If a
| fraudster being uncovered will put the offending entity out of
| business, there's no incentive to risk getting blackballed.
| AbrahamParangi wrote:
| Government should collect before investors, otherwise you
| create a perverse incentive on the part of investors to ignore
| malfeasance.
| engineer_22 wrote:
| Was he doing the _right thing_ for the sake of it?
|
| Or was he snitching so he could make money?
| gowld wrote:
| "Doing well by doing good."
| ivalm wrote:
| Who cares? I strongly prefer that people snitch to make money
| rather than keep quiet.
| engineer_22 wrote:
| OK, I understand you all are being utilitarian about this, and
| I appreciate the perspective.
|
| And it's unfortunate that this guy lost his job, and he might
| also have a hard time finding new work because he's a snitch.
|
| Now, this is a bit tangential to the article, but I'm having a
| hard time accepting that our financial system is so blatantly
| corrupt that individuals within the system are expected to
| behave poorly, and we rely on cash payments to root out crimes.
| It doesn't sit well. Am I being naive?
| romwell wrote:
| Yes.
| sokoloff wrote:
| Why can't it be do the right thing _and_ make money doing it?
|
| It seems like such a structure would give us
| broadly/consistently better results than relying only on one
| factor or the other.
| mabbo wrote:
| That's the entire point.
|
| If you rely only on people doing the _right thing_ , turns out
| that most of Wall Street won't help you. If you offer financial
| payouts, then suddenly you have a lineup of people ready to
| spill the dirt.
|
| Now, you can take the moral high ground of 'Well we don't
| _want_ the help of greedy people ', but it seems that when you
| do that, you don't get a lot of convictions, and the financial
| crimes continue to happen.
| xwdv wrote:
| Relying on people to do the right thing isn't really scalable
| or efficient.
| hyperbovine wrote:
| The number of people in this world doing the right thing for
| the sake of it is laughably small.
| ARandomerDude wrote:
| Why did you go to work today?
| wccrawford wrote:
| If we could rely on people doing the right thing, we wouldn't
| be in this position in the first place.
| fmajid wrote:
| I would think the SEC fines would be senior to investors, but it
| seems the SEC never filed to recover them in bankruptcy court. As
| noted pedophile Woody Allen once said, 80% of success in life is
| showing up.
| AlbertCory wrote:
| I read the original WSJ. I guess the tricky moral question is:
| were the investors partially culpable for the crime, or blameless
| victims? You can say "they should have been more diligent" but
| are you equally willing to apply that standard to ALL fraud
| victims? Example:
|
| You moved into an unsafe apartment building that collapsed snd
| killed you -- "too bad, you should have checked it out better!
| The signs were there."
|
| Bernie Madoff ran a Ponzi scheme and paid early investors with
| the funds of later ones. The early people who benefited from the
| fraud were forced to disgorge their "investment returns" and some
| of that money was returned to the later ones. So was that
| "justice?" Should the whistleblower have gotten some of that?
|
| Not easy questions. Don't be too quick to take sides.
| matthewdgreen wrote:
| If we're going to have mechanisms like fines and penalties, and
| we're going to use those fines to support whistleblower reward
| programs, then we're going to have to resolve these questions.
| Because what we have now is a whistleblower reward program that
| does not work, at least in certain circumstances.
| baybal2 wrote:
| The legal system should not protect ponzi schemes investors, or
| just any investors.
|
| Somebody's lack of commercial sense, and financial stupidity
| should not be rewarded with such "insurance" by the public.
|
| American ultralitigious banker/investor culture effectively
| rewards people going completely casino with their, or, more
| often, somebody's else money.
| lallysingh wrote:
| The system protects investors who were lied to. Yes that
| includes lies that are a bit obvious, but the result is a
| very, very healthy investment economy in the US. Investing is
| safer from flat-out fraud in the US, and that makes for more
| investment.
| zucker42 wrote:
| Protecting investors from being lied to incentivizes
| investors to spend less resources on discerning whether
| representations made to them are true. "More investment"
| isn't a definite good if it leads to investment in the
| wrong places.
| AlbertCory wrote:
| Correct. You don't want to reward the people who are
| _exceptionally_ good liars, like Madoff: the ones who can
| con those who normally can 't be conned.
|
| There are actually people who believe a message that their
| Social Security number has been compromised, and they have
| to pay money to avoid going to prison. The stupid deserve
| fraud protection, too.
| aeturnum wrote:
| > _the result is a very, very healthy investment economy in
| the US._
|
| There were some recent examples of this system creating
| perverse incentives for US investments that are worth
| considering. For instance, the repackaging of mortgage-
| backed securities in the 2007 financial crisis took
| advantage of multiple transfers to place all risks on
| consumers and allow brokers to evade nearly all risk.
|
| I think that we need to think very carefully about what
| risks we protect against (and how) to avoid situations
| where middle-men capture down-side protections as alpha and
| gain an incentive to seek out investments that are priced
| lower because they will often fail. A model that imagines
| an investment market where the only two parties are the
| investment originator and the final owner are too
| simplistic now.
| AlbertCory wrote:
| Absolutely. Privatizing the profit and socializing the
| risk is the wrong model.
| mcguire wrote:
| "Ponzi schemes investors" are technically known as _victims._
| crazygringo wrote:
| To me, this doesn't seem like a tricky moral question at all.
|
| Investors are always supposed to be paid out last in bankruptcy
| proceedings, _after_ whoever a company owes debt to. That 's
| the "risk" part of being an investor. It's part of law.
| Everyone knows this up front, and the likelihood of it is built
| into stock prices.
|
| There's zero analogy to leasing an apartment, where a tenant
| _isn 't_ expected to take on risk of the building collapsing --
| that's handled by government-mandated inspections, insurance,
| etc etc.
|
| And one would reasonably expect penalties and fines to be
| treated similarly to debt. How are they not a debt to the
| government? They should get paid off, and investors are left
| with whatever remains, if anything remains.
|
| It _can_ be trickier to apportion losses _between_ people owed
| debt, or _between_ investors owed in Madoff 's case. But paying
| off debt should always come _before_ paying off investors, full
| stop.
|
| However, I'm genuinely confused as to why, in this case, SEC
| fines _didn 't_ get precedence in bankruptcy. Why on earth did
| lawmakers decide something else?
| AlbertCory wrote:
| You have some good points there, and IANAL although I've sure
| spent enough time with lawyers. SEC fines possibly _should_
| be the same seniority as the guy who sold them desks. I 'd be
| interested to hear the rationale.
|
| On the other hand, are you considering "investors" in a fund
| that has a fiduciary duty to them on the same level as common
| stock holders in a cement company? It seems to me they are
| different.
| gowld wrote:
| This is the fundamental cost and benefit of the LLC --
| investors get to profit from the risk assumed by
| counterparties.
|
| Never extend credit to an LLC unless you have a good risk model
| for default.
| Zachsa999 wrote:
| I wanted to read it, but I didn't want to sign in.
| neonate wrote:
| https://archive.is/KAY41
| WheelsAtLarge wrote:
| I get that there is no money from the penalty so he can't get
| paid from that but he should at least get paid for his expenses
| and time. After all, his help was invaluable to the case. There
| needs to be a minimum payout. I bet all the lawyers got paid from
| the recovered funds so he should get his share from that.
| fastball wrote:
| I guess the problem is that if you're not collecting a fine
| what exactly is the bar for this minimum payout?
| WheelsAtLarge wrote:
| Yes, but there was $1 billion recovered for the victims. I
| guarantee the lawyers that did the work got a share of that
| money. I think the whistleblower should have gotten, at the
| very least, his expenses covered.
|
| That's how bankruptcy works. There's an amount of money
| recovered then all interested parties tell the court how much
| they are owed. An finally, a judge decides who gets what.
| Like I said, the lawyers got their share. I think he should
| too.
| oefrha wrote:
| https://archive.is/KAY41
| oefrha wrote:
| > The company sold more than 20,000 individual investors
| fractional shares in life settlements--the right to collect on
| a stranger's life insurance policy when the insured person
| dies. Mr. McPherson suspected the company was overcharging
| clients by providing misleading estimates of how quickly the
| insured person was likely to die.
|
| Not directly related to the whistleblowing case, but this life
| settlement investment concept is new to me, and apparently it's
| a well-established market:
| https://www.forbes.com/sites/forbesfinancecouncil/2021/03/09...
|
| Honestly, I find this concept rather disturbing.
| jedberg wrote:
| It's disturbing but makes sense in a lot of business
| contexts. Imagine I own a business and I have a key employee
| who has a unique skill. And if they were to die, my business
| would have serious problems. It makes sense to take out a
| life insurance policy on that person to protect my lost
| revenue.
|
| Or let's say I have a business partner, we own the business
| 50/50. It makes a lot of sense for each of us to have a life
| insurance policy on the other person to make up for the fact
| that the business might likely die if the person does.
|
| Where it's kind of screwed up is when Walmart takes out
| policies on their front line retail employees and doesn't
| tell them as a way of diversifying revenue.
| gruez wrote:
| >Where it's kind of screwed up is when Walmart takes out
| policies on their front line retail employees and doesn't
| tell them
|
| Why is that screwed up? It doesn't affect them in any way.
| ineptech wrote:
| Walmart isn't some disinterested third party; they enact
| policies that directly affect their employees' health and
| longevity. It's a pretty perverse incentive for the party
| responsible for negotiating and administering your health
| insurance to have a financial interest in you dying
| younger than expected.
| jessaustin wrote:
| It allows Walmart to care less about safe working
| conditions for its employees.
| gruez wrote:
| Is there any evidence they're doing that? Moreover, if
| they would do that, wouldn't that be already be priced in
| by the insurance company, wiping out any potential gains?
| jessaustin wrote:
| There may be evidence but I don't know about it. If we
| were talking about insurance for property damage, I could
| almost agree with the "priced-in" idea, [EDIT:] although
| that assumes a very efficient torts system for the third
| parties who suffer damage to their property. There is an
| inherent asymmetry when we're talking about the health
| and lives of third parties, however. If anything firms
| should be encouraged to care _more_ about not killing
| their employees.
| oefrha wrote:
| Life insurance makes total sense and is a good thing in
| general for the family and possibly the business involved.
| The part I find disturbing is investing in the life
| insurance policies of complete strangers where the return
| on investment depends on the demise of said strangers.
| gruez wrote:
| This is baffling. Is this supposed to provide above market
| returns (after adjusting for risk)? If not, what's the point?
| If yes, how's the counterparty to this (insurance companies)
| coming up with the returns? After all, they're just investing
| the money so they can pay out a few decades later; it's not
| like they can print money to do the payouts. Are they just
| betting on the insurance companies mispricing their insurance
| products?
| jcheng wrote:
| > Are they just betting on the insurance companies
| mispricing their insurance products?
|
| Sort of. First, the investors are betting that the
| information they have now (when the insured wants to sell)
| is better than what the insurance company had then (when
| the insured purchased the policy). Second, life insurance
| policies have a "cash surrender" value, basically an amount
| of money that the insurance company will pay to the insured
| to give up the policy. These days those cash surrender
| values are extremely low, as the insurance companies rely
| on the difference to boost profits; they can do this
| because many policyholders don't know there are
| alternatives to surrendering the policy if they can't make
| the payments.
|
| What's attractive about this from an investor's perspective
| is not outsized returns, but returns that are uncorrelated
| with the market.
|
| I was pretty grossed out when I first heard of this kind of
| investment but then learned that it first became popular
| during the AIDS epidemic. Selling their life insurance
| policies was a way for the terminally ill to benefit from
| an asset that was not going to have any value to them after
| death (if they had no family to benefit from the payout).
| Without investors providing a market for these policies,
| they'd have to settle for the cash surrender value.
| hogFeast wrote:
| Either the person who bought the policy wants to sell or
| the insurer who wrote the policy wants to sell. The person
| selling wants cash today, and the person buying wants cash
| tomorrow. Same as anything else.
|
| EDIT: I will add, there is a lot of this kind of thing
| going on in insurance now because no-one expected rates to
| stay this low for so long. This drives cash out of insurers
| who, often, have a massive stream of liabilities and no way
| to generate cash to pay them. And this specific market is
| driven more by individuals who took out huge life insurance
| policies, lived longer than they expected, and are now
| stuck paying huge premiums they can't afford (so they sell
| the policy to someone else, who pays the premiums, and
| collects the final value). Again, this is basically how
| financial markets work. Risk is shifted towards those who
| are most able to bear it. The alternative here is a bunch
| of old people having to declare bankruptcy and being
| stripped of all their assets because there is no-one who
| will cash their policy.
| oefrha wrote:
| According to the Forbes article I linked, they selectively
| invest in policies that will likely see a payout (old
| people with health issues) and ignore the rest. They then
| pay the premiums to keep the policies alive until they can
| cash out.
| mcguire wrote:
| My understanding is that they became common during the AIDS
| epidemic, with people selling their life insurance proceeds
| early in order to get money for their current living
| expenses. It's a little disturbing, but it makes sense.
| [deleted]
| shadilay wrote:
| So if you are going to blow the whistle it ought to be a large
| company unlikely to declare bankruptcy. Not sure how that helps
| the investors.
| paulpauper wrote:
| 3 trillion for covid relief like nothing. Why not set aside just
| a miniscule amount for whistle-blowers? Getting the govt. To geta
| payout is like prying open a bear trap.
| clipradiowallet wrote:
| This sends a bad message to would-be whistleblowers. I read it
| as... "next time, take your evidence, make contingency plans, and
| finally blackmail the criminals - you're more likely to get
| paid".
| duxup wrote:
| I don't think this guy is just some rando whistleblower.
|
| He tried to make it a full time job, it's not clear why but he
| took out loans to do it ... it just was a bad "business"
| choice.
| wsc981 wrote:
| In The Netherlands and the EU there are quite a few well-known
| whistleblowers who received the short-end of the stick. One
| example would be Paul van Buitenen [0].
|
| It's really risky to become a whistleblower and if you do, you
| better be able to live the rest of your life on your finances,
| because it might become very hard after becoming a
| whistleblower to receive another well-paying job. Also be
| prepared to deal with a lot of stress that might impact your
| health and mental wellbeing.
|
| ---
|
| [0]: https://en.wikipedia.org/wiki/Paul_van_Buitenen
| ClumsyPilot wrote:
| It seems whitleblowing is more dangerous than fraud these
| days
| jacquesm wrote:
| To receive another job, never mind the 'well-paying' bit.
| Companies would be scared shitless to hire someone that might
| expose their dirty laundry, especially if they already have a
| track record of doing so.
|
| If there is one thing that is pretty certain then it is that
| whistleblowers get to blow the whistle exactly once.
| snarf21 wrote:
| I personally think that we need to combine significant
| whistleblowers with witness protection. They need the same
| protections and compensation to give up their current life.
| This is why people don't come forward know. Someone is likely
| married to the child traffickers and corporate fraudsters off
| the world but you have to convince them to give up their life
| and be in a media circus and potentially risk the lives of them
| and their family. You have to reward them as such.
| mariogintili wrote:
| it is literally how the world works these days
| explorigin wrote:
| If you take this route, have a life-insurance policy.
| navierstokes wrote:
| A lesson they teach in $IVY_LEAGUE, "you all know whistle
| blowers don't end up well." Direct quote from $INFLUENTIAL_DUDE
| in response to $PUBLIC_THING.
|
| Trust your gut. When it says leave, leave. Even if others
| encourage the opposite. Even if your extended family depends on
| your income.
|
| Make the effort to build and maintain a strong social circle.
| Filter for integrity. Assiduously avoid those who distort truth
| for personal advantage.
| navierstokes wrote:
| When you know you're going to be alone and homeless, it's
| really hard to find the strength to keep on living. What's
| the point?
| drewcoo wrote:
| WSJ prints scare piece to dissuade future SEC whistle blowers.
| Who expected that?
| jtbayly wrote:
| WSJ advocates changing SEC rules to better support
| whistleblowers.
| LanceH wrote:
| And if they don't print it, they are covering up the
| ineffectiveness of the SEC's whistleblowing program. What
| exactly should they print?
| bidirectional wrote:
| Individual goes bankrupt and implodes his career due to little
| known fact, and somehow it's bad practice to report on that?
| The SEC are a big organisation, they can take a knock.
| stuff4ben wrote:
| This is a bit of a click-baity article title. He went broke
| because he assumed he was getting a payout and did stupid things.
|
| From the bottom of article:
|
| Early in the Life Partners saga, Mr. McPherson was so beguiled by
| the lure of whistleblower millions that he essentially quit his
| day job to become a full-time whistleblower, using his accounting
| and life-insurance knowledge to spot potential miscreants...In
| 2018, he took out a $1 million litigation-funding loan at very
| high interest rates, secured by the Life Partners whistleblower
| claims, to pay back taxes and continue to pursue his cases.
| newacct583 wrote:
| That's a "he was no angel" argument, and like all such it's
| really an attempt to deflect. The reason to reward
| whistleblowers isn't to make sure the money goes to Objectively
| Good and Unimpeachably Moral individuals, it's to incentivize
| enforcement of laws and norms.
|
| The guy could be a raging narcissist with a gambling problem
| (which would be quite a bit worse than trying to be a "full-
| time whistleblower") and we would _STILL_ want him to blow the
| whistle on wrongdoing he witnesses, right?
| yellow_lead wrote:
| You would think that if he were so invested in the
| whistleblower program he would do his due diligence to
| understand the fine print.
| matthewdgreen wrote:
| The fine print seems to be that the bankruptcy process
| privileges investors, rather than requiring companies to pay
| fines (which pay for the whistleblower program.) I don't know
| if this is good or bad, but it's the important substance of
| the article -- not the silly detail about this particular
| person's finances.
| cortesoft wrote:
| Well the crime the company committed was fraud against
| their investors... shouldn't the victims get their money
| back?
|
| Paying out the whistleblower before the victims would be
| like if someone stole your bike, then the cops arrest the
| guy and recover your bike because of a tip... and then the
| cops give your bike to the guy who called in the tip
| HarryHirsch wrote:
| It's all about the incentives. You have to decide what
| you want, a criminogenic environment or fairness.
| [deleted]
| pessimizer wrote:
| Not having a whistleblower would be like if someone stole
| your bike, got away with it, then went on to have a long,
| successful career in stealing bikes.
|
| The crime has already been committed. The whistleblower
| is the reason you're getting anything back.
| fsckboy wrote:
| wow, that would be like having a bounty program that paid
| whistleblowers 10% of value of the theft for
| encouragement and was catching enough perps to act as a
| deterrent and lowered the overall crime rate and got
| victims 90% of their losses back, kind of an ex post
| insurance pool...
|
| ...and then figuring you could get victims 100% of their
| losses back by taking that 10% from the whistleblowers
| and sending them to the back of the line, and then coming
| back a year later and seeing that...
|
| ...while victims were getting 100% of their losses back
| when these crimes were discovered, very few of these
| crimes were being discovered, and using your impeccable
| logic concluding that the crime rate must have gone down!
| who needs whistleblowers!?
| [deleted]
| rsj_hn wrote:
| > and got victims 90% of their losses back
|
| We do not have a justice system in which the victim pays
| for the cost of investigating, prosecuting, and punishing
| offenders. All of that is paid by the general public.
| That does not mean there are no bounties -- there are,
| but the bounties are never paid by subtracting out
| amounts due victims. Changing that, so that victims would
| not be entitled to full restitution in order to help
| finance law enforcement would require changing a lot of
| laws, not just adding a whistleblower law. It would also
| overturn a lot of precedent. It would be a big change
| that a large majority of the public would oppose.
| dbuder wrote:
| Against their investors or on their investors behalf? And
| either way, it is the investors who could (supposedly)
| bring an end to it.
| bombcar wrote:
| Eggs were counted before they hatched. News at 11.
| Rapzid wrote:
| Chickens.
| modeless wrote:
| > he essentially quit his day job to become a full-time
| whistleblower
|
| It sounds like you're criticizing him here, but this is a good
| thing, right? We incentivize whistleblowing because we want
| more whistleblowing. He was successful in bringing frauds to
| justice. We got exactly what we wanted. This is exactly how it
| should work.
|
| > 2018, he took out a $1 million litigation-funding loan at
| very high interest rates, secured by the Life Partners
| whistleblower claims
|
| This isn't necessarily stupid either. If it was a secured loan,
| then as I understand it he probably won't have to pay the
| million back. He transferred the risk to the lender and they
| lost. He paid his back taxes and should emerge from bankruptcy
| without the debt.
| TheRealPomax wrote:
| Not if you turn it into a career, no. Then you should have
| signed up for an undercover investigator position, drawing a
| normal salary, instead of assuming your reporting will net
| you an income.
|
| Should whistleblowers be rewarded? Absolutely. Should that
| come from a pool allocated and managed by the SEC? Most
| certainly, because we want folks to be secure in their
| whistleblowing. Is it the American way to go "there's money
| here, I can probably take repeat-advantage of that"? You bet
| your star spangled butt it is. But is that last part also on
| you, and not anyone else? In most American fashion: boy howdy
| yes.
| pessimizer wrote:
| > we want folks to be secure in their whistleblowing
|
| People are not. I'd advise against it in almost all
| circumstances, unless you're 5 minutes from retiring
| anyway.
| mcguire wrote:
| Or you can get a cut of the action.
| loonster wrote:
| That is great advice. Even bringing up things internally
| is a financially dangerous thing to do.
| saiya-jin wrote:
| _and_ your retirement funds are not anyhow tied to the
| party you are blowing whistle against
| MomoXenosaga wrote:
| And if you don't have any friends or family working in
| whatever field you are whistling against.
| Supermancho wrote:
| > Not if you turn it into a career, no.
|
| > Then you should have signed up for an undercover
| investigator position, drawing a normal salary, instead of
| assuming your reporting will net you an income.
|
| That's your opinion.
|
| > It sounds like you're criticizing him here, but this is a
| good thing,
|
| It _is_ a good thing, even if it wasn't great for him. Lots
| of people do things that are ultimately less optimal than
| other paths. That being said, more scrutiny is better,
| regardless of the participation in specific programs that
| some people think is better suited.
| modeless wrote:
| > Then you should have signed up for an undercover
| investigator position
|
| Why though? Is this a moral judgement against
| whistleblowing as a profession, or something? I expect that
| offering whistleblower rewards is a _much_ more scalable
| and effective way to discover frauds than employing a
| standing army of investigators.
| bee_rider wrote:
| What's the point of whistleblowing? I thought it was to
| provide a framework for people who've come across shady
| behavior on the part of their employer in the execution
| of their day-to-day work. So, I guess it is more scalable
| because it is operating under the assumption that the
| whistleblowers were receiving their normal paycheck while
| "investigating."
|
| Certainly no negative moral judgement on people
| intentionally going for those bounties, fighting
| corruption is admirable. But the system is probably not
| calibrated to provide for their their day-to-day expenses
| or the cases where their investigations aren't
| successful. If it were, it would be equivalent to just
| employing that army of investigators (just, without any
| official organization, so it'd miss out on any benefits
| from legal authority or economies of scale).
| mcguire wrote:
| No moral judgement, it's just risky. As he discovered,
| you may not get the big payout, for any number of
| reasons.
|
| If you expect to make a living at anything, you have to
| be prepared to manage the risks that go along with it.
| fastball wrote:
| The problem here is that he leveraged himself and pursued
| a case which resulted in bankruptcy which makes it hard
| for the SEC to collect a fine that they can disburse part
| of to the whistleblower.
|
| Whistleblower rewards are great, but they must have
| limits, and he bumped into them here (while highly
| leveraging himself).
| modeless wrote:
| No, the problem here is that the whistleblower reward
| program is less effective than it should be because
| payouts are divorced from the effectiveness of the
| whistleblowing. If you set up a program that is supposed
| to reward a specific behavior, and then you don't
| actually reward that behavior, that is a problem.
|
| As I said, the leveraging he did is mainly a problem for
| the lender, who is now out $1m, not him.
| dataflow wrote:
| > Why though?
|
| One reason being that then you have a strong financial
| incentive to "whistleblow" on things that are less clear-
| cut, making it likely that (a) you'll eventually harm
| innocent people in the process, and (b) you'll inject too
| much noise/unnecessary work into the system.
|
| As a rough analogy, imagine someone calling to report an
| impaired driver they encountered by pure happenstance,
| vs. someone who made it their personal full-time career
| to just go around on roads finding people he can report.
| I'm not sure if you see a difference but I certainly do.
| viscanti wrote:
| Was he harming innocent people? Was he injecting too much
| noise/unnecessary work into the system?
|
| I don't see how him doing it as more of a freelance thing
| rather than an undercover position guarantees a different
| outcome. It seems like we have to look at the actual
| outcome and we can't paint with such broad strokes about
| how one model or the other is better.
| dataflow wrote:
| > Was he harming innocent people? Was he injecting too
| much noise/unnecessary work into the system?
|
| It doesn't matter because we don't base societal
| incentives on 1 guy.
| robertlagrant wrote:
| What you're saying seems to be based on nothing.
| dataflow wrote:
| Yeah, it's not like financial social incentives have any
| history of inflicting collateral damage or anything of
| that sort. I'm just imagining things.
| darawk wrote:
| > One reason being that then you have a strong financial
| incentive to "whistleblow" on things that are less clear-
| cut, making it likely that (a) you'll eventually harm
| innocent people in the process, and (b) you'll inject too
| much noise/unnecessary work into the system.
|
| It's not like a whistle blowing claim just results in
| enforcement action without investigation. The claim gets
| investigated by the relevant agency first, and then if
| and only if it is found to be justified is an enforcement
| action taken. That enforcement action can then be
| challenged in the courts, too, if the entity in question
| perceives the agency to be in the wrong.
|
| I don't think there's much risk of whistle blowers
| significantly harming innocent companies here.
| dataflow wrote:
| Do you see any difference with the impaired driving
| analogy? Or with someone spending 40h/week just walking
| around calling the cops every time they see some dude do
| something that looks appears illegal to them? If we don't
| even agree on those it's going to be too much effort to
| argue...
| passivate wrote:
| Yeah, that is a great point. Often, we don't consider the
| unintended consequences of policies.
| robertlagrant wrote:
| Exactly. Or imagine people spending their time finding
| security flaws and collecting bug bounties as a career
| instead of just reporting security issues whenever they
| occasionally happened upon them.
| homero wrote:
| I don't think the SEC even goes undercover by getting hired
| as an accountant or something. And second, he wouldn't get
| any large payouts he wanted.
| hammock wrote:
| >This is a bit of a click-baity article title. He went broke
| because he assumed he was getting a payout and did stupid
| things.
|
| Is that something different than what the title says?
| gowld wrote:
| This is Y Combinator's Hacker News.
|
| Investing in a new business is not "stupid things".
|
| Taking out a personal loan instead of using an LLC is "stupid
| things".
| _e wrote:
| Even if the loan was taken out under a LLC, lenders would
| require a personal guarantee for a new and unproven venture.
| paulpauper wrote:
| This is why you should not try to save the world. It is not your
| job to save others. Focus on your own life.
| knodi123 wrote:
| I don't think you'll get a lot of traction with a heartfelt
| argument against the concepts of heroism and personal
| sacrifice.
| paulpauper wrote:
| I made the opposite argument in an earlier reply which was
| also downvoted. Can someone tell me what opinion is the
| correct one?
| teddyh wrote:
| "Undank ist der Welten Lohn".
| uvesten wrote:
| Otack ar varldens lon.
| SilasX wrote:
| I couldn't find a common translation or appearance of this
| saying's equivalent in English. Ungratefulness is the world's
| wage?
| ggsp wrote:
| I'd say "reward" instead of "wage."
| stickfigure wrote:
| Ah, the English equivalent would be something like "No good
| need goes unpunished."
| jfk13 wrote:
| "no good deed", not need
| SilasX wrote:
| Although I like to do a deliberate pun, no good _h_ eed
| goes unpunished. (The consequences of following well
| intentioned but naive advice.)
| stickfigure wrote:
| The HN version is apparently "No good typo goes
| unpunished."
|
| :-)
| bigwavedave wrote:
| >> "Undank ist der Welten Lohn".
|
| > I couldn't find a common translation or appearance of this
| saying's equivalent in English. Ungratefulness is the world's
| wage?
|
| I believe it means something akin to "nothing is so hard as
| man's ingratitude." It's an expression that's not dissimilar
| to "no good deed goes unpunished." They're not quite the
| same, but they're tandem in the general principle of
| ingratitude.
| krylon wrote:
| Yes, that fits. The best English equivalent, I think is the
| saying that "no good deed goes unpunished".
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