$3 M To Whistleblower, Will We Have Bounty Hunters In RE?

Question

While I was investigating Arbitration in RE Contracts I came across some legal notes pertaining to whistleblowers and informants, I believe it's covered in Section 599 of the Dodd Frank Act and an option available for years under the SEC.

While the whistleblower program is targeting employees of companies encouraging them to come forward about wrong doing, a court of appeal opens the door to anyone who has information of wrongdoing. An accountant, private compliance auditor or attorney who learns of wrongdoing or compliance violations can blow the whistle on any violator. Government examiners or officials aren't eligible.

Is the clerk at the title company who has knowledge of investor's deals stepping outside financial regulations going to make a phone call? Awards are up to 30% of the fines levied. An investor who gets nailed for a small deal can be tapped for $10,000.00 pretty easily, is that a $3,300 phone call?

I'm not bringing this up to add to anyone's paranoia, but my opinion of successful deals sliding by is diminishing somewhat. I have said that eventually deals will surface as a buyer-borrower attempts to seek financing under a contract or other possible events occur, now that period of clear sailing may have a hurricane blowing in. If folks out there have a financial incentive to turn in the bad operators it stands to reason informants will speak up.

Will RE get back to more of a self regulated business practice industry?

Will investors, especially ones with the rip, rinse and repeat thinking, take notice when they realize that anyone with knowledge of their practice may lead to their demise?

While this is posted in the creative finance section, as it applies to matters here, it's actually much broader in other areas as well, applicable to any predatory practice. The thing about rules, regulations and laws is that a violation of some infraction can become a violation of other aspects of law, everyone has heard of some DA throwing the book at some scammer. An example is wire fraud, a common charge as brokers or RE types use depository accounts and money runs through title companies to transact illegal transactions.

Before you jump out of RE, take some pills or have a stiff drink, might consider some more education. :)

Karen Margrave · Answer

Bill Gulley Wow Bill such a serious subject for so early!! It's 5:00 am my time! But, those thieves running the government have to figure out some way to bring in more money! Did you see in Washington state they want to fine people for throwing away too much food! But I digress... let's keep it on topic everyone!

The flaw to the whole thing is that I'm sure there would be a flood of people calling to turn people in that weren't actually guilty of anything, and can you imagine the government actually being able to investigate, let alone get people paid for being a whistleblower?

Jeff Rabinowitz · Answer

I strongly disagree that the Government does not have a financial interest in this. The regulators need to prove their value to exist and when they do they will be rewarded with larger budgets for more employees. The bounties will lead to more monitoring of more activities of more citizens.

This will also have a chilling effect on business as more people choose not to do some transactions because they may be construed as illegal by an agency. Not because there is illegal intent but because it is not worth being in the space anymore. The fact that we are becoming a nation who spys on our citizens and coerces and rewards citizens to inform on each other will hasten this.

I have already experienced a form of this. I made a few cash deposits in my bank a few months ago. (I needed to mobilize my emergency fund to complete a deal). I made several deposits at different branches of the bank over a period of 3 weeks. (I know the managers at both branches and both are about equidistant from my home). None of the deposits were near the reportable amount but in aggregate they were. There was nothing illegal about where the funds came from or what I was doing with them. (They were actually drawn out of these banks over a couple years). The internal compliance department of the bank flagged my account to be closed. Both managers spoke on my behalf but I did not know whether the accounts would remain open until hours before their self imposed deadline. The bank was reacting beyond what the government required so as not to risk government inquiries.

I believe this type of preemptive activity by banks, title agents, loan officers, etc. will become more pervasive and will make it much more difficult to do any type of transaction that has an unusual component. This will in turn kill a lot of creative deals simply because the agents do not understand them. This country will suffer economically as more businesses close up rather than risk violating a term of legislation which those who passed it into law did not understand or, in many cases, even read.

Richard C. · Answer

There are whistleblower provisions in many financial laws, and the government isn't overwhelmed with so many reports (let alone false reports) that it cannot investigate and respond.

Agree with Bill that this has nothing whatsoever to do with government revenue seeking. The activities in question are already illegal. This is simply about encouraging people to come forward with evidence of illegal activity.

I hope the self-regulation of the industry will make something of a resurgence. Many in real estate (including many on BP) appear to be operating under the delusion that questionable ethical behavior, one sided deals, and a wild-west approach to rules and regulations can continue forever. It cannot. Once a critical mass of people get hurt, the industry will either need to seriously regulate itself or the people's elected representatives will do it for us.

Bill Gulley · Answer

Not sure I really follow you Karen, it's not an income ploy by government it's motivating people to report violations for the public good, enforce the rules that otherwise may go unchecked.

Your point goes to another matter, the IRS doesn't investigate claims made by the public, there is a great possibility that your neighbor tries to turn you in out of spite and won't have reliable knowledge. Those types of complaints usually fall on deaf ears of regulators.

The claims that may have validity are those from employees, those connected with some event where they have first hand knowledge, title folks, a Realtor or a party to a contract. Someone who is a party to the subject transaction isn't really a whistleblower, they are the plaintiff but if they have knowledge of other deals they could be. Those with greater expertise, such as a mortgage broker or bank loan officer could be a source of details.

And yes, the one who calls needs to know and be able to show there is a violation, they can't just be saying I think Sam is doing this that or the other.

$3 M To Whistleblower, Will We Have Bounty Hunters In RE?

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