Exhaustblowing

People react to incentives and if you give them money to report wrongdoing, you can be sure they will blow the whistle on a lot of it.

Prior to 2011, whistle-blowers on financial fraud rarely came forward because they didn’t get a lot of protection from the SEC or other authorities and had to fear retribution by their employer, and often became blacklisted in the industry. This is why in 2011, the year the SEC introduced its current whistleblowing programme, it received less than 500 tips for fraudulent behaviour. One year later, it jumped to c3,000 and in 2021, it hit a new record at 12,200 tips, up 76% from a year earlier.

The SEC’s whistle-blower programme is well-designed, because it only pays for tips that are material, leads to the collection of a fine above $1 million, and only pays the whistle-blower after the fine is collected. If the tip doesn’t lead to a conviction for fraud or a material fine, the whistle-blower gets nothing, thus discouraging employees who merely want to harass their employer. Thousands of fraudulent investment schemes have been detected and shut down thanks to the SEC’s whistle-blower programme and hundreds of thousands, if not millions of investors have seen their money recovered.

But to become an SEC whistle-blower, you have to work for a company committing fraud to begin with. In New York City, on the other hand, you can make a living out of becoming a whistle-blower. The city’s Citizen Air Complaint Program pays 25% of the collected fine to anyone who reports a commercial vehicle idling its engine on the street for more than 3 minutes (or more than 1 minute if it happens in front of a school). The minimum requirement to collect the reward is a video that shows the company that owns the truck and is at least 3 minutes and a few seconds long. The fine collected for idling a truck is at least $350 and is split 75% for the city and 25% for the whistle-blower.

You may think that this is a small reward for staking out the streets and collecting $87.50, but if you have ever lived in New York City, you know that trucks are left idling everywhere and all the time. No surprise then that the New York Times profiled some retirees in the city that made some $64,000 in 2021 from filming idling trucks. Not a bad income on top of your pension, especially since it is tax-free income.

The problem just is that you can’t just stand for three minutes in front of an idling truck and film it. The driver of the truck is going to catch on eventually and apparently will react rather forcefully to prevent a fine. People who filmed idling vehicles had their bags and cameras stolen, have been assaulted and sometimes the police had to be called.

Today, there seems to be an arms race going on. Truck drivers immediately get suspicious when they see people with a smartphone, and citizen vigilantes have resorted to disguising themselves as tourists with maps and old-fashioned flip-phones while filming trucks with hidden cameras. It seems worth their while given the money they rake in. And it is worth the while of the city, which has collected some $3.2 million in fines out of which it kept $2.4 million in extra income after paying rewards. And it is good for the environment since idling trucks burn millions of litres of fuel each year in New York City alone.