As Whistleblowing Becomes The Most Profitable Financial 'Industry', Many More 'Greg Smiths' Are Coming

Tyler Durden's picture

Minutes ago on CNBC, Jim Cramer announced that Greg Smith will never get a job on Wall Street again as "one never goes to the press. Ever." Naturally, the assumption is that the secrets of Wall Street's dirty clothing are supposed to stay inside the family, or else one may wake up with a horsehead in their bed. There is one small problem with that. Now that compensations on Wall Street have plunged, and terminations are set for the biggest spike since the Lehman collapse, the opportunity cost to defect from the club has also collapsed. And if anything, Greg Smith's NYT OpEd has shown that it is not only ok to go to the press, but is in fact cool. So what happens next? Well, as the following Reuters article reports, 'whistleblowing' over corrupt and criminal practices on Wall Street is suddenly becoming the next growth industry. Yes - people may get 'priced out' of the industry, but since the industry will likely fire you regardless in the "New Normal" where fundamentals don't matter, and where the only thing that does matter is the H.4.1 statement (as Zero Hedge incidentally pointed out back in early 2010), why not expose some of the dirt that has been shovelled deep under the coach, and get paid some serious cash while doing it?

Here is Reuters on why we are about to get a deluge of Greg Smiths exposing the muppet army, only this time they will not cast merely ethical aspersions about their employers, but will provide solid, hard evidence of criminality.

Whistleblowers who were instrumental in revealing epidemic mortgage abuses, some of whom risked their careers to do so, are getting multi-million-dollar payouts, court documents show.


Victor Bibby and Brian Donnelly, two Georgia mortgage brokers, are among the handful of whistleblowers whose stories are coming into focus.


Bibby and Donnelly said they started noticing in 2005 that lenders were charging veterans hidden fees on mortgage refinancing - a violation of the government's Interest Rate Reduction Refinancing Loans program.


The pair, who worked for U.S. Financial Services Inc, a mortgage brokerage firm in Alpharetta, Georgia, said they became suspicious when lenders told them not to show an amount charged for attorneys fees on loan documents, but instead add the sum to the charge shown for "title examination fee."


After lenders ignored their concerns, Bibby and Donnelly hired an attorney and filed a whistleblower suit.

The payoff to rat out criminal behavior?

The wait paid off in the form of a $45 million government settlement with JPMorgan Chase & Co that became public this week. Bibby and Donnelly and their attorneys will receive 26 percent, or $11.7 million.

And many more are coming:

The case is one of five whistleblower suits settled for a total of $227 million as part of the broader $25 billion deal with five lenders over foreclosure abuses, according to court documents filed this week.


Details of the cases are emerging slowly as suits are unsealed and prosecutors disclose settlements.


U.S. Attorneys in North Carolina and South Carolina said on Monday that five banks - Bank of America Corp, JPMorgan Chase, Wells Fargo & Co, Citigroup Inc and Ally Financial - agreed to pay the amount to address allegations they participated in a nationwide practice of failing to obtain the required mortgage assignments, documents used to transfer ownership of loans.


The lenders also used false assignments to submit Federal Housing Administration insurance claims, prosecutors said.


The whistleblower in the case, Florida homeowner Lynn Szymoniak, will receive $18 million.

But wait, there's more. While Wall Street will hate these newly turned "rats", America's taxpayers, tired of being raped on a daily basis by Wall Street will embrace the "whistleblowers", especially since there is money finally coming back from Wall Street to the "rest of America."

Two of the other settlements outlined this week - for $75 million and $6.5 million - appear to be related to an investigation into whether Bank of America and its Countrywide Financial unit knowingly made FHA-insured loans to unqualified borrowers.


Prosecutors in New York said in February they had reached a $1 billion settlement with the bank over these practices, but have not yet filed court documents.


Court documents have not been filed in the fifth case, which resulted in a $6.2 million settlement.


Legal releases in the $25 billion mortgage settlement indicated other whistleblower cases are still in the works.

Sure, these people are terminally gone from the industry...

Bibby, who is 46 and married with three children, and Donnelly, who is 56 and married, said they don't have plans for their portion of the settlement. They will have to pay taxes and attorney fees out of the $11.7 million sum.


U.S. Financial Services at one time had about 50 employees, but is now basically out of business. They are not sure what they will do next.


"I think we're kind of dead in this industry, to say the least," Bibby added.

But so what? If the opportunity cost of staying is offset by millions in whistleblower payoffs, it makes the return on loss of career not only tolerable but largely desired.

Sorry Cramer, Greg Smith is just the beginning- with his Op-Ed he has unleashed an avalanche of similar disclosures, many of which will expose the true dirt that you and yours would do everything in your power to cover up.

Incidentally, and as a reminder, Zero Hedge will always gladly publish without editing any of our readers' reports of criminal or less than legal activity witnessed at their financial employers.

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LongSoupLine's picture

Fuck Cramer, that coked-up mental case is a f'ing idiot and Goldman asspuppet

centerline's picture

Him and so many others will someday be seen as all that was wrong with our current times.

azzhatter's picture

Somebody should blow the whistle on that cocksucker CRamer. He is a fucking cancer on society, fuck coked up bullshit carnival barker

battle axe's picture

John Stewart did it on the Daily Show when Cramer was on. Cramer was gutted by Stewart like a fish it was awesome to watch....

Clowns on Acid's picture

Yes...but what will be the cost of the damage...before they are seen as "all thast was wrong"?

Everybodys All American's picture

I'd like to see a whistle blower come out at CNBC. You can't tell me don't have an agenda over there that doesn't get discussed in meetings every day.

HD's picture

Unfortunately - that's the media now. 100% for profit and tightly controlled message. Report anything that will generate ratings and clicks - while not biting the hand that feeds you. There is no such thing as journalistic integrity anymore - it has been sacrificed in the name of profits and "access".

Only six media companies own the media:


trav7777's picture

now?  It's been that way since one group cinched their stranglehold on it.

FlyoverCountrySchmuck's picture

"been that way since one group cinched their stranglehold on it."

THOSE WHO MUST NOT BE NAMED, because it is politically-incorrect to notice.

LouisDega's picture

So true. We need Walter Cronkite , Jim Jensen, Bill Buetel and Roger Grimsby back. Sarc 100% off

battle axe's picture

Roger Grimsby, I loved that guy, angriest man on TV. 

LouisDega's picture

What an era. I so miss it. My father in law saved some copies of NY daily news from 1974. Now that was  news.. real news.  

MeelionDollerBogus's picture

Holy cow, that's an amazing article. Since page 1 is filled with zingers & everyone should read it, I thought just for fun I'd take this quote out of page 2

The rationale for allowing that merger spree in the first place was based on a phony assumption: that big banks would somehow be more efficient and more profitable than small ones. "The whole premise of a Citibank or a Chase or a Bank of America is wrongheaded," ... Yves Smith. "Studies consistently show that after a certain size threshold, bank efficiency taps out. In fact, it turns out that all those cost savings the banks were supposed to enjoy from being bigger were actually based on cutting corners and fraud."

scatterbrains's picture

sweet!  financial Joe Stacks  bring it bitchez!  I want to see a swarming angry beehive of activity.

Brokenarrow's picture

I wish I had something to rat them out for.

A Mc Veigh will come from the shadows one day.

mess nonster's picture

McVeigh. All action, no talk.

sunaJ's picture

It's the new golden parachute.

Mr Lennon Hendrix's picture

When asked how Walled Street was taking the whistleblowing, Cramer will retort that, "The Bavarian Illuminatti are fine!"

Theta_Burn's picture

This sums up why Corzine and Co all walked.

Very soon they will start eating each other

tbone654's picture

MF Global - Now those are real "muppets"...  They've taken it in the pipe sooooo well...

rsnoble's picture

2 thoughts:  Greg Smith spends 12 years working for someone he thinks is pure evil.  Did he leave for these reasons or is the shit about to hit the fan and he's doing his on PR and washing his hands clean like he never had anything to do with it?

#2......STFU Jamie Dimon!  Bullshit damage control from someone who's last name should be changed to Demon.

The cats out of the bag you fkn morons.

Global Hunter's picture

From the day we're born here in the west we're told to study and work hard, if you really work hard one can be "a doctor a lawyer", your parents and teachers push you to study to make money and have a career.  One works their ass off then gets what they think is a reward, a good job with a reputable company (what they thought was reputable) in a reputable business.  Along the way some people wake up from this trap.

espirit's picture

Smith prolly didn't get the bonus or promotion he thought he'd deserved this last 6 mos.

Never met one that wasn't a pompous ass.

They're burned out - and rich - by age forty.

reload's picture

Exactly: for 12 years it was profitable enough to stomach any ethical concerns. Now it is not, and after 12 years at GS an individual on his pay/bonus scale simply does not need the agro any more. He may be right about the culture getting worse but as head of department, what did he do about it? just took the money anyway and then said after the fact - I worked for a bunch of crooks.  

WonderDawg's picture

I'm as cynical as anybody here, but Jeebus, the guy wakes up and does the right thing and still gets bashed? There might be some truth to what you say, but at least he's doing the right thing now.

FXPortent's picture

People like this will always have some sort of a living. He will most likely be offered a sum of money to write a book, or be approached about a movie/documentary.

Monica Lewinsky was a complete moron, let's not forget this little fact.

Greg Smith on the other hand, even though far from a big shot, will not be left completely in the dirt.

ShankyS's picture

Now that is an avalance (the one of whistle blowers) that I look forward to seeing. 

mess nonster's picture

A sudden Goldman collapse would be the ultimate Black Swan. I can dream, can't I?

TuffsNotEnuff's picture

We stopped dealing with them in 2006. Made it a rule in 2007.

Sitting in for due diligence on GS presentations, then researching their "facts" left no choice.

I have no idea why their derivitives business is still in business. Or anything else, for that matter. Why do investment teams pay fees to get a combo of lie/cheat/fraud ? They're sharks and all investors are the fish.

"Nice dogs, Queenie !"

AcidRastaHead's picture

Awesome new industry.  If only we can squeeze the lawyers out somehow.

TPTB's picture

Yesterday Jim Cramer on squakbox


"Apple produces something everybody wants (the new retinal camera ipad)... At this price, buy the stock."

TPTB's picture

I think you scan the retinals of possible business contacts with it.



digalert's picture

"reports of criminal or less than legal activity"

I thought what I've been reading at ZH over the years has all been criminal or less than legal activity.

Is buy buy buy Cramer a mad muppet?

mess nonster's picture

Recently, someone, recovered a gob of spit ejected by Cramer during one of his shows, and had it DNA tested.

It appears Cramer shares 98% of his DNA with the Snuffleupagus, Grover, and Oscar the Grouch.

j0nx's picture

Not like the gov will do anything about it or investigate any of the claims. In fact I'd lay even money that the gov will investigate the whistleblowers for what they did instead. Nothing will be investigated until a million people show up in front of eric holder's office demanding it and I sure as shit don't see that happening in the days of snooki and march madness. Fughet about it. The people have spoken loudly and they prefer bread and circus.

tmosley's picture

Smell that?

Smells like FEAR.

1835jackson's picture

The BIG rats left the ship a long time ago.

Clowns on Acid's picture

You are correct Jack - Weill, Rubin, Clinton, Raines, etc...

PMakoi's picture

I would love to believe Greg Smith's own sincerity, and GS is probably overdue tar and feathering, but there is also the self interest motive of whistle blowers who can switch teams (or start their own team) and take hundreds of thousands, millions, or billions of client wealth with them.  Many investors are not simple sheep, goats maybe, cattle perhaps, but many are sorely pissed off about losing money, and about not earning decent returns on THEIR capital.  Make no mistake, the basis of the game is THEIR money.  If bank runs scare TPTB, guys like Smith that can play Pied Piper are also a threat to these powers.  Not many have shown Smith's guts.  I tip my hat to him for that, but I also suspect he's not retiring.  Cramer is full of shit.  Smith probably will be hired in a heartbeat if Smith can pull his GS customers along with him.  And. this publicity certainly won't hurt his chances of attracting other fed up customers/investors.

Acet's picture

Many if not most of the customers of investment banks are instutional investors like funds and pension funds.

The structure of funds is to have one or more persons who manage (and risk) somebody else's money while being paid a fat fee for it even for lousy performance (in fact, most funds underperform the market).

So what you have is a bunch of guys (at the investment bank) selling overpriced services to a bunch of other guys (fund managers) who themselves receive overpriced fees, with both the overpriced services and the overpriced fees paid out by the people that have their money in those funds.

Guess who the real muppets are here ...

realtick's picture

Years ago at Barnes & Noble I bought a book called "The Illuminati Manifesto". This was before the esoteric section exploded after the DaVinci Code. It was hard to believe that it was on the shelf.

The author made a statement that I have never forgotten:

"The Illuminati envision a world in which its citizens are valued not only by social status and wealth, but by their integrity and honor, by the standard of individual rights; by the moral standard, by how they live in regards to each other, by the respect and honor they hold for the individual rights of others."

LoneStarHog's picture

Uh!...There can be thousands of Whistleblowers...Who cares?...It will require ONE PROSECUTOR...Fat chance of that!

Antifaschistische's picture

I'm all conflicted....does this mean, that one day ZH may have competition from the mainstream media exposing WallStreet criminal and immoral activity?   They've got a long way to go.


espirit's picture

Small fry, taking some heat off to prevent a blow off top.

Think cynically.

web bot's picture

I'm starting to dislike Cramer.

He's now starting to look like a bag of shit with a hole in it. He should just plug the hole.