Notable Securities Fraud Whistleblowers
Arthur F. Schlobohm IV - In 2008 Schlobohm caught wind of an investment opportunity in his home town of Minneapolis. He was a veteran trader, having worked up from being ticket runner at the New York stock exchange as an adolescent. Trevor G. Cook was the manager of the fund, which was equal to $4.4 billion. Cook had a checkered past, with two suspensions from the National Futures Association. The deal Cook was pandering intrigued Schlobohm's friends and neighbors, many of whom attended an informal financial meeting at Cook's house in the spring of 2009. By this time Schlobohm, so convinced that the fund was a ponzi scheme, had contacted the FBI to initiate an investigation. He then embarked on a four month undercover quest to gather evidence against Cook. Ultimately, when the case was brought forward, Cook pleaded guilty to mail and tax fraud. The fraud resulted in $160 million in losses. Cook was sentenced to 25 years in prison.
John Alpert - Alpert was a Tampa attorney who alerted the feds to a securities fraud involving NationsBank in the 1990s. Although this case preceded the Dodd-Frank Act, the case still resulted in $60 million settlement and extra $6.75 million fine.
Infospace Employees - Infospace is a wireless communications company. The former CEO Naveen Jain promised stock options to new employees as one of their benefits, and a real boon to lure in the best of prospective employees. The only catch was that, in order to have the stock options, employees had to work at the company for at least one year. Many employees did not consider this a difficult task, until they were mysteriously fired shortly before the year mark came around, effectively denying the employees of any payoff. Three employees opened a case and Jain settled with them out of court, Robert Hoffer in January 2001 (undisclosed amount), Kent Plunkett and Mark Kaleem in 1999 (for $10.5 million and $4.5 million, respectively). Jain and Infospace are still battling securities fraud cases.
Amy Stroupe - In 2007 she was working for BB&T Corp. The Winston-Salem-based bank began to get involved in a development scam located in North Carolina. The development was proposed to be built in the mountains and was called the Village of Penland. The fraud was initially noticed when a company official noted that a new employee was making a large number of Penland loans. That official requested that Stroupe look into the matter. It was obvious to Stroupe that the Penland development was a Ponzi scheme, but no company official took action and the bank continued to dole out loans to local residents aiming to invest in the development. BB&T, all told, loaned out more than $20 million to local investors. Soon after, Stroupe was fired over a trivial matter and decided to blow the whistle on the company. The judge ruled in favor of the plaintiff. Five individuals have pleaded guilty to criminal charges in reference to the case.
Harry Markopolos - Harry Markopolos is very familiar with securities fraud law, as he is a private fraud investigator in his home town of Boston, MA. Ever since 1999, Markopolos recognized that there was something suspicious about Bernie Madoff's financial dealings. He organized heaps of evidence against Madoff over the years, repeatedly submitting it to the SEC, New York's Attorney General, and anyone else who could be construed as relevant to securities fraud regulation. Unfortunately, none of these bodies acted upon the information, and Markopolos had to wait until the Madoff scam collapsed to see the man come to justice.