NEW YORK — They've called from pay phones. They've had furtive meetings at hotels and even a church. On internal government documents, they go by code names like Mr. X.
For the last year, whistle-blowers deep inside corporate America have been dishing dirt on their employers under a U.S. Securities and Exchange Commission program that could give them a cut of multimillion-dollar penalties won by financial regulators.
A new bounty program has been an intelligence boon to the securities industry regulator, which has struggled to redeem itself after failing to stop Bernard Madoff's epic Ponzi scheme and rein in Wall Street before the 2008 financial crisis.
Motivated by cash and the chance to rat out wrongdoers, tipsters are dropping more than names. Whistle-blowers and their attorneys are turning over boxes of documents, copies of emails and even audio recordings of alleged fraud or illegal overseas bribery.
"We are getting very, very high-quality information from whistle-blowers," said Sean McKessy, director of the SEC's whistle-blower office. "I was girding myself for what we were promised, which was an avalanche of nonsense, and I've been very pleased."
In the program's first year, 2,870 tips — or about eight a day — rolled in as of Aug. 12. And on Tuesday, one of them finally led to the agency's first payout: $50,000 to an informant who alerted regulators to an investment fraud.
They declined to specify the case, careful to avoid identifying the whistle-blower. Some say shielding identities could pose a challenge for publicizing the program, but the anonymity probably will yield more information.
The flood of new information doesn't necessarily mean the SEC will be more effective. In the case of Madoff, one whistle-blower repeatedly sounded the alarm years before the scheme blew up — to no avail. The whistle-blower unit now has seven lawyers pursuing cases and plans to add four more.
Some observers wondered whether the agency has enough resources or appetite to pursue complicated cases.
"I'm not sure the SEC is capable of processing the information it could now be receiving," said John Coffee, a Columbia Law School professor specializing in securities matters. "There's not enough staff and the staff is greatly overworked."
But McKessy said the new information has helped the SEC better focus its investigations. "Good information isn't resource-draining — it's actually resource-saving," McKessy said.
Under the program, tipsters whose information proves crucial to a case could get 10% to 30% of penalties over $1 million. To provide the payouts, the SEC has set aside $452 million from past penalties and fines in an investor protection fund.
And it's not just insiders who are eligible — short-sellers, who bet against stocks, or other outsiders using publicly available information in their analyses can profit, too.
"The full tidal wave of cases is more likely to be in year four, five — that's when you'll see the full effect," said Jordan Thomas, a whistle-blowers' attorney at law firm Labaton Sucharow in New York.
Thomas, who helped set up the program before leaving the SEC, said it could "revolutionize" securities enforcement. Wall Street's cops need good intelligence, he said, and insiders can put investigators on the right paper trail or provide firsthand witness accounts of wrongdoing.
Even senior executives have divulged internal secrets, their attorneys said. Many want to keep their jobs but have suffered retaliation after coming forward.
"They like their life, but they know something that they can't pretend they don't know," Thomas said. Behind his desk hang posters from classic whistle-blower movies: "The Insider" and "All the President's Men."
The SEC has fielded tips from insiders of varying stripes: current and former employees, board members, former spouses and some compliance officers.
Tips also have come from sources inside financial firms, said Erika Kelton, who represents whistle-blowers at law firm Phillips & Cohen in Washington.
Potential payouts could come in handy, because Wall Streeters could get blacklisted for dropping a dime.
"They feel they need some financial security in the future," Kelton said. "Many of these people risk never being able to work again in their chosen career."
The SEC has tried to attract tipsters before. A previous bounty program was aimed only at insider trading. But in two decades, the regulator doled out rewards to only a handful of claimants, who collectively won nearly $1.2 million. The regulator's handling of the program drew criticism from the agency's inspector general.
Now the agency has expanded the program and received tips on alleged market manipulation, stock-offering frauds and misleading corporate disclosures and financial statements.
Some are top-notch tips leading to immediate inquiries. Previously, the SEC saw about two dozen such tips a year. Under the new program, "we were seeing probably two a day of that quality," said Tom Sporkin, former head of the SEC's Office of Market Intelligence.
The new program has its roots in the Dodd-Frank financial overhaul of 2010. The Commodity Futures Trading Commission started its own whistle-blower bounty program in January.
Business groups had feared that insiders with axes to grind would race to regulators with gossip or unfounded complaints, and worried that this would lead to costly SEC investigations.
Corporate lawyers may not know for sure whether whistle-blowers tipped off the SEC in the first place.
"It's really too early for lawyers and corporations to tell" how the whistle-blower program has worked, said Stephen Crimmins, a partner at K&L; Gates law firm in New York.
The SEC has come under criticism for in effect outsourcing some investigations by letting companies hire private law firms to look into some cases of alleged wrongdoing.
Gary Aguirre, a San Diego lawyer and former SEC official, said the practice of using an outside lawyer to investigate cases shows "how the SEC has basically yanked the teeth out of the tiger that Congress gave them."
The SEC maintains the whistle-blower program has been successful.
McKessy would say little about what future cases may result from whistle-blower tips, other than to hint they could bring bigger paydays.
"If they ripen the way we think some of them might," McKessy said, "we could be issuing checks larger in magnitude than the one we issued today."