Today, the law says that an employee needs only “a reasonable belief” that his or her employer is violating a securities law or is in any other way imperiling shareholder value to qualify for government protection from retaliation. “Retaliation” encompasses everything from firing to verbal threats and missed promotions. Within 90 days of experiencing retaliation, an employee can file for protection, which means anything from reinstatement with back pay to a full federal court trial with the potential of compensation for pain and suffering. These protections apply even if the employee is wrong about his or her accusations.
“The employee could be wrong, but if they have a reasonable belief there’s been a violation and the company retaliates against them in any way, it triggers the whistle-blower protection in Section 806 and leaves the company wide open,” says Neil Aronson, a partner with Mintz Levin Cohn Ferris Glovsky and Popeo in Boston.
A separate section of the law puts managers who allow retaliation against a whistle-blower at risk of jail time or fines. That, in turn, exacerbates the enormous public-relations risk to the company. Add to that the praise heaped on whistle-blowers like Enron’s Sherron Watkins and WorldCom’s Cynthia Cooper, and what does an angry employee have to lose?
Plenty, it turns out. Most people who have publicly accused their companies of securities fraud say Sarbanes-Oxley does little to mitigate the high personal price of coming forward.
“It’s the exception that a whistle-blower is looking to get even, because it’s very painful to break ranks with [your company], even if [you] have strong legal rights,” says Thomas Devine, an attorney who has counseled more than 2,000 whistle-blowers protected by other federal statutes through the Government Accountability Project, a nonprofit group based in Washington, D.C. Even with legal protection, once whistle-blowers go public, their reputations are called into question and their future career prospects hampered, all for the dubious goal of reinstatement to a work environment in which they are considered troublemakers.
Even if a case does go all the way to a federal court, whistle-blowers would probably have to change industries if they ever want to work again, says Devine, since they will be considered “wild cards” regardless of the outcome. And despite the attention given Watkins et al., most whistle-blowers are rebuffed, not supported, by the federal government. Since Sarbanes-Oxley was passed, about 131 public-company employees have reported violations of whistle-blower protections to the Occupational Safety and Health Administration (OSHA) of the Department of Labor (DoL). (The agency was directed to oversee these violations because it has handled the industry-specific whistle-blower statutes.) Most of these investigations—83 percent of the 60 completed so far—have been dismissed or withdrawn.
True, the percentage of cases upheld may increase, since about one-third of claims have been thrown out for technical reasons—for instance, because the company is private or the alleged retaliation began before passage of the law. But in general, says John Spear, OSHA’s head of investigative services, 75 percent of cases brought each year under other whistle-blower statutes are found to lack merit.