Whistle-Blower Woes

Many companies think the whistle-blower provisions of Sarbanes-Oxley will spark nuisance suits by disgruntled employees. The truth is far more complex.

“I didn’t want to go public, but I didn’t know what choice I had because no one would listen to me,” says Whitley. The proposed $44.4 million settlement “was intended to get Coke’s attention,” he says, adding that he never expected Coke to pay that amount.

Coke has not responded so far to any of the specific allegations, but the company denies that it fired Whitley in response to the claims he raised, and downplays the claims themselves. “As we have investigated all of the allegations raised by Mr. Whitley, we have found nothing material that requires a restatement of our financial statements, or we would be doing that right now,” said Heyer in July’s second-quarter conference call.

Still, while the issues might not be material to Coke at a corporate level, it’s hard to say Whitley was just grousing. In response to his lawsuit, Coke conducted an internal investigation and subsequently agreed to pay Burger King $21 million as recompense for the marketing frauds, after firing Fisher in April for a further (and unrelated) violation of the corporate conduct code. The company announced in June that it was writing down $9 million due to overvalued assets in its Fountain division, and said it would continue to investigate financial arrangements with its suppliers. In August, Coke announced that Tom Moore, Fountain president and a named defendant in Whitley’s suit, was stepping down.

Whose story—Whitley’s or Coke’s—is the real thing could be decided by a civil-court jury or the DoJ, which is investigating the alleged Frozen Coke fraud. But Whitley isn’t pinning his hopes solely on Section 806 and OSHA. Why? “In many ways, Sarbanes-Oxley is toothless,” says Marc Garber, Whitley’s attorney, “because the [DoL] has no subpoena power and no authority to interview employees without a company representative present.” That makes it difficult to gather the evidence necessary to win a case.

Thus, while OSHA is still investigating Whitley’s case, Garber, a former federal prosecutor, is also relying on broader state and federal lawsuits. The latter offer the opportunity for fuller investigation, he explains, and the potential for a larger settlement.

Hanging on at Duke

Other whistle-blowers who have endured OSHA investigations agree that the protections aren’t as strong as they might seem. “People ask me, do I think Sarbanes-Oxley will cause more people to come forward? I don’t think so, not if they know their careers will be forever altered,” says Barron Stone, an 18-year employee of Duke Energy Corp.’s finance department.

Stone’s efforts to blow the whistle at Duke started in early 1999, when he told the American Institute of Certified Public Accountants, the South Carolina Board of Certified Public Accountants, and the Securities and Exchange Commission that Duke was intentionally understating revenues for its regulated energy division to avoid having its rates lowered. Stone says he waited in vain for regulators to catch the problems on their own, and finally, in July 2001, he decided to step forward. He put in an anonymous call to the company’s ethics hotline and met with the head of the Public Service Commission of South Carolina (PSCSC).


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