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.

Waiting for OSHA

Anyone waiting to be rescued by OSHA is liable to be waiting for Godot,” charges Devine of the Government Accountability Project. He says that given OSHA’s track record handling other whistle-blower cases, “it’s a black hole…cases languish indefinitely.”

Although Sarbanes-Oxley gave OSHA new responsibilities, the agency received no additional resources to go along with them. It did bring in representatives from the SEC and DoJ to speak with its investigators, says OSHA’s Spear, and “familiarize them with issues related to Sarbanes-Oxley.” In any case, connecting the dots between a red flag raised and a subsequent act of retaliation—particularly if it doesn’t involve a layoff or a salary cut—is always difficult.

Moreover, the remedies OSHA can offer are weak. None of its initial findings are binding, so it must broker a voluntary settlement between employee and employer. Even then, at best an employee can hope to be reemployed at the same seniority level—potentially in another division—with back wages plus interest for lost time, along with litigation costs, expert-witness fees, and attorneys’ fees. OSHA has no power to order accounting procedures reformed, numbers restated, or other employees fired. “We focus on making the complainant whole, not on changing the work environment,” says Spear.

A whistle-blower’s allegations of fraud, in general, fall to more-powerful agencies, like the DoJ and the SEC. But those agencies also offer little in the way of subsequent reward, protection, or even information about the case. “The SEC is kind of a one-way street,” says Stone, who had provided documents to the SEC’s regional Atlanta office. So far he has not been deposed by the SEC, which is reportedly investigating Duke.

Others complain that investigations go nowhere. Roy Olofson, a former vice president of finance at Global Crossing who made allegations of accounting fraud, was interviewed only once—by the U.S. Attorney’s office in winter 2002, according to his attorney, Paul Murphy. “After that, we saw no follow-up,” says Murphy. The investigation has since been dropped, despite a $1 billion earnings restatement related to Olofson’s concerns in late 2002.

Some whistle-blowers say they can’t get heard at all. “I’m starting to feel like the wallflower at the dance,” says Lynn Brewer, who worked in various divisions of Enron from 1998 to 2000. She has been trying to share her Enron documents and experiences with the DoJ and various members of Congress since the day the company filed for bankruptcy in December 2001 and nullified her confidentiality agreement with Enron. “At that point, I was getting desperate to get my story out there, because I was getting concerned about my own culpability,” she says.

Yet getting government officials even to return her phone calls has been a challenge. For instance, she says she E-mailed and phoned Sen. Byron Dorgan (D—N.Dak.), but never heard back, nor has she heard from anyone from the SEC or the DoJ. Now on the lecture circuit for organizations such as The Conference Board and the Association of Certified Fraud Examiners, Brewer says she gets 15 to 20 E-mails or phone calls per month from people who feel trapped by illegal activity at their companies. “My official answer is to send them to OSHA,” she says, “but I also give them the name of a good lawyer.” In the long run, of course, there’s hope that Sarbanes-Oxley may have the desired effects on whistle-blowing. “A case could be made that there will be fewer claims in the future,” says OSHA’s Spear, “because the act puts more mechanisms in place for companies to hear from whistle-blowers early. Plus, there’s a criminal penalty attached to [retaliation], which tends to get people’s attention.”

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