SEC urged to enforce whistle-blower law
WASHINGTON -- Two senators who wrote a tough but little-understood law to protect corporate whistle-blowers are pressing the Securities and Exchange Commission for aggressive enforcement, just as a case emerges that could determine how companies are policed.
Spurred by scandals at Enron, WorldCom, and other large corporations, Congress passed the Sarbanes-Oxley Act in 2002. It requires chief executives to swear their companies' books are accurate. It also gives corporate whistle-blowers more protection than any previous federal law has extended to insiders who report wrongdoing.
Senators Charles Grassley, an Iowa Republican, and Patrick Leahy, Democrat of Vermont, who wrote the whistle-blower section, said they wanted to change a corporate culture that ''valued profit over honesty." In addition to making it easier and safer to report corporate misdeeds, the law:
''Congress noticed there was a whistle-blower in most major scandals, like Sherron Watkins at Enron and Cynthia Cooper at WorldCom," said Stephen M. Kohn, a director of the National Whistleblower Center. He said Congress' plan to use conscience-stricken company insiders as important players in reforming corporate culture can succeed ''only if the SEC does its job."
The SEC has been silent about the whistle-blower provisions. Last week, Grassley and Leahy wrote SEC Chairman William H. Donaldson for details of the agency's enforcement plans.
The senators were prompted by a Labor Department finding on Oct. 7 -- the first under the law -- that a publicly traded company retaliated against a whistle-blower.
Asking for ''aggressive enforcement," Grassley and Leahy noted that the law says any violation of its provisions ''shall be treated for all purposes . . . as a violation of the Securities Exchange Act of 1934."
SEC spokesman Matthew Well declined to comment.
In an Oct. 7 finding, the Office of Occupational Safety and Health ruled CheckFree Corp. of Norcross, Ga., fired its product marketing director, Larry Hogan, after he told superiors the company was using deceptive marketing and overstating revenue, thereby defrauding customers and investors.
CheckFree markets electronic software to banks and businesses that allows consumers to receive and pay bills over the Internet.
The Labor Department found that Hogan had complained to superiors that they were claiming capabilities for a new product being offered to Mellon Bank that the product did not have. He raised similar complaints about marketing to Anthem Blue Cross/Blue Shield and National City Bank.
In a preliminary order appealed by both sides, the Labor Department said CheckFree must pay Hogan more than $103,000 in back pay, interest, counseling and job search expenses, and other compensation.
CheckFree spokesman Dave Fontaine declined to comment.
Leahy said Friday that the ruling gives the SEC a ''clear opportunity to show and tell the public how it will be handling allegations that could form the basis for a criminal violation of the whistle-blower provisions" of the law.
Kohn, who represents Hogan, said the Labor Department ''can only protect the private interest of the whistle-blower." But the SEC, he said, ''can use this law to protect the public interest of civilly and criminally investigating corporate wrongdoing."
