There’s a high cost to being a whistleblower. As my Bank Whistleblowers United colleagues and I can attest to, being a whistleblower means losing your job and most future possibilities of getting another position in your profession are slim to none; not to mention the human cost of the stress and emotion involved and the personal financial debacle that comes along with this decision.
While Sarbanes-Oxley supposedly protects whistleblowers from retaliation, the facts prove different. So it is an end of year gift to discover that whistleblowing is actually demonstrating results, a real return on the investment.
New research by Jaron H. Wilde, an assistant professor of accounting at the University of Iowa’s, Tippie College of Business, “demonstrates for the first time that financial shenanigans at companies decrease markedly in the years after truth tellers come forward with information about wrongdoing in their operations.”
The new research, which will be published shortly in Accounting Review, has disclosed a “sharp and lasting drop in in financial wrongdoing at companies that were subject to whistle-blower investigations.”
In 2016, the whistleblower program at the S.E.C., which was established under the Dodd-Frank Act of 2010, heard from 4,218 “tipsters,” a 40% increase from 2012. This is a dramatic increase from 2008, when as reported in the Wall Street Journal, the Department of Labor had ruled in favor of whistleblowers in only 17 of 1,273 complaints filed under the Sarbanes-Oxley Act since it was enacted in 2002.
Incidentally the passing of Sarbanes-Oxley came about as a result of my friend, Enron whistleblower Sherron Watkins’ Congressional hearings and testimony about the Enron fraud.
The research shows that that the S.E.C. program has awarded $136 million to 37 whistleblowers since its program’s inception and the enforcement actions have resulted in almost $900 million in financial remedies, which went primarily to wronged investors.
Mr. Wilde’s research involving whistleblowing under the Sarbanes-Oxley Act, which spans from 2003 to 2010, includes 317 U.S. public companies. He says, “following the allegations whistleblower firms are significantly more likely to experience a decrease in the incidence of accounting irregularities and a decrease in tax aggressiveness, compared with control firms.” Based on the data he had accumulated to date, the decrease lasted for at least a two-year period.
While skeptics have questioned whistleblowers’ motivations and the merits of complaints, the study shows that there were “certainly a number of instances where whistle-blowers are providing incremental information that allows the government to have a case against a company or an employee.” As Mr. Wilde says, “the organizational complexity of companies is now so high that it makes it difficult for external parties to detect misconduct. These individuals coming forward are what allow the government to have a case in many instances.”
Granted, the study may have its limitations. Still, new cases of whistleblowing are calling attention to the illegal practices of retaliation some companies and, yes, even our government, has engaged in.
A recent case in point is that of National Security Agency inspector, George Ellard. It appears that Mr. Ellard, an outspoken critic of whistleblower Edward Snowden, personally retaliated against another NSA whistleblower.
Mr. Ellard received a termination notice. Jesselyn Radack, a whistleblower attorney who has represented multiple NSA whistleblowers, including Snowden and Thomas Drake, is quoted … “Ellard’s proposed termination for whistleblower retaliation confirms what the whistleblowing community has long known: there were no safe and effective internal channels for NSA whistleblowers like Snowden to use. The case for pardoning Snowden is made stronger given Ellard’s now proven record of retaliation.”…“This is a man, who runs an office that is supposed to protect whistleblowers, yet he described them as manic thieves and other such terminology and was quite hostile and intimidating.”
Another case is the Wells Fargo situation where employees came forth to report on retail banking practices that enrolled customers in services they did not ask for or want. Employees who spoke out paid dearly for trying to do the right thing: they were fired!
CNNMoney is hearing from former Wells Fargo workers around the country who tried to put a stop to these illegal tactics. The case is still under investigation and is finally getting the attention it deserves on the side of whistleblowers.
Dozens of Wells Fargo employees filed retaliation complaints with a federal whistleblower program since 2010. And the data reveals that not only did the bank know about widespread complaints, but the government did, too!
So perhaps change is coming and this report will have some traction, encouraging truth tellers to come forward, and stopping the massive retaliation practices, which, though against the law, continue to be used.
If companies can see that preventing whistleblowing and doing the right thing has a return on investment, we may finally gain traction in stopping the massive fraud that almost crippled this country.
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Whistle-Blowers Spur Companies to Change Their Ways
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Labor Department Pulls Rug Out From Under Corporate WhistleBlowers
Enron Stands Unprecedented as the Poster Child of Blatant Corporate Fraud
Banking in the 21st Century: The Great American Ponzi Scheme at Wells Fargo (and all TBTF)
Dozens of Wells Fargo Employees Filed Whistleblower Complaints with Feds, New Data Shows
Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.
