A Failure of Whistleblower Protection

Despite the passage of new laws designed to protect them, whistleblowers have found themselves largely unprotected during the Bush administration. Six years ago, the Public Company Accounting Reform and Investor Protection Act of 2002, also known as the Sarbanes-Oxley corporate governance act, was passed in response to the Enron and WorldCom scandals. Provisions in the law made it illegal for publicly-traded companies to retaliate against “any other office, employee, contractor, subcontractor, or agent” of a company for acting as a whistleblower. Despite these strong provisions, the Department of Labor has ruled in favor of whistleblowers who claimed to be retaliated against only 17 times out of 1,273 complaints that were filed between 2002 and September 2008. Of those, 841 cases were dismissed, many on the technicality that the whistleblowers work for subsidiaries of the companies, not the main companies themselves. The Labor Department has argued that the statute does not cover employees of those subsidiaries. Senator Patrick Leahy, a Vermont Democrat, and Senator Charles Grassley, an Iowa Republican, who together drafted the protections, counter that there is no basis for this reading of the law. It is not just corporate whistleblowers who are not receiving the protection they expect; federal whistleblowers also find themselves without cover. In June 2008 a coalition of 112 independent groups urged the Senate and House to pass a new bill increasing whistleblower protection for federal employees. This call came after only two of 53 whistleblowers who brought cases to the Merit System Protection Board during the first three months of 2008 were victorious.

Follow-up:
On September 10, 2008, Senators Leahy and Grassley sent a letter to Secretary of Labor Elaine Chao accusing her department of violating the “spirit and goals” of the corporate whistleblower provisions from the Sarbanes-Oxley act. In a statement, the agency replied that they are “confident we are correctly enforcing the statute, and do not believe the text of Sarbanes-Oxley as written supports the broader reading that employees of subsidiaries are automatically covered.”

Photo: U.S. Senator Chuck Grassley. Photo credit: U.S. Senate

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