Erika A. Kelton and Eric R. Havian are attorneys with the whistleblower law firm of Phillips & Cohen. Today they released an opinion piece on the Washington Post’s Capital Business web page. They are urging the Securities and Exchange Commission (SEC) to resist what the corporate lobbyists are saying, and adopt regulations that protect all whistleblower disclosures. The corporate lobbyists are asking the SEC to require that whistleblowers must report their concerns first to their corporation’s own internal compliance department if they want to have any protections under the new whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act . Such a rule would "render the program ineffective," Kelton and Havian say. They explain:
The biggest and most profitable frauds that come to our attention are planned and directed by top management. In these circumstances, internal compliance is absent, meaningless or co-opted. Requiring formal reporting would scare off many, if not most, whistle-blowers.
Corporate compliance departments can be good for discovering frauds that are contrary to the wishes of top management. However, when top management is conducting or allowing the fraud, then the internal compliance programs are a trap for whistleblowers who think they can report a fraud while staying anonymous. Meanwhile, corporate lobbyists are currently urging the SEC to constrict whistleblowers to internal whistleblowing. That way, corporate managers will have a chance to punish the messenger and scare other employees away from blowing the whistle. "Such an outcome would benefit only the corporate interests aggressively lobbying the SEC to weaken the whistle-blower program — not investors," Kelton and Havian say. I agree. The deadline for submitting comments to the SEC is this Friday, December 17, 2010. Read more from the National Whistleblowers Center (NWC) here.
