NWC seminar on Dodd-Frank a huge success

Sean X. McKessy and NWC founders
David Colapinto, Stephen Kohn, Sean McKessy and Michael Kohn.

Yesterday, the National Whistleblowers Center (NWC) road trip of seminars came to Washington, DC, to spread the word about new opportunities for whistleblowers under the Dodd-Frank Wall Street Reform and Consumer Protection Act. “This was the best continuing legal education I’ve had in 17 years,” attorney Don McKenna told me. In fairness, this is in part because the law has never been so good for whistleblowers. “Dodd-Frank’s employee protections are the Cadillac of whistleblower protections,” NWC Executive Director Stephen M. Kohn said. However, it was also because of the star-studded faculty. The seminar marks the first appearance of Sean X. McKessy to a “whistleblower-friendly” crowd since he became Director of the Security and Exchange Commission (SEC) Office of the Whistleblower. There was more than one joke about McKessy’s background working for corporations. Answering corporate concerns about whether the SEC’s rules would undercut internal compliance programs, McKessy said, “I would know if something we [the SEC] do would destroy internal compliance as we know it.” McKessy explained how he read through 305 pages of comments to the SEC whistleblower rules. He did so with an eye toward the 40% of frauds that go undetected. McKessy announced that on August 12, 2011 (the day the SEC whistleblower rules go into effect), his office will launch a new web page. The page will have a form for on-line whistleblower submissions. He said his office would be looking for submissions that are “specific, timely and credible.” His main message, “We are open for business, and whistleblowers are welcome at the SEC.”

Donna Boehme made a presentation on corporate compliance and interface with the new rules. Boehme (rhymes with “Rome”) is an internationally recognized authority in the field of organizational compliance and ethics. She is currently a Principal of Compliance Strategists LLC. She serves on the boards of the RAND Center of Corporate Ethics and Governance, the Rutgers Center for Government Compliance & Ethics, the Society of Corporate Compliance & Ethics, and South Texas College of Law – Corporate Compliance Center, and is Program Director for the Conference Board Council on Corporate Compliance and Ethics. She previously served as Group Compliance and Ethics Officer for BP plc (London). Boehme said that she felt the SEC found a good balance between internal compliance and SEC enforcement action and is giving employees a choice of whether to report internally first depending on how they feel about the company’s internal compliance program. “Employees really know if a company’s compliance program is serious.” One good clue: to whom does the chief compliance officer report? If the answer is the CEO, CFO, general counsel, or HR director, then the program does not have the independence required for the compliance mission. A company’s senior people are the typical wrongdoers, she notes. The correct answer is the board. “Expectations for the board are changing, and real board training should be the next wave,” she urges. “Not all internal compliance programs are equal,” Boehme observed. The process of developing a program employees will trust “allows companies to do some soul-searching.” Boehme, and her colleague Michael Greenberg, wrote an op-ed for Bloomberg Government last month on the SEC whistleblower rules. “Compliance and internal audit people often get in trouble for doing their job too well,” Boehme told us.

Dean Zerbe (pictured with David Colapinto) is special counsel to NWC, and a principal of The Alliant Group. He formerly worked for Sen. Charles Grassley as chief investigator, and as counsel to the Senate Finance Committee. In that capacity, he wrote the law creating the IRS whistleblower reward program. “The SEC rules came out a lot better because of the National Whistleblowers Center,” Zerbe said, noting that the SEC cited NWC’s comments over 40 times. “Thank them for the rule being much better.” Zerbe’s main point, however, was that, “the people whose hands are dirty are the ones who have the specific, timely and credible information.” He explained that the phrase “substantially directed, planned, or initiated the violation” is a term of art that refers to the leader of the law-breaking group. Anyone who was following the leader should not suffer a reduction in any reward because they are precisely the group that whistleblower rewards were meant for. Moreover, since becoming a whistleblower can mean a person’s career is over, rewards should not be reduced. “To catch a big fish, you need to put a lot of bait in the water.”

The NWC seminar tour makes its next stop in New York City on July 25, 2011, at 1:00 p.m. Stephen Kohn will be speaking at the Mid-Manhattan Library in New York City at 6:30 pm (EDT) that evening on his new book, The Whistleblower’s Handbook: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself.

Stephen Kohn offered additional tips for whistleblowers and their advocates.

(i) a report to the Commission is necessary to prevent substantial harm to the entity or investors;
(ii) the entity is engaging in conduct that will impede our investigation; or
(iii) 120 days have elapsed.

Sean X. McKessy added these points:

Dean Zerbe adds:


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