The federal law designed to shield whistleblowers from retaliation has given scant protection to workers in the six years since it was written into the Sarbanes-Oxley Act (SOX), legal experts claim and Department of Labor (DOL) statistics confirm. Moreover, it appears the odds are getting worse, with recent actions exposing loopholes so big that Enron-scale fraud, or auction-rate securities malfeasance, could slither through. "The law obviously has not worked," says attorney D. Bruce Shine.
As evidence, he points to a recent court decision that snatched away protection previously awarded his client, and a new DOL interpretation of the statue that limits its scope to publicly-traded companies, not their privately-held subsidiaries.
In the first instance, a federal appeals court ruled that David Welch, former CFO of a Cardinal Bankshares Corp. unit–and the very first person promised protection under the SOX stipulation–wasn't entitled to return to his previous job at the Bank of Floyd in Arkansas. The three-judge panel ruled that Welch, now an accounting professor at Franklin University in Columbus, Ohio, failed to prove that the bank committed fraud by overstating its earnings by $195,000.
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"This says that a whistleblower better be very careful," says University of Nebraska law professor Richard Moberly. But, perhaps more daunting, he adds, is the developing controversy about the reach of the law. The DOL has asked whistleblower Timothy Flynn, a former senior vice president at UBS Financial Services, to show why the UBS AG subsidiary should be covered under the whistleblower statute, since it is privately held. "The plain language of the statute only applies to publicly traded companies," DOL spokeswoman Sharon Worthy says. Based on these grounds, the department already has dismissed complaints against Siemens AG and WPP Group.
And, if these recent actions aren't proof enough that the law has no teeth, the DOL's own numbers indicate that whistleblowers have little or no security. Of 1,273 complaints filed since 2002, administrative law judges promised protection to only six whistleblowers, including Welch. Because of subsequent court decisions and continuing adjudication, few, if any, of those six have actually won their jobs back, Shine says. DOL could not provide an exact figure.
If the statute hasn't achieved Congress' goal of shielding whistleblowers, it's not the law that's at fault, most legal experts agree. "It's the interpretation that undermines the broader goals," says Moberly. Adds Shine: "It does not appear that anyone in the administration wants to enforce the law." That could, of course, change in January.
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