Study Says Sarbox 806 Doesn't Protect Whistleblowers

Lora Bentley

Corporate whistleblowers who report accounting or other financial fraud won't get much protection from Sarbanes-Oxley, according to a recent study from the University of Nebraska College of Law. WebCPA reports the Occupational Safety and Health Administration found in favor of the employee in only 13 of the 361 cases it reviewed in the first three years after Sarbox was enacted. What's more, the story says:

Although a number of those decisions were appealed to Labor Department administrative law judges (ALJ), only 6.5 percent of those whistleblower appeals were successful, [researcher Richard] Moberly reported... Financial whistleblowers whose cases are turned down by ALJs have the option of appealing those decisions to a federal administrative review board, and a number of complainants did so, the analysis said. But the review board has never ruled in favor of a SOX whistleblower.

Moberly argues these facts illustrate Sarbanes-Oxley section 806 isn't protecting whistleblowers as legislators intended it to. And if the problem isn't corrected, he says, employees will stop reporting fraudulent activities. His proposed fixes include: a longer limitations period for reporting the wrongdoing; requiring the ALJs and the agencies involved to report their findings so that potential whistleblowers better understand the situations in which they will or will not receive protection; or even moving investigative responsibility from OSHA to the Securities and Exchange Commission.

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Oct 30, 2007 1:27 AM Jolly Roger Jolly Roger  says:
I Could not agree more being a whistleblower myself and speaking with many others. What is the point in reporting even blatant fraud if all that happens is YOU get fired and black-balled out of their industry often at horrific personal loss.There is little or no safety unless you fully prepare and record your report. As one article I found today at says often those that investigate are controlled by the board members they are supposed to police through better compensation, mainly including a 'cut' of the share options pie often for millions of dollars.So in some senses SOX makes it worse, the criminals just band together that much tighter. OSHA is overworked and is often useless if the company does not admit guilt. The SEC is only interested in 1.) looking effective in preventing another Enron and 2.) not risking the favor of the company's defense law firm because that is where they go to get fat paychecks and cushy jobs when they leave the SEC.So the SEC is useless and just as likely to attack the whistleblower to keep them hushed about the fraud to keep investor confidence & politicians happy as they are to do anything to the fraudsters.SOX is an expensive joke & false comfort for the investor ... to put it in the words of a Big Law firm partner "SarBox is great, its like y2k for lawyers" If you are going to blow the whistle fine, but do it right - but go to sites like the one mentioned above to get up to speed first, if you don't know something ask them or find someone you can do not just blow the whistle and expect anything but the 'firing' squad to appear... Reply

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