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Study Says Sarbox 806 Doesn't Protect Whistleblowers

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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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