Good lord, when will this gorilla finally go away and live in quiet service of the Lord, as she’s so loudly proclaiming she wishes to do? Now she has surfaced to say that if Enron happened today, she would have gone to Wikileaks instead of the SEC. Big problem with that: she went to Ken Lay, not the SEC. And what documents would she have provided them? Enron was notoriously scant on the paperwork. I can just see Julien Assange trying to shift through financial statements, trying to find a scam in all that. Not bloody likely.
Sherron Watkins, the former vice president at Enron who tried to blow the whistle on the accounting violations at the scandal-plagued Houston energy-trading giant, told an audience at a seminar Friday on the new whistleblower provisions in the Dodd-Frank Act that she and other whistleblower employees would probably take their concerns to WikiLeaks rather than the Securities and Exchange Commission now.
“People now will go to WikiLeaks to protect themselves,” she said during a briefing at the New York State Society of CPAs’ Foundation for Accounting Education offices in Manhattan. “WikiLeaks is a huge, huge sledgehammer that many employees will go to. People like myself will just go to WikiLeaks.”
To protect themselves? This lady has forgotten her own actions. She was protected by Ken Lay. He took her out of Global Finance (Andy Fastow’s group) and put her in Cindy Olson’s group (HR). She wasn’t fired or threatened. In fact, her job was so secure that she took off to Mexico for a vacation. She returned two or three weeks later, refreshed and ready to get cracking in Human Resources.
Watkins, a CPA, said that since she came forward, she has been unable to get a job in corporate America despite her years of experience as an accountant and portfolio manager. “The label whistleblower is stuck on my head,” she said. She now makes her living by giving speeches, and said she has heard from other whistleblowers about their inability to get jobs in their old occupations.
Here’s a newsflash: this is what happens to whistleblowers. Especially ones as irresponsible as Sherron Watkins. They destroy their careers. Would you hire her? Would you want her on your team? Hell no. Not in a million years. But here’s a more immediate point: she was not a whistleblower. She wrote that memo to Ken Lay saying there was a PR problem. And if there was fraud, she wanted in on it.
Nobody called her a whistleblower. She called herself a whistleblower. She thought it would give her a little exposure, maybe leverage that to a better paying job. She miscalculated.
The Dodd-Frank Wall Street Reform and Consumer Protection Act passed last year and made sweeping changes to the financial regulation structure at the SEC and other agencies. Among its provisions is the establishment of a whistleblower office at both the SEC and the Commodity Futures Trading Commission. However, the SEC whistleblower office has not yet received any funding, and the rules establishing it are still out for comment. With threats from Congressional Republicans to de-fund the financial regulatory reform effort, it may not ever get that funding.
God I hope the Republicans hold on this issue.
However, another of the panelists at the briefing, former SEC commissioner Paul Atkins, who later co-founded the consultancy Patomak Partners, said the whistleblower awards would be self-funding. Under the provisions of the Dodd-Frank Act, whistleblowers would be able to claim between 10 and 30 percent of the amount collected from companies, but the tip needs to lead to a successful enforcement action by the SEC and the monetary sanction needs to be at least $1 million.
And there’s your motive for frivolous whistleblower claims. How sick. How sick that a bitter employee can make the claim that his employer is corrupt and then, Sherron Watkins-like, collect on that corruption – even if it wasn’t corrupt. In this environment, it is frighteningly easy to launch a witch hunt in which nothing needs to be proved – only implied. Don’t understand SPEs? There’s corruption afoot! Don’t like the CFO? A ten minute call to the Whistleblower Office should be enough to get him fired. Yippee.
However, as Atkins pointed out, the SEC is already being inundated with whistleblower tips, particularly at the Office of Internet Fraud. “Tips aren’t the problem at the SEC,” said Atkins. The problem is having enough people to deal with them.
Francine McKenna, who writes the Re:The Auditors blog and moderated the panel, noted that she receives many tips on accounting problems just from her readers.
“Whistleblowing is just one tool in detecting and deterring fraud,” said another panelist, Marion E. Koenigs, deputy director in the Public Company Accounting Oversight Board’s Division of Enforcement and Investigations. She noted that about 15 percent of the tips received by the PCAOB are anonymous. The PCAOB shares tips internally with its Office of Research and Analysis and its Inspections division, as well as with the SEC and the IRS when the tips fall outside its jurisdiction.
The proposed rules for whistleblowers try to strike a balance between encouraging employees to first report the accounting fraud to the internal compliance departments at their companies and bringing them to the attention of regulators.
Employees have 90 days after first reporting the problem internally to bring it to the attention of the SEC. However, that could lead to employees facing retaliation during that critical time period.
Oh no! Poor employees, whatever shall they do? They mistrust their employer enough to report it to the SEC, yet expect it to continue to issue payroll checks every two weeks? What kind of fucked up Barney Frank thinking is that? To this day I can’t wrap my mind around this. If the company is corrupt, why not get off your lazy ass, polish your resume, and find another job?
Also, some employees are exempted from the whistleblower awards, including internal and external auditors and compliance staff. Some employees may decide it’s better to wait until the potential damages reach the $1 million threshold before reporting on the violations, the panelists noted, and that could make them liable for helping to cover up the fraud. Clearly many whistleblowers will want to consult with their attorneys before deciding what to do, and that could expose them to predatory class-action attorneys who will try to claim a large chunk of the whistleblower award.
Gosh, it sounds like whistleblowers just can’t win. Victimized by “predatory class action attorneys” (hello Bill Lerach), their own greedy employers, and the system itself, what are they to do? Probably sue more.
In the meantime, the whistleblower runs the risk of being fired or demoted. “Companies have a number of ways to oppress people so they sound paranoid or like a nut case” by the time they blow the whistle, Watkins noted.
Or, in Watkins case, perhaps she was just paranoid and a nut case.
She pointed out how the SEC treated whistleblower Harry Markopolos like a “nut case” despite credible efforts over eight years to draw their attention to Bernard Madoff’s Ponzi scheme.
She noted that her whistleblowing at Enron, which made her Time magazine’s 2002 Person of the Year along with fellow whistleblowers Colleen Rowley of the FBI and Cynthia Cooper of WorldCom, probably wouldn’t have qualified her for a whistleblower award from the SEC under the current proposed rules. She believes that given the risks, many employees who want to get their companies to stop committing fraud will prefer not to bring the problem to the attention of either their internal compliance departments or the SEC, but to leak the documents quietly to WikiLeaks so they can hold onto their jobs as well as their careers.
Well, what documents would she have leaked to Wikileaks? That’s the fun question that goes unanswered in Sherron’s rambling. Enron was not corrupt, and Enron had nothing to be ashamed of. Sherron Watkins, on the other hand, does.
Maybe I should leak to my blog some documents about her. Private ones. Ones that no jury ever saw. Hmmm. Maybe I should.