On October 27th[1], the Fordham Journal of Corporate and Financial Law held its Annual Symposium entitled “What Would We Do Without Them: Whistleblowers in the Era of Sarbanes-Oxley and Dodd-Frank.” The Symposium featured a keynote speech from Ms. Jane Norberg, who heads the Office of the Whistleblower at the SEC, and included an in-depth panel discussion that addressed both the successes and the shortcomings of corporate whistleblowing in the complex legislative and regulatory framework created by the Sarbanes-Oxley Act of 2002 (“SOX”) and the Dodd-Frank[2] Act of 2010 (“Dodd-Frank”). The panelists were drawn from a broad range of careers within the public and private sectors, and included SEC employees, private practitioners and law professors, each of whom brought a diverse perspective on contemporary whistleblowing.
The Whistleblowing Decision
An implicit theme throughout the Symposium was the inherent risks that an individual faces when he or she decides to become a whistleblower, and the potential for corporations to retaliate against whistleblowers after they make a complaint. Specifically, an employee’s decision to report a potential violation either through: (i) a company’s internal structure and/or (ii) the SEC can have adverse effects on the trajectory of a whistleblower’s career and financial stability, notwithstanding the anti-retaliation protections and monetary incentives offered to whistleblowers under SOX and Dodd-Frank.
As the panelists delved into the anti-retaliation provisions of the whistleblowing legislation and the common experience of the whistleblower in today’s corporate environment, both the scope of the risk and the severity of the retaliation that whistleblowers face became clear. Corporations can take action against whistleblowers by firing them or reducing the whistleblower’s responsibilities at work.[3] Whistleblowers are also confronted with the reality that they may become “blacklisted” within a particular industry, leaving them virtually unemployable.[4]
Although there has been a positive increase in the number of whistleblowing claims in recent years,[5] the threat of severe retaliation by corporate employers and the risk of economic losses still weigh heavily on an employee’s decision to report a claim under SOX or Dodd-Frank.[6] The panel explained that the typical corporate whistleblower is a high-level employee because of his or her privity to sensitive information, and that such employees must be committed to making whistleblowing claims as a substantial loss of potential earnings will likely result from their decision to report. While high-level employees are undoubtedly in a better position to bring a case under SOX or Dodd-Frank because of their status within an organization, these employees may also be more capable of dealing with financial losses resulting from the whistleblowing process because they are more established in their careers than other members within the organization.[7]
Potential Impact on Lower-Level Employees
If the typical whistleblower is a high-level employee, how do lower-level employees that may be in a position to blow the whistle fit into the whistleblowing landscape? Examples of corporations retaliating against whistleblowers suggest that lower-level employees may be discouraged or effectively excluded from whistleblowing altogether. Recent cases with respect to practices within the Wells Fargo organization illustrate that the anti-retaliation provisions of SOX and Dodd-Frank, while effective, do not guarantee that a whistleblower will be insulated from the damaging effects of a corporation’s actions.[8] In these cases, Wells Fargo admitted to firing 5,300 lower-level employees within the past several years because the employees spoke up about fraudulent financial practices that were prevalent throughout the organization.[9] For lower-level employees such as the retail bankers at Wells Fargo, firing and blacklisting can leave them in dire financial situations and forced to cope with tremendous stress.[10] Threatened by these forms of corporate retaliation and with their livelihoods at stake, many lower-level employees may choose not to report and avoid the risk altogether, which could leave the intent behind the framework of SOX and Dodd-Frank partially unfulfilled.
[1] Please note that this blog post is based on the author’s perspective and empirical research and is not intended to represent the statements made or viewpoints expressed by the keynote speaker or the panel during the 2017 JCFL Symposium.
[2] The full title of the Act is the Dodd-Frank Wall Street Reform and Consumer Protection Act.
[3] Michael McMillan, CFA, Retaliation Against Whistleblowers: No Good Deed Goes Unpunished, CFA Institute (Oct. 24, 2012), https://blogs.cfainstitute.org /investor/2012/10/24/whistle-blowing-no-good-deed-goes-unpunished/.
[4] Paul Sullivan, The Price Whistleblowers Pay for Secrets, N.Y. Times (Sept. 21, 2012), http://www.nytimes.com/2012/09/22/your-money/for-whistle-blowers-consider-the-risks-wealth-matters.html.
[5] U.S. Sec. and Exchange Commission, 2016 Annual Report to Congress on the Dodd-Frank Whistleblower Program (Nov. 15, 2016), https://www.sec.gov/files/owb-annual-report-2016.pdf.
[6] See McMillan, supra note 3.
[7] Ann Marsh, Unprotected: How the Feds Failed Two Wells Fargo Whistleblowers, The American Banker (Aug. 14, 2017), https://www.americanbanker.com/news/unprotected-how-the-feds-failed-two-wells-fargo-whistleblowers.
[8] See Id.
[9] Matt Egan, I Called the Wells Fargo Ethics Line and was Fired, CNN Money (Sept. 21, 2016), http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html?iid=EL.
[10] See Egan, supra note 9; See Sullivan, supra note 4.
