NWC and Investor Protection Group Oppose Anti-Whistleblower Bill
Washington D.C. May 11, 2011. Today at 2:00 pm EST, the Capital Market and Government Sponsored Enterprises Subcommittee of the House Committee on Financial Services will be holding a hearing on an anti-whistleblower bill proposed by Congressman Michael G. Grimm (R-NY, 3rd). The bill amends the Security Exchange Act to reverse the main whistleblower protections in the Dodd-Frank and creates unprecedented sweeping restrictions on the ability of employees to blow the whistle on corporate fraud. Some of the most alarming features in the bill are:
- Punish employees who disclose violations of the Act directly to the
Securities and Exchange Commission (SEC). It forces whistleblowers to
inform corporate wrongdoers that they are violating the law before
contacting law enforcement, giving the wrongdoers the opportunity to
hide their misconduct from investors.
- Strip the Act of the current mandatory rewards provisions designed
to encourage employees to risk their careers and expose large,
multi-million dollar, corporate fraud against shareholders.
- Allow corporations to use limitless shareholder funds to oppose
whistleblowers, while imposing burdensome restrictions on the rights of
corporate whistleblower employees to hire their own attorneys.
- Explicitly authorize corporations to establish "employment
agreements" and "codes of conduct," restricting the right of employees
to notify investors or the SEC about potential fraud. Firing
whistleblowers under these newly established corporate codes "shall not
- Require the SEC to notify the company that it is being investigated, tipping off the wrongdoers.
Stephen M. Kohn, Executive Director of the National Whistleblowers Center stated:
The introduction of such an anti-whistleblower bill demonstrates a
contempt for oversight and accountability. The bill will gag employees
who are the main source of fraud detection and make it nearly impossible
for the government to uncover complicated financial fraud. Best
describes as the "Madoff-Enabling Act," the bill will render innocent
investors the biggest losers on Wall Street.
According to Randy G. DeFrehn, Executive Director of NCCMP
*, a national trade association representing numerous multiemployer pension funds with substantial investments on Wall Street:
This new bill is highly ill-advised and should be seen for exactly what
it is -- a blatant attempt by the Wall Street lobby to eliminate some of
the strongest anti-fraud provisions enacted in last year's Dodd-Frank
financial reform legislation. The intent of those provisions is to
create an environment that discourages those who would be tempted to
take the wrong road in the first place. Dodd-Frank as enacted will do
Mr. DeFrehn explained:
In passing Dodd-Frank, Congress has already debated and decided these
issues and there is no need to re-legislate whistleblower protection on
Wall Street. One needs to look no further than 2008 to see the prior
laws were ineffective; and our nation came very close to total economic
collapse. Research shows this occurred in no small part because of
massive, systematic fraud on Wall Street -- fraud that has been so widespread it is described as pandemic
by leading industry experts. Individual and institutional investors
deserve better protection from the U.S. government. Mr. Grimm's bill
should not see the light of day.