Wall Street 'License to Steal' Bill Gains Momentum

Published on January 24, 2012

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Wall Street ‘License to Steal’ Bill Gains Momentum

NWC Launches National Campaign to Stop Grimm Act

Washington, D.C. January 24, 2012. Today, the National Whistleblowers Center launched a national campaign against the Grimm Act (H.R. 2483). The bill, sponsored by Rep. Michael Grimm [R-NY13], systematically rolls back every whistleblower provision included in the Dodd-Frank Wall Street Reform Act. It has passed the initial mark-up and is poised for full approval.

The NWC has called upon its grassroots network to oppose the bill, calling it an act of war on whistleblowers. The NWC objects to the following measures of the bill, which systematically dismantle the current, effective whistleblower process from beginning to end:

    • Gag orders legalized — The bill permits companies to enforce, “any established employment agreements, workplace policies, or codes of conduct,” regardless of the impact on the right of an employee to report corporate crimes. This means that companies can force employees to sign agreements forfeiting their whistleblower rights.
    • Retaliation legalized — “Any adverse action taken against a whistleblower for any violation of such agreements, policies, or codes shall not constitute retaliation” (emphasis added). 
    • Law enforcement crippled — The Grimm Act requires the SEC to, “promptly notify any entity that is to be subject to [an investigation]” before beginning an investigation. Tipping off companies suspected of violating the law allows the corporations to intimidate witnesses and tamper with evidence before the investigation begins. 
    • Anonymity destroyed — The Grimm Act allows, and in most cases requires, the SEC to, “disclose to the employer’s audit committee such information provided by the whistleblower.” This means that the SEC would not only be unable to guarantee confidentiality, but it would be required to turn whistleblowers over to the very corporations accused of wrongdoing. 
    • Accountability minimized — The Dodd-Frank Act provides incentives for companies to self-report violations, including reduced fines and penalties. The Grimm Act creates a gaping loophole, allowing companies to claim they self-reported even when a whistleblower makes a report to the SEC. This applies even if the company initially covered up problems and retaliated against the whistleblower. 
    • Whistleblowers disqualified — The Dodd-Frank Act reasonably excludes persons found guilty of fraud from obtaining the benefits of the new SEC whistleblower program. However, the Grimm Act disqualifies employees who in any way “participated in” the violation. This means that low- and mid-level employees, such as a secretary who took a phone call or a clerk who made a photocopy, are excluded from the whistleblower program. This subtle-but-deliberate language would cut out the vast majority of whistleblowers from protection, as almost every whistleblower “participates” in the violations they uncover.

 Awards program broken — The Grimm Act makes whistleblower awards discretionary, returning the SEC whistleblower program to its pre-Dodd Frank Act status. The old program was completely discredited by a 2010 report by the SEC Inspector General. This document reported that the SEC helped only five people and awarded only $159,537 during 20 years of operating a discretionary program. The report lamented that the discretionary program was, “not fundamentally well-designed to be successful,” and made recommendations that were implemented by the Dodd-Frank Act. The Grimm Act turns back the clock.

Stephen M. Kohn, Executive Director of the National Whistleblower Center, issued the following statement about the Grimm Act:

The Grimm Act is a license to steal. It undermines every major whistleblower protection achieved for corporate employees in the past 20 years. Employees witness fraud every single day, and they are going to stay silent if this bill is passed. It stacks the deck in favor of those who are accused of waste, fraud, and abuse, and it removes the only incentive David has to fight Goliath. This is a green light for corporate fraud. It must be stopped.

Today on Honesty Without Fear, Stephen Kohn will discuss the Grimm Act with Eugene Ross, a financial analyst who exposed millions of dollars in corporate fraud committed by Bear Stearns under the SEC’s pre-Dodd Frank whistleblower program. Tune in today at 1pm ET or download the episode at whistleblowersradio.org.Links:

Grimm Act (H.R. 2483)
2010 SEC Inspector General Report
Dodd-Frank Rulemaking webpage

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