Wikileaks or bigger cash rewards. That’s the stark choice offered by Sherron Watkins, the woman who made the cover of Time Magazine in 2002 for exposing abuses at energy trader Enron.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, those aware of financial fraud are now free to bypass the internal compliance officer and go straight to the SEC. If their information proves correct, the whistle blowers may collect awards of 10 to 30% of the penalties imposed. But despite this rosy picture, Watkins, recently told journalists the new provisions would not have helped her and the sacrifice just isn’t worth it. The former corporate VP advises whistle blowers today to post what they know on Wikileaks and forget about awards.
“I’m probably the only whistle blower with a wonderful life,” Watkins, a CPA, told the press at a seminar on whistle blowers provisions in the Dodd Frank era, held by the NY Society of Certified Public Accountants. Watkins described a life of “traveling ‘round the world talking about important issues.” By contrast, “others who came after me have horrible stories.” Watkins was joined on the panel by Francine McKenna, a freelance writer with a news site re:TheAuditors, Marion Koenigs, deputy director at the Public Company Accounting and Oversight Board (PCAOB), and Paul S. Atkins, a former SEC commissioner and co-founder of Patomak Partners LLC, a Washington, DC-based consulting firm to the financial services industry.
Watkins favors increasing the amount of whistle blower awards since the cases often drag out in court while mortgage payments go unmet and attorney’s fees mount. “He needs a guarantee of payoff because he has to live off of it,” said Watkins, who cited as an example the tobacco industry whistle blower Jeffrey Wigand who lost his job, his career, and his family, as a result of going public. He teaches high school now, which probably pays far less than his job as a tobacco industry chemist, she ventured. “It’s asking too much of individuals.”
Her fellow panelist, Atkins, cautioned that the law could lead to “specious claims” and great expense for public companies. He said Dodd-Frank, which expands incentives to cover all securities law violations, not just frauds perpetrated against the government, was “passed in the middle of the night,” and summarized the provisions as “a management headache.”
To qualify for an award, a claim has to result in enforcement action by the SEC and sanctions have to amount to at least $1 million. “Every dollar that goes to a whistle blower is one less that goes to a shareholder,” said Atkins.
In addition to Wikileaks, Watkins said reform of corporate malfeasance was really simple. Dispense with non-cash compensation and incentivize risk managers. Stock options, she said, encourage corporate officers to take risks, which push share prices up. Then the “right voices within the corporation will be heard.”
