SB 777 Is Early Warning System to Prevent Corporate Fraud
Sacramento -- Legislation to provide new protections for workers who blow the whistle on corporate fraud and to punish corporations that stay silent about financial deceptions cleared its final policy hurdle today in the Assembly Judiciary committee. The proposal will also create the nation's first 1-800 Whistleblower Hotline to give employees confidential access to the Attorney General.
SB 777 (Escutia) will establish an early warning system against financial fraud and other corporate abuses by encouraging workers to come forward with evidence of corporate wrongdoing said sponsors of the measure, the Foundation for Taxpayer and Consumer Rights (FTCR). The bill will go to the Appropriations Committee before reaching the Assembly Floor.
"Lawmakers are wrestling with a super-sized budget crisis because no one blew the whistle when corporate crooks were gaming the energy market, like Enron, or gouging the state for hospital services, like Tenet," said FTCR senior consumer advocate, Doug Heller. "SB 777 will ensure that employees can alert the public to corporate dangers without fear of retribution. Stopping corporate fraud before it does its damage will do more than just save investors' money and workers' jobs, it is a defense shield for the economy "
FTCR sponsored similar legislation in 2002 (SB 783) that was passed by the California Legislature but vetoed by Governor Davis. He indicated that he would sign the bill with modifications that were incorporated into SB 777.
The need for strong whistleblower protections in the corporate world grows with ongoing revelations of corporate fraud, said FTCR. The Associated Press reported today that former Rite Aid Corporation CEO, Martin Grass, pleaded guilty to charges of "massive accounting fraud, [and] the deliberate falsification of financial statements" to inflate the company's stock price.
FTCR Executive Director Jamie Court -- author of the new book Corporateering: How Corporate Power Steals Your Personal Freedom And What You Can Do About It -- notes that strong whistleblower protections are critical to bringing "corporateering" to light.
"Workers inside corporations are our first line of defense to safeguard investors, consumers and the economy from corporate fraud when companies corporateer -- prioritize the bottom line over individual and societal interests," said Court. "SB 777 will protect employees who fight corporateering in the workplace by coming forward with vital information that protects the public."
SB 777 will:
- Impose up to $1 million fine on corporations that withhold information about financial fraud.
- Provide new protections to employees who refuse to participate in illegal activity or blow the whistle on illegalities at their company or organization.
- Make it easier for whistleblowers to avoid retribution and to fight retaliatory actions by employers.
- Establish a Whistleblower Hotline to provide employees with confidential access to law enforcement authorities.