SB 777 Will Protect Employees Who Come Forward, Punish Corporations and Executives That Do Not
Sacramento--Legislation to provide new protections for workers who blow the whistle on corporate fraud and to punish corporations and executives who stay silent about financial deceptions was introduced by Senator Martha Escutia and the Foundation for Taxpayer and Consumer Rights (FTCR) today.
"Employees should be able to alert the public to corporate dangers without fear of reprisal," said FTCR's senior consumer advocate, Doug Heller. "Even after the federal corporate accountability law, there are still accounting scandals reported daily. The lesson of Enron and WorldCom is that people on the inside of corporations know about fraud long before it wreaks havoc on investors, workers, consumers and the public. To date, however, there has been no legislation enacted that would create an early warning system such as that proposed in SB 777."
The bill is similar to legislation (SB 783) passed by the California Legislature in 2002, but vetoed by Governor Davis. In his veto message, Governor Davis said, "I strongly support the highest corporate responsibility and accountability standards for our corporate executives." He further added that he would sign the bill with certain modifications.
"As Governor Davis and lawmakers try to solve the budget crisis, the impact of corporate fraud cannot be ignored, as the crisis is intrinsically linked to the corporate behavior that sent the stock market into the tank and pushed the economy over the edge," said Heller. "Stopping corporate fraud before it does its damage would be worth far more than just saving investors' money and workers' jobs, it is a defense shield for the economy."
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.
- Punish executive silence by imposing up to $10,000 fines on executives, directors and upper-level financial managers who cover up accounting fraud.