California Proposal Would Punish Executives Who Remain Silent About Financial Fraud
State legislatures will have to take up the issue of corporate accountability and accounting reforms, as federal lawmakers drop the ball, according consumer advocates with the Foundation for Taxpayer and Consumer Rights (FTCR). The New York Times and Reuters have recently reported that lawmakers in Washington, DC, buckling under the pressure of legions of corporate lobbyists, will fail to enact strong accounting and corporate accountability reforms despite the disastrous Enron situation and a series of other corporate crises, including Tyco and Adelphia.
"Lawmakers were full of sound and fury when the Enron scandal was a daily news item, but as the cameras have faded, so have the hopes for meaningful reform in DC," said Doug Heller, senior consumer advocate with FTCR. "The real battle for corporate accountability will be in state legislative chambers."
An FTCR-sponsored proposal in California -- SB 1452 (Senator Escutia) -- offers the strongest Enron-Adelphia-Tyco reforms introduced. The bill punishes corporate officers and directors who withhold information about financial fraud in their company. An executive who has knowledge, for example, that the company keeps two sets of books -- one for the public and one that is real -- would be required to inform the California Attorney General within 15 days of acquiring that knowledge or be subject to a $100,000 civil penalty under this law.
The bill also adds new protections for whistleblowers, including a confidential "Whistleblower Hotline" that will allow employees to expose corporate wrongdoing to government authorities without fear of reprisal. The bill has passed its first committee and will be considered by the California Senate Judiciary Committee on Tuesday, June 18.
"The last six months have provided too much information about the state of corporate America to ignore the problems. If the federal politicians won't do their job they should pay on election day, but that does not mean big businesses and the auditors should be given a free pass. Laws like California's proposal to punish executive silence give the public a fighting chance to protect itself from big corporations running amok," said Heller.