The San Francisco Chronicle
The state’s energy crisis, the collapse of Enron, Arthur Andersen’s document shredding and the resulting scandal that cost investors billions of dollars and ordinary citizens their life savings, should have taught us a lesson about financial fraud and the conspiracy of silence that feeds it.
Since the unraveling of Enron, we’ve seemingly endured a daily diet of high- level corporate wrongdoing that has shaken worldwide faith in the once-revered U.S. financial institutions.
WorldCom, Tyco, Global Crossing, ImClone and even Martha Stewart have become fouled by the stink of insider trading and despicable accounting practices that have made financial security a misnomer. Skepticism is growing nationwide as cynics wonder which CEO will be the next with dirty hands and cooked books.
Yet, despite one of the worst waves of financial corruption in recent times, our government leaders are barely moving, indeed if at all, to mete out penalties and erect barriers to future corporate misconduct. Granted, Congress has crafted nearly 50 financial reform measures. But none has been adopted — though they appeared to be getting fresh momentum with last week’s WorldCom revelations.
That’s why the passage last week of SB1452, the “Whistle-blower Act,” is commendable, encouraging and wise.
Among other things, the measure by state Sen. Martha Escutia, D-Whittier, requires corporate executives to tell the attorney general about accounting abuses. It also sets up a hotline for anonymous tips about corporate misbehavior and fines — as much as $100,000 — for executives who knowingly fail to report illegal business activity.
The bill, the biggest reform of its kind in the nation, would end the practice of corporate insider coverups, becoming the most significant new policy since Enron‘s bamboozle.
Opponents derisively call it a “snitch bill,” claiming it will harm relations between co-workers and drive businesses elsewhere. State Sen. Maurice Johannessen, R-Redding, even warns of it causing a “police state” similar to the Nazis after the 1940 invasion of Oslo.
Such claims are absurd, even laughably so. SB1452 won’t foster
petty office tattling or resurrect Nazism which, after all, thrived not because people pointed fingers but because witnesses to wrongs fell silent.
Also, because it’s already illegal to engage in fraud, it’s hard to imagine otherwise good corporate neighbors pulling up anchors to evade a law that simply induces them to be forthright.
SB1452 will shield workers from retaliation, and remind bosses of their duty to protect the public trust by not turning a blind eye to obvious lies and bogus accounting.
Executives, already obligated to report dangerous workplace conditions, would now have to report fiscal hazards that can cause just as much hurt. The bill may be the last chance to implement lessons so painfully learned amid rolling blackouts, lost jobs and bankrupt pension funds.
Yet, SB1452 faces an uphill fight in the Assembly. Just last month, the Assembly killed an Enron-inspired reform effort to stop accountants from consulting for firms they audit, with 25 Assembly Democrats failing to vote. The Assembly Judiciary Committee is expected to vote on the whistleblower bill today.