Bill Addresses WorldCom-Style Cover Ups, Intimidation
Sacramento — The toughest corporate accountability legislation in the United States passed the California Assembly today. SB 783 (Escutia), which was sponsored by the Foundation for Taxpayer and Consumer Rights, creates stiff fines for high-ranking corporate officials who cover up accounting fraud, and protects whistleblowers from retaliation for coming forward with information about such misdeeds.
The bill addresses the dual problem of cover ups and intimidation illustrated by WorldCom emails released by congressional investigators, which show that WorldCom‘s controller used intimidation tactics to silence an individual who questioned the now-bankrupt company’s accounting practices. A version of the bill has already passed the Senate, and Governor Davis is expected to sign the bill into law.
“This bill will create a new culture of accountability in corporate boardrooms by punishing executive silence and creating a new duty to come forward with information about accounting fraud,” said FTCR’s senior consumer advocate, Doug Heller. “This bill is California’s early warning system to protect against the next Enron or WorldCom. We are urging Governor Davis to support this bill and make California the nation’s safest state for pensioners and employees.”
SB 783 will:
– Punish executive silence by imposing up to $100,000 fines on executives, directors and upper-level financial managers who cover up accounting fraud.
– 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.
– Establish a Whistleblower Hotline to provide employees with confidential access to law enforcement authorities.
The votes were: 43 ayes and 20 noes, 17 not voting.