Senate Passes Whistleblower Protections, Corporate Accountability After Two Year Fight for Reform

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1-800 Whistleblower Hotline, New Protections for Employees Who Speak Out And Penalties For Hiding Financial Fraud Go to Governor’s Desk

Legislation to establish an early warning system to protect against corporate fraud passed the California Senate today and will be sent to Governor Davis for his signature. The package of two bills (SB 777 and SB 523) creates new protections for workers who blow the whistle on corporate fraud and punish companies that stay silent about financial deceptions. The proposals also establish the nation’s first 1-800 Whistleblower Hotline to give employees confidential access to the Attorney General.

The bills, both authored by Senator Martha Escutia (Whittier), grew out of the energy company manipulations of 2000-2001 and corporate frauds identified in 2002, which have collectively cost California consumers, workers and retirees tens of billions of dollars. The bills’ sponsor, the Foundation for Taxpayer and Consumer Rights (FTCR), also noted that public employees need strong protections in order to root out government corruption and fraud.

“These bills give Californians the protection they need to blow the whistle on corporate crime without fear of reprisal,” said FTCR consumer advocate Doug Heller. “The honest employees inside corporations and government are our best line of defense against the next Enron or the next Quackenbush.”

The proposals, which were contained in one bill until August when it was split for technical reasons, were opposed by some business interests and vetoed by Governor Davis last year. This year, however, all opposition was removed during this legislative session when a controversial provision to fine individual executives who withheld information about financial fraud was removed. This change also addresses the reason Governor Davis vetoed last year’s bill.

“Whistleblower protections combined with stronger corporate accountability create an early warning system against fraud. By signing this package, Governor Davis can set a national standard that encourages employees to come forward with vital information to protect the public, and punishes those corporations which fail to bring that information to light,” said Heller

SB 777 and SB 523 will:

  • Provide new protections to employees who refuse to participate in illegal activity or blow the whistle on illegalities at their company or organization. (SB 777)
  • Make it easier for whistleblowers to avoid retribution and to fight retaliatory actions by employers, by requiring employers to provide clear and convincing evidence that an act against a whistleblower was not retaliatory. (SB 777)
  • Establish a Whistleblower Hotline to provide employees with confidential access to law enforcement authorities and require employers to post this number, and notice of whistleblower rights, in the workplace. (SB 777)
  • Impose up to $1 million fine on corporations that withhold information about financial fraud. (SB 523)

The bills passed with the following vote totals:
SB 523 — 23 to 13
SB 777 — 22 to 12.

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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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