Sunday Read: National Whistleblower Day Speaker: Sherron Watkins
National Whistleblower Day is less than one week away and on July 27, 2023, National Whistleblower Center (NWC) will again host a live event celebrating the day’s 10th anniversary in Washington D.C. The day will feature experts, legislators, and whistleblowers with incredibly fascinating updates and insights.
We celebrate National Whistleblower Day to recognize the important contributions whistleblowers have made to safeguarding our democracy, public health, environment, and economic stability. July 30, 1778 marks the first action taken to protect whistleblowers in the United States, and even predates U.S. independence.
In this Sunday Read, we highlight the contributions of former Enron vice president Sherron Watkins. A featured speaker and presenter at National Whistleblower Day ceremonies, her honesty and bravery paved the way for sweeping corporate reform laws and helped present whistleblowers in the appropriate light. Watkins will be returning to National Whistleblower Day, moderating a panel on needed policy improvements from the viewpoints of real whistleblowers.
The Short Story of the Enron Scandal
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Enron peaked as the seventh-largest corporation in the U.S. with a valuation of more than $70 billion, but when it began losing money and accumulating debt in the late 1990s, it hid the losses through accounting tricks.
As the media caught on, others on the inside were trapped in a moral and ethical dilemma.
Enter: Sherron Watkins
Former Enron vice president Sherron Watkins wrote a letter to then-CEO Kenneth Lay in Summer 2001 warning that the company’s methods of accounting were improper and that it “might implode in a wave of accounting scandals.” Watkins was uniquely positioned to make this assessment, having been with Enron for 10 years and previously employed by Arthur Andersen, Enron’s accounting firm and auditor.
Watkins’ warning went unheeded and she came forward to Congress. Her brave actions exposed corporate misconduct and the scandal paved the way for sweeping corporate reform laws. Congress passed the historic Sarbanes-Oxley Act (SOX) in 2002, which protects employees of publicly traded companies who report violations of Securities and Exchange Commission (SEC) regulations or any provision of federal law relating to fraud against the shareholders.
In recognition of her coming forward, Watkins and two other whistleblowers were named Time “Persons of the Year” in 2002.
Watkins is now Professor of the Practice at Kenan Flagler at the University of North Carolina at Chapel Hill and the Leadership and Ethics Advocate for her own company. Her journey through the Enron crisis has inspired many others and crystallized her focus to improve the lot of whistleblowers and would-be whistleblowers.
Watkins has appeared at NWC’s National Whistleblower Day events, most recently in 2019. She is the Senior Fellow for Ethics and Policy for Whistleblower Network News, where she recently voiced her public support for a permanent National Whistleblower Day. As she recently said on the Whistleblower of the Week podcast:
“This is about changing the culture so that whistleblowers are celebrated, not denigrated.”
Echoes of Enron in 2023
In March 2023, the collapse of Silicon Valley Bank (SVB) struck many as reminiscent of the fall of Enron. Just one day before SVB’s demise was announced, hedge fund manager Michael Burry, who was masterfully portrayed by Christian Bale in 2015’s “The Big Short” — which focused on the housing crisis — weighed in on Twitter.
“It is possible today we found our Enron,” Burry tweeted cryptically on March 9.
As previously reported, various factors contributed to SVB’s fall, including:
· Rising interest rates.
· Venture capital drying up.
· The extended absence of a risk officer.
· Years of poor, and possibly illegal, decisions by SVB executives.
This ultimately led to massive losses that were being lamented behind closed doors for months ahead of SVB’s demise.
Whistleblowers have not yet come forward. But thanks to trailblazers like Watkins, there are laws and programs in place to protect whistleblowers who report bank fraud. A corporate or bank whistleblower might look to one of the following programs for guidance and protection:
· SOX broadly defines protected activity to include reports made to federal regulatory and law enforcement agencies, Congress, an employee’s supervisor, and internal corporate investigators. The law also protects employees who participate or testify in SEC regulatory proceedings or other federal proceedings related to fraud against shareholders. More information on reporting corporate fraud can be found on the NWC’s SOX Resource Page.
· The Dodd-Frank Act permits individuals to file a complaint with the SEC or the Commodity Futures Trading Commission (CFTC), alleging that a person or company violated U.S. securities or commodities law. The Dodd-Frank Act SEC Whistleblower Program contained three major whistleblower laws: The Commodity Exchange Act, the Consumer Financial Protection Board, and the Security and Exchange Act. Learn more here.
· The Financial Crimes Enforcement Network’s (FinCEN) anti-money laundering whistleblower program became effective following passage of the Anti-Money Laundering Act of 2020 (AML). Thanks to NWC’s successful advocacy and public support, FinCEN’s AML program allows whistleblowers who report violations of the Bank Secrecy Act to receive up to 30% of any resulting monetary sanctions in excess of $1 million. Potential whistleblowers who previously felt direction-less can disclose information to FinCEN relating to complex efforts by oligarchs, drug traffickers, and terrorist organizations to hide money.
· The IRS. The Internal Revenue Act permits individuals who provide original information to the Internal Revenue Service (IRS) about a violation of the tax laws or the underpayment of taxes to obtain a monetary reward if their information results in a sanction against the tax law violator. More information on the IRS Whistleblower program is here.
Do not wait for investigators to call you, find an attorney and make a report now. Sherron Watkins could not use the rights and protections available to whistleblowers today. Thanks to her, whistleblowers today are protected from retaliation, can report to the government in secret, and are eligible for awards.
Watkins’ Influence on National Whistleblower Day
Each year since 2013, the U.S. Senate has unanimously passed a Resolution designating July 30 as National Whistleblower Day. The date commemorates the first whistleblower law in the history of the United States which was passed on July 30, 1778. In recent years, a growing number of federal agencies have celebrated National Whistleblower Day by informing employees of their whistleblower rights and by highlighting the critical role whistleblowers play in exposing fraud, corruption, and abuse of power.
Watkins is one of several whistleblowers behind the grassroots campaign to have signed a petition urging President Biden to sign an Executive Order making National Whistleblower Day a permanent designation and requiring federal agencies to recognize the day. The whistleblowers are calling on whistleblower supporters to sign the petition.
This call to action will:
· Honor our history.
· Change the culture of fraud, corruption and retaliation.
· Demand justice and respect for modern-day whistleblowers.
Support NWC
NWC fights to bolster whistleblower programs, inform the employees in all sectors about available laws and protections and advocate for July 30th to be declared a federally recognized National Whistleblower Day. As a 501(c)(3) non-profit our awareness building work is made possible with the support of our generous donors. Please consider donating $75 today to help us produce and host live events that inform and educate the public.
This story was written by Justin Smulison, a professional writer, podcaster and event host based in New York.
