The public’s help is needed to stop H.R. 2483, a House bill, that would expose financial industry whistleblowers to truth-chilling retaliation.
The public’s help is need to stop passage of H.R. 2483, a House bill deceptively named The Whistleblower Improvement Act of 2011. The legislation, introduced by four Republicans, would require financial industry whistleblowers to report their concerns internally before taking them to government regulators. Danielle Brian, of the Project on Government Oversight writes, “This would be like requiring police officers to tip off suspects before they begin an investigation.”
One of the bill’s sponsors, Representative Michael G. Grimm (R,C-NY) offers this defense of the legislation.
“If we are serious about putting a stop to fraud and wrongdoing, we should continue encouraging companies to remain vigilant,” said Rep. Grimm. “For decades, companies have maintained effective internal reporting mechanisms to help them stop criminal activity early with the help of tips from anonymous whistleblowers. The overreaching provisions in Dodd-Frank make these internal programs obsolete, open the floodgates of claims to an already overburdened SEC, and delay action on escalating crimes within a company. The Whistleblower Improvement Act corrects these provisions in Dodd-Frank that have the potential to cause more harm than good.”
In truth, the industry has not made effective use of internal reporting mechanisms, or even come close to it. In an interview, Michael Hudson, of the Center for Public Integrity, said that more than sixty whistleblowers at twenty different financial institutions internally reported problems that ultimately led to the financial meltdown of 2008. Their employers’ response was to ignore the warnings and to punish, marginalize, demote or fire the whistleblowers. Millions of homeowners, investors and retirees would suffer as a result.
Outsiders, also, attempted to work through the companies themselves to correct problems, but were ignored as well. One of those was Nye Lavalle, who discovered that “some loan-servicing companies that worked for Fannie Mae routinely filed false foreclosure documents.” He disclosed the problems directly to Fannie Mae and the firm eventually issued a confidential report that corroborated many of his disclosures; but “there is little evidence that Fannie Mae’s management or board ever took serious action,” reports the New York Times.
Rep. Grimm’s bill claims to “carve out common sense exceptions” by “allowing whistleblowers to report directly to the SEC in situations when the wrongdoing is conducted by compliance officers or the highest level of management,” or when a company “does not have a robust internal reporting mechanism in place.” But, a whistleblower is not likely to know these things until after retaliation occurs, and a whistleblower may suffer unemployment for years until a government reward comes…if ever.
Michael Hudson has written a book about the financial debacle, “The Monster: How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America–and Spawned a Global Crisis.” Asked to describe the biggest lesson that developed from his research, Hudson said, “The biggest lesson..is that….everyone talks about companies that have open-door policies and..encourage whistleblowers…but the truth is…in human relations people don’t want to hear bad news…we need to have real protections for whistleblowers.”
We hope you agree. Please call or fax your Congressional representatives, or use email them using the convenient form provided by the Project on Government Oversight.
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