Posted: March 30th, 2022
In definition, a whistleblower can be an employee or a former employee of a corporation who provides proof and evidence that substantiates the fraudulence and ethical behavior within the entity or activities that are not in the best interests of the general public or stakeholders. Customarily, whistleblowers reveal classified data and information concerning their workplace, which is in violation of the laws and regulations in place, and also that can be disparaging to the well-being of the employees. Whistleblowers have various characteristics. One of the key individualities of whistleblowers is credibility. A whistleblower has to have the character of being trusted, depended upon and have integrity. This is because the information provided by the whistleblower has to be truthful and reliable. Another characteristic of a whistleblower is believing in their behavior and being in changing their beliefs. A whistleblower should maintain their stance in being honest about the fraudulent behavior of the organization and lack of integrity. Third, persistence is another fundamental characteristic of a whistleblower. Whistleblowing involves a protracted period of time before the case is closed. In addition, the whistleblower has to face his or her current or former employees in the process of providing evidence against them (Johnson, 2006).
Example of Whistleblowing
A fitting example of an employee whistleblower is Alayne Fleischmann. Fleischmann was a former employee of JP Morgan Chase and was a whistleblower against the company in providing proof about white-collar crimes committed by the financial institution. Fleischmann was the key witness of one of the major cases in the history of the United States, revealing secrets that the Chief Executive Officer (CEO) of JPMorgan, Jamie Dimon, ended up paying $9 billion to preclude the general public from hearing. The financial institution took part in a huge criminal securities fraud within the mortgage operations department of JPMorgan. Fleischmann was employed by the company to ensure that its operations did not include bad loans. However, the company employed a diligence manager, who was her superior, and responsible for appraising and clearing loans. Her superior instructed her to cease sending him emails and the department did not want information to be disclosed regarding its mortgage transactions. Fleischmann and her colleagues were requested to analyze $900 million packet of loans, most of which were sold in a suspicious manner (Taibbi, 2014).
Justification of the Whistleblower’s Actions
Alayne Fleischmann’s actions for being a whistleblower were completely justified. To begin with, she was given a directive not to send emails regarding her concerns for the bad loans that were being granted by the organization. Secondly, she experienced bullying from the superiors at Chase and also her written alarms and warnings regarding the transgressions were completely ignored. Fleischmann was hired by the company to operate as a quality control officer, which significantly included making certain that the company did not purchase bad loans. The $900 million packet of home loans were initial payment defaults, implying that the loans had been formerly sold to other financial institutions and thereafter returned subsequent to defaulting by borrowers on numerous payments. The institution superiors had been notified of the transgressions, and eventually fired Fleischmann. Her actions of disclosing such information was completely justified (Taibbi, 2014).
Sarbanes-Oxley and Whistleblowing
The Sarbanes-Oxley Act (SOX) was legislated in 2002 with the main purpose of tackling fraud in the corporate world. Imperatively, SOX formed the Public Company Accounting Oversight Board (PCAOB) to create oversight in the accounting industry. SOX underpins the autonomy and financial literateness and knowledge of boards for companies. As a result, CEOs are individually culpable for the errors and facilitations in accounting audits. Moreover, the Act proscribed loans to company executives and provided work protection to whistleblowers (Amadeo, 2016). The SOX act offers substantial protections for corporate whistleblowers. Different from other whistleblower regulations, the Sarbanes-Oxley Act’s whistleblower protection provisions are not restricted to offering legal solutions for illegally fired or laid off employees. Along with consisting of employment-centered protections for employee whistleblowers, the regulation consists of four other stipulations that are directly pertinent to protection of whistleblowers. To begin with, the law necessitates that all publicly traded companies generate internal and autonomous audit committees. To a certain degree of the authorized audit committee function, these publicly traded companies are obligated to set up processes for employees to report whistleblower complaints, and practices which would safeguard the privacy of employees who report accusations with the audit committee (Kohn, 2004).
Secondly, the Act lays out new ethical standards for advocates who practice before the Securities and Exchange Commission (SEC). This regulation, in tandem with the execution of regulations by the SEC, necessitates advocates, in some situations, to be whistleblowers on their employers. The third aspect is that the SOX revised the state impediment of justice decree and outlawed reprisal against whistleblowers who offer truthful evidence to an officer of the law regarding committing or prospectively committing any Federal transgression. SOX’s provision of this law was not restricted to solely public companies but rather encompasses each employee across the nation (Kohn, 2004). Fourth, the Act gives the SEC the authority to carry out each aspect of the SOX, taking into account the different whistleblower associated provisions. In addition, it fends for criminal fines for being in violation of the SOX, containing the whistleblower-linked provisions (Kohn, 2004).
Amadeo, K. (2016). Sarbanes-Oxley Summary: How It Stops Fraud. The Balance. Retrieved from: https://www.thebalance.com/sarbanes-oxley-act-of-2002-3306254
Johnson, R. A. (2006). Whistleblowing: When It Works: And Why. London: Lynne Rienner Publishers.
Kohn, S. M. (2004). Sarbanes-Oxley Act: Legal Protection for Corporate Whistleblowers. National Whistleblower Center. Retrieved from: http://www.whistleblowers.org/index.php?option=com_content&task=view&id=27
Taibbi, M. (2014). The $9 Billion Witness: Meet JPMorgan Chase’s Worst Nightmare. Rolling Stone. Retrieved from: http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106
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