Whistleblowers Pay a Heavy Price

While whistleblowers are protected under the Sarbanes-Oxley Act, the financial and emotional toll remains alarmingly high.

Just ask David Windhauser, the former controller for Trane, the heating and cooling company. He was the first person to receive a U.S. Department of Labor order requiring his former employer to rehire him under Sarbanes-Oxley. He complained in 2003 that managers were committing fraud by recording fake expenses on financial statements. He was fired one month later. He and his wife, Jeanne, then filed a Sarbanes-Oxley complaint.

"I felt very strongly that we had to go forward, because there has to be a point at which a law stands up for the little guy in this structure," Jeanne Windhauser told USA Today.

The legal and paperwork nightmare took a heavy toll on the Windhausers' finances, emotions and their health. They are far from alone. Hundreds of people have lost their jobs and filed complaints since the act was passed. Only two have been rehired.

"You do a lot of crying, and there's a lot of soul-searching and a lot of stress within the family," David Windhauser said. "Your pride's been hurt and your honor challenged, but you can't allow it to get the best of you."

Windhauser is now working as a controller at a small food service company, making 25 percent less than he did at Trane, which fought the rehiring order for months before paying him a settlement to end the case.

In another case, a researcher who blew the whistle on his former employer, Internet Security Systems (ISS), is now being investigated by the FBI for violating trade secrets, Wired News reports.

Mike Lynn revealed a flaw in the operating system that runs Cisco routers, which transfer information over much of the Internet. He spoke about the flaw at a recent security conference in Las Vegas. At first, ISS and Cisco supported his plan to speak, then switched gears and threatened Lynn with a lawsuit if he talked. After the conference, they filed a restraining order to prevent him from saying anything more about the flaw.

Fraud examiners could be called professional whistleblowers. By combining their accounting know-how with investigative techniques, they can root out improprieties or criminal activity. Those skills are in high demand in the post-Enron environment, and the specialty is drawing attention from students.

“Fraud investigation has, until recent years, typically been an area the accounting profession has resisted becoming involved with, said Jim Dodd, a Drake University accounting professor who teaches a new anti-fraud elective course. “It was really not until Sarbanes-Oxley and the enhanced penalties for mail and wire fraud that the accounting industry began looking more at fraud,” Dodd told the Des Moines Business Record.

The whistleblower protections under Sarbanes-Oxley are imperfect, but one result of the law is a better working relationship between companies and employees with grievances.

"It is almost always preferable to handle complaints internally than through the federal government," David Martin, a former director of corporation finance at the SEC, told USA Today. "The right way is to have a corporate culture that shows why we're all in it together: because it's best for all of us if no one violates the law."

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