With the one-year anniversary of Dodd-Frank approaching this week, Rep. Michael Grimm (R-NY) has introduced legislation to gut a vital provision in the financial reform law that provided expanded incentives and protections to whistleblowers who tell regulators about corporate misconduct.
Last week, Rep. Grimm was joined by Representatives Scott Garrett (R-NJ), John Campbell (R-CA), and Steve Stivers (R-OH) in introducing the “Whistleblower Improvement Act of 2011” (H.R. 2483). Despite its title, the bill could hardly be more hostile to whistleblowers.
When a draft version of the Grimm bill was first introduced a few months ago, POGO joined with other groups representing consumers, investors, taxpayers, employees, and whistleblowers in arguing that the proposal was an “extreme approach that would silence would-be whistleblowers, endanger critical inside informants, undermine investigations, hamstring enforcement at the [Securities and Exchange Commission] and [Commodity Futures Trading Commission], and provide lawbreaking financial firms with an escape hatch from accountability.”
Rep. Grimm et al. made one change to the original draft bill, removing a section that would have denied contingency fee representation to whistleblowers. But the bill introduced last week still includes a slew of provisions that would eviscerate the whistleblower programs at the SEC and CFTC, just as key reforms are being finalized. Among other things, the Grimm bill would:
- Tip off corporate wrongdoers by requiring whistleblowers to report internally before going to the SEC or CFTC;
- Disqualify many would-be whistleblowers who have a contractual obligation to cause their employer to investigate or respond to misconduct;
- Eliminate the minimum reward requirement for whistleblowers who provide information leading to a successful enforcement action that results in sanctions of $1 million or more;
- Strip protections for whistleblowers who face retaliation for contacting the SEC or CFTC; and
- Create an accountability loophole by giving special treatment to self-reporting firms that conduct internal investigations and take “appropriate corrective action.”
After the SEC narrowly approved final rules for its whistleblower program, the Chamber of Commerce announced it was throwing its support behind Rep. Grimm’s legislation. The Chamber declared on its blog last week that the bill would “restore a balance to the whistleblower system.”
Reps. Grimm, Garrett, Campbell, and Stivers received a combined $2.1 million in campaign contributions from the finance, insurance and real estate industries in the 2010 election cycle, according to data from the Center for Responsive Politics.
Please take a moment to contact your representative and urge them to stand with whistleblowers, consumers, investors, and taxpayers by rejecting Rep. Grimm’s legislation.
Michael Smallberg is a POGO Investigator.