Enron Aside, Whistle-Blowers Still Withering

Most corporate whistle-blowers will never score a book tour.

Yes, Time magazine helped make a few famous by declaring them heroes in a big cover story last year. And one of those people, Enron's Sherron Watkins, has actually gone on to sell a stack of autographed copies of her tell-all, Power Failure: The Inside Story of the Collapse of Enron .

But workers who expose corporate misdeeds don't normally end up with a listing on Amazon.com. Instead, many find that straying from the company line ends up derailing their once-promising careers. In an age of rising worries about ethical business practices, some observers call it troubling that dissent is still being suppressed -- and caution that investors could again wind up paying the price.

"Retaliation is a serious problem," says Stephen Meagher, a San Francisco attorney who represents whistle-blowers in health care. "People try to do the right thing, and they get squelched. It happens all the time."

Meagher should know. For years, his clients have been protected by laws that specifically shield, and even reward, people who report abuses of Medicare and other government programs through the False Claims Act.

Spurred on by calamities such as those at Enron and WorldCom, the new Sarbanes-Oxley Act extends similar protection -- though without the financial incentives -- to corporate whistle-blowers outside the health care world. Under the new law, publicly traded companies face harsh penalties for retaliating against employees who expose corporate shenanigans.

Some experts believe managers will now respond with sweeping policy changes like those last seen when sexual harassment took center stage a decade ago. But Meagher has watched similar laws fail to protect his clients already. And noted academic C. Fred Alford remains skeptical that any law can weaken powerful corporations bent on keeping secrets.

"The goal of any organization is to eliminate the disruptive effect of the ethical individual," says Alford, a University of Maryland political science professor who wrote the book Whistleblower: Broken Lives and Organizational Power . "Organizations are basically amoral."

Men in White

In general, fate has not been kind to workers who stick their necks out calling attention to questionable conduct. Whistle-blowers typically spend at least five years -- and sometimes twice that -- fighting expensive battles that they rarely win. In the end, studies show, fewer than half of all whiste-blowers manage to hold on to their jobs after reporting corporate abuses.

"It's not just the law that hinders whiste-blowers," Alford says. "It's what it takes to use the law. It's very, very hard for people to use the law against organizations that have a lot of money, a lot of time and a lot of lawyers on their side."

Whistle-blowers who take that risk often lose their old identities in the process. They are no longer accountants or engineers or sales managers. They are, Alford says, people who disrupted company business by "committing the truth."

Take two men in Charlotte, N.C. The first, a finance specialist at Duke Energy ( DUK), kissed his fast-track career goodbye when he exposed accounting issues now being probed by government agencies. The second, a former standout in one of Tyco's ( TYC) most troubled divisions, lost his career altogether after accusing his superiors of ignoring widespread abuses in regional ADT security offices.

The two Carolina men wouldn't know each other if they wound up on the same elevator. But each would instantly recognize the other's story -- and in many ways could even claim it as his own.

Truth and Consequences

For years, F. Barron Stone kept the troubling truth about Duke mostly to himself.

He complained internally, of course. He saw no legitimate reason for Duke to suddenly change accounting policies that were probably as old as the company itself. He even dragged out federal manuals that indicated the changes -- which protected Duke from utility rate cuts -- were forbidden. And he scored some early praise for his persistence.

"Barron does a good job of keeping management informed of potential problems," Rick Ealey, Duke's assistant controller, wrote in Stone's 1999 performance review. "He has demonstrated managerial courage and is not afraid to stand alone."

But inside, Stone was shaking. After fretting over the accounting changes for months, he finally called the state and national accounting boards to ask whether he was ethically required to report Duke. When they couldn't decide, he went a step further and called the Securities and Exchange Commission and the state utility board. Both expressed immediate interest in the case. Still, Stone was not yet prepared to expose himself -- or even his company -- to the spotlight. He put his head down, went back to work on his promising career and waited for outsiders to detect Duke's problems.

Years passed without event. Stone finally spoke up.

"We were cheating electricity customers," Stone explained. "We were hurting the people we'd been doing business with since the beginning."

Duke's "luck" was about to run out. On a blistering Friday the 13th in 2001, Stone called the company's internal hot line and warned that he planned to expose the accounting changes to utility regulators in South Carolina. Nobody tried to stop him.

Less than two months later, though, Stone's career began to fall apart. He weathered a "hostile" five-hour interrogation by company attorneys gathering information for a report to the Carolina utility regulators. They would go on to order their own investigation -- conducted by independent auditing firm Grant Thornton -- which blasted Duke in the alleged use of accounting tricks to downplay utility profits and lock in higher power rates.

Duke ultimately settled both utility cases. But federal investigators have picked up where state authorities left off. The company has responded by hiring some of the biggest defense attorneys around to represent executives now swept up in a growing criminal probe.

Meanwhile, Stone continues to fight an uphill battle mostly on his own. He lost his first round when the Labor Department recently sided with Duke. But last week he slapped the company with a retaliation lawsuit, filed under the Sarbanes-Oxley Act in federal court.

Duke expects to prevail again. The company pointed out that the Labor Department found no proof of retaliation, and that Stone's new case relies on the same evidence that failed to support his arguments the first time around.

But Stone insists that he has paid an unfair price for his honesty. "As a result of his demotion and harassment by Duke, Stone's career has been shattered," the lawsuit states.

Still, Stone is luckier than most whistle-blowers. He has a job -- for now.

Alford estimates that the average whistle-blower lasts two years, usually weathering an inappropriate job transfer first, before finally getting fired. Stone sounded the alarm at Duke 22 months ago.

Security Breach

Former ADT sales manager Charlie Jones managed to last three years -- all of them miserable, he said -- before he finally lost his job.

In 1999, Jones set out to expose abuses that now seem almost innocent in comparison with the corporate-level looting that since has been alleged at Tyco. Jones sent an anonymous fax to his superiors warning that other ADT managers were taking kickbacks from vendors. He claims that ADT supervisors initially chose to ignore the abuses and punish him for exposing them instead.

In the end, ADT did ultimately fire the managers for continued misconduct. But Jones lost his career too -- after he continued to report abuses. By the time he left ADT in misery last year, Jones had documented transgressions ranging from forgery to fraud to theft. He finally got fired from his next job, working for an ADT authorized dealer, just days after reporting ADT's troubles to new Tyco CEO Ed Breen.

"At this point, my gripe isn't even about the salespeople who committed the theft and fraud," Jones said. "I think the bigger problem is the message the behavior of management sends to the customers and shareholders of this company.

"By refusing to take action, management legitimizes and encourages ongoing unethical behavior."

Tyco insists that it has responded properly.

"We have taken steps to investigate the problem areas that Mr. Jones identified," Tyco spokesman Gary Holmes said Friday. "We take all allegations of wrongdoing seriously."

Indeed, Breen has publicly vowed to crack down on Tyco employees who break rules and has, in fact, already fired some big names in the problematic ADT division. But Jones is still watching for clear signs that ADT's old culture -- which fostered troublemakers in the past -- has truly changed.

In the meantime, the award-winning sales manager is hunting for a job. But his record as a whistle-blower isn't helping.

"I can't even get an interview with a security company despite my record and abilities," Jones said.

And even after everything he's been through, Jones misses his old job at ADT.

"There was never a day in 10 years that I didn't believe that ADT was providing superior service -- and doing it better than anyone else -- for our customers," Jones said. "I was always proud to spread that word."

Unsung Heroes

But obviously, speaking out can hurt.

In the end, people like Stone and Jones often walk away with the label of "disgruntled ex-employee." They don't generally wind up on magazine covers. But they can, and do, make a difference.

"You can't stop them," says Donald Soeken, a clinical social worker who blew the whistle both early and late in his career and now runs a retreat, known as the Whistle Stop, which provides a welcome escape to those who dare to speak the truth. "They will be blowing the whistle from now until the end of time.

"And they'll be paying the price for it, too."

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