More whistleblowers seek shelter

NEW YORK — Home on sick leave two years ago, Ammar Halloum says he watched the Enron Corp. investigation play out on television — then decided he had to blow the whistle on his own employer.

His former company, computer chip maker Intel Corp., says that’s just a flimsy cover story. Halloum’s whistleblower allegations — that the company purposely delayed payments for factory parts to bolster its earnings — are the invention of an employee who knew he was on thin ice for poor job performance, Intel says.

Either way, the run-in between Halloum and Intel points to the tensions generated by a recent surge of workers accusing their firms of fraud or misconduct, a wave touched off by high-profile scandals at Enron, WorldCom and other firms.

The rise in workers claiming whistleblower status began after Congress’ approval of a law in 2002 offering new protection to corporate insiders willing to flag financial trickery at publicly traded companies. Just a handful of workers stepped forward at first, but 181 filed such complaints in the year ending Sept. 30, making them the fastest-growing category of whistleblower cases handled by the U.S. Department of Labor.

Workers like Halloum seeking to take shelter under the new law, the Sarbanes-Oxley Act, are just the most visible part of the rise in whistleblower complaints, including some by employees of privately owned companies, employment lawyers say.

Other workers accusing their companies of misconduct are attempting to take shelter under state whistleblower laws and other measures.

While most of those laws have been in places for years, states like Illinois have added protection for whistleblowers at private companies. California has strengthened its law, requiring employers to post its provisions insides offices and factories and setting up a hotline to the state attorney general’s office.

The swelling chorus of whistleblowers is an outgrowth of recent corporate scandals, attorneys and officials say. The spotlight on corporate greed and the high praise for whistleblowers like Enron executive Sherron Watkins have sensitized rank-and-file workers to once arcane accounting practices and convinced some of a responsibility to speak up.

“This isn’t just people who read The Wall Street Journal. This is the average American,” said Sara Goldsmith Schwartz, an Andover, Mass., lawyer who represents employers. “As people are more educated about these financial fraud issues, then when the opportunity arises to point out financial fraud, they’re more willing to do it.”

But lawyers representing companies say many of the complaints are bogus and are largely efforts by marginal employees to squeeze settlements out of their companies. Even many of those situations are made complex, they say, because some of the very whistleblowers who deserve to be fired are also worthy of being heard.

“Some of the more difficult problems I’ve had is whistleblowers who will raise issues in which we find some merit, but where they will raise them to gain personal protection for marginal performance,” said Victor Schachter, a Mountain View, Calif., lawyer who argues on behalf of companies. “It’s very much a mixed bag.”

His clients’ companies and other California firms are facing a “genuine explosion of whistleblower claims,” Schacter said.

Under the new federal law, companies are not allowed to fire or otherwise retaliate against a worker who reasonably believes financial fraud is taking place and files a complaint, either with the company or an outside agency. Investigators or judges who find that the retaliation resulted from a worker’s whistleblower activity, can order their reinstatement, back pay and some compensation.

That protection is far from automatic. But the Occupational Safety and Health Administration, which administers the law, has quickly received numerous claims from workers at a range of companies, many of them far lower in profile than Enron.

Those claims are likely to continue increasing for the next three or four years as more workers become aware of the law that, more than two years after passage, continues to generate considerable public attention, said Richard Fairfax, director of enforcement programs for OSHA.

“It’s really high-profile right now,” Fairfax said, of Sarbanes-Oxley. “Everyone knows about it, or they’re learning about it.”

Since July of 2002, when the law took effect, 331 workers have filed complaints accusing their companies of retaliating against them because they pointed out financial misconduct. In addition to Sarbanes-Oxley, OSHA investigates whistleblower claims made under 13 other laws, many which have been on the books for decades, offering protection to workers who expose safety or health issues in industries like trucking, nuclear power and airlines.

The number of those types of claims is far larger than allegations of accounting fraud. But while OSHA is able to resolve many of the workplace safety complaints quickly, allegations related to finances appear to be spurring more hard-fought disputes. Of all the cases appealed to DOL administrative law judges last year, roughly a third were brought by workers alleging corporate fraud, outweighing all other types of cases.

So far, workers making such claims have had limited luck in making their cases. Of the 111 claims handled by the judges so far, just three workers have been granted the whistleblower protection they’ve sought.

Attorney Michael York said the fact that very few workers have been granted whistleblower protection under Sarbanes-Oxley shows concerns the law might grant sweeping rights to workers in battles with employers were probably unwarranted.

Those limitations have frustrated workers like Halloum, a former group leader at an Intel computer chip plant in Chandler, Ariz., near Phoenix. According to court documents, in the spring of 2002, about a month after managers criticized his work and presented him with a plan to address his shortcomings, Halloum took a medical leave for stomach problems. While on leave, he contacted the Securities and Exchange Commission, alleging that his boss had instructed him to delay payments for parts purchases.

“I was watching the Enron Corp. investigation and the responses of those officers and employees who cheated and participated in the scheme,” Halloum says. “Basically from watching what was going on, I felt this was wrong.”

A spokesman for Intel, Chuck Mulloy, said the timing of Halloum’s claim, coinciding with the Enron scandal, ensured that the company took particularly quick and careful notice of his claim. But three internal investigations found nothing to Halloum’s story except an employee trying to save his own skin, Mulloy said.