Sherron Watkins, the lone whistleblower at Enron, is the one bright spot in the company’s otherwise tawdry history of corruption and scandal. In August 2001, she warned Kenneth Lay that fraudulent off-the-books partnerships would cause the company to “implode in a wave of accounting scandals.” Enron’s senior officers ignored her concerns.
Recognizing the critical role that whistleblowers played in exposing some of the major accounting scandals, including Watkins’ warnings to Lay, Congress included in the Sarbanes-Oxley Act of 2002 protection for whistleblowers who report fraud or violations of securities laws. Yet, even as the Enron trial revealed the critical role that whistleblowers play in protecting investors, some Department of Labor administrative law judges and federal judges have diluted this protection to the point that it would not protect even Watkins.
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