Using a skewed and highly restrictive interpretation of the whistleblower protection provision of the 2002 Sarbanes-Oxley (SOX), Elaine Chao’s Department of Labor (see item 63) has decided that it does not apply to the subsidiaries of publicly traded companies. As reported in the Wall Street Journal, the Department has ruled in favor of whistleblowers in only 17 of 1,273 complaints since SOX was enacted. Many of another 841 complaints were dismissed using the subsidiary loophole. Sarbanes-Oxley was written to demand greater corporate accountability and prevent abusive practices involving shell companies, spinoffs, and subsidiaries which led to the collapse of Enron. The provision in question Chapter 18 of the US code, Section 1514A states that no publicly traded company “or any officer, employee, contractor, subcontractor, or agent of such company” can retaliate against an employee who reports fraudulent activity.
In response to the WSJ article, the authors of the whistleblower protection clause of SOX, Senators Patrick Leahy (D-VT) and Chuck Grassley (R-IA), wrote a letter dated September 9, 2008 to Secretary Chao pointing out that both the language of the statute and their intention were clearly for subsidiaries to be covered under the whistleblower protection and that “there is simply no basis” for the Labor Department’s interpretation. They demanded an explanation of the Department’s actions.
But it is clear what Bush’s Labor Department and its Secretary Elaine Chao were doing. They were running interference for corporate malefactors and hanging out to dry those who would expose their wrongdoing, in other words business as usual.