Watch CBSN Live

Why Enron Whistleblower Sherron Watkins Doesn't Trust the SEC

Corporate squealers, start your engines! Under new rules slated to go into effect later this year as part of the Dodd-Frank financial reform law, blowing the whistle on corruption at your firm can net you up to 30 percent of any monetary penalty over $1 million the SEC slaps on the organization.

There's just one thing -- the SEC doesn't have time for your paranoid delusions.

At least that's the opinion of Sherron Watkins, better known as the former Enron exec who helped bring the energy fraudster crashing down by exposing its dirty tricks in 2002.

"The perception is that you wouldn't be listened to" by the SEC, she said during a panel discussion about whistleblowers held by the New York State Society of Certified Public Accountants.
Watkins also said she doesn't think the Dodd-Frank "bounty provisions" will do much to expose corporate corruption, reasonably pointing out that it's safer -- and more lucrative -- for most employees to, you know, shut up.

It's certainly true that the SEC has a dismal track record of running down whistleblower complaints. Fraud investigator Harry Markopolous handed the agency Bernie Madoff's head on a silver memo, only for the agency to ignore him for years before eventually fluffing the ensuing probe at every turn:

"If people don't think the SEC is going to be a reliable source, this is an ineffective provision," [Watkins] said.
So who would Watkins approach today if she were an employee with corporate secrets to spill? WikiLeaks or similar organizations. Such sites "can do much damage" to companies, she said. That won't make, say, Bank of America (BAC) or Citigroup (C) feel any better, as the financial industry braces for a document dump this month that WikiLeaks founder Julian Assange says will "take down a bank or two."

Of course, even if Watkins is right, that's no reason to strip the expanded whistleblower protections out of Dodd-Frank. That's what Republican lawmakers and business groups including the U.S. Chamber of Commerce are seeking as part of a broader campaign to de-fang the new law. It could happen. The SEC is still developing the rules to implement the whistleblower provisions, along with other parts of Dodd-Frank. There's no guarantee the corporate lobbying blitz won't succeed in blunting the regulations.

What does the corporate lobby want? For the SEC to change the provisions so that whistleblowers first have to bring their concerns to a company's management. In other words, do what former Fannie Fae (FNMA) exec Caroline Herron did in alerting her superiors in 2009 that its administration of HAMP, the government's anti-foreclosure program, was a shambles. The housing agency promptly fired her.

Similarly, Watkins initially took her questions about Enron's accounting legerdemain to then-CEO Ken Lay. We know how well that worked out.

Image from

View CBS News In