Sherron Watkins, the former vice president at Enron who tried to blow the whistle on the accounting violations at the scandal-plagued Houston energy-trading giant, told an audience at a seminar Friday on the new whistleblower provisions in the Dodd-Frank Act that she and other whistleblower employees would probably take their concerns to WikiLeaks rather than the Securities and Exchange Commission now.

“People now will go to WikiLeaks to protect themselves,” she said during a briefing at the New York State Society of CPAs’ Foundation for Accounting Education offices in Manhattan. “WikiLeaks is a huge, huge sledgehammer that many employees will go to. People like myself will just go to WikiLeaks.”

Watkins, a CPA, said that since she came forward, she has been unable to get a job in corporate America despite her years of experience as an accountant and portfolio manager. “The label whistleblower is stuck on my head,” she said. She now makes her living by giving speeches, and said she has heard from other whistleblowers about their inability to get jobs in their old occupations.

The Dodd-Frank Wall Street Reform and Consumer Protection Act passed last year and made sweeping changes to the financial regulation structure at the SEC and other agencies. Among its provisions is the establishment of a whistleblower office at both the SEC and the Commodity Futures Trading Commission. However, the SEC whistleblower office has not yet received any funding, and the rules establishing it are still out for comment. With threats from Congressional Republicans to de-fund the financial regulatory reform effort, it may not ever get that funding.

However, another of the panelists at the briefing, former SEC commissioner Paul Atkins, who later co-founded the consultancy Patomak Partners, said the whistleblower awards would be self-funding. Under the provisions of the Dodd-Frank Act, whistleblowers would be able to claim between 10 and 30 percent of the amount collected from companies, but the tip needs to lead to a successful enforcement action by the SEC and the monetary sanction needs to be at least $1 million.

However, as Atkins pointed out, the SEC is already being inundated with whistleblower tips, particularly at the Office of Internet Fraud. “Tips aren’t the problem at the SEC,” said Atkins. The problem is having enough people to deal with them.

Francine McKenna, who writes the Re:The Auditors blog and moderated the panel, noted that she receives many tips on accounting problems just from her readers.

“Whistleblowing is just one tool in detecting and deterring fraud,” said another panelist, Marion E. Koenigs, deputy director in the Public Company Accounting Oversight Board’s Division of Enforcement and Investigations. She noted that about 15 percent of the tips received by the PCAOB are anonymous. The PCAOB shares tips internally with its Office of Research and Analysis and its Inspections division, as well as with the SEC and the IRS when the tips fall outside its jurisdiction.

The proposed rules for whistleblowers try to strike a balance between encouraging employees to first report the accounting fraud to the internal compliance departments at their companies and bringing them to the attention of regulators.

Employees have 90 days after first reporting the problem internally to bring it to the attention of the SEC. However, that could lead to employees facing retaliation during that critical time period.

Also, some employees are exempted from the whistleblower awards, including internal and external auditors and compliance staff. Some employees may decide it’s better to wait until the potential damages reach the $1 million threshold before reporting on the violations, the panelists noted, and that could make them liable for helping to cover up the fraud. Clearly many whistleblowers will want to consult with their attorneys before deciding what to do, and that could expose them to predatory class-action attorneys who will try to claim a large chunk of the whistleblower award.

In the meantime, the whistleblower runs the risk of being fired or demoted. “Companies have a number of ways to oppress people so they sound paranoid or like a nut case” by the time they blow the whistle, Watkins noted. She pointed out how the SEC treated whistleblower Harry Markopolos like a “nut case” despite credible efforts over eight years to draw their attention to Bernard Madoff’s Ponzi scheme.

She noted that her whistleblowing at Enron, which made her Time magazine’s 2002 Person of the Year along with fellow whistleblowers Colleen Rowley of the FBI and Cynthia Cooper of WorldCom, probably wouldn’t have qualified her for a whistleblower award from the SEC under the current proposed rules. She believes that given the risks, many employees who want to get their companies to stop committing fraud will prefer not to bring the problem to the attention of either their internal compliance departments or the SEC, but to leak the documents quietly to WikiLeaks so they can hold onto their jobs as well as their careers.

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