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Whistleblowing: SOX's Unintended Victims

By Philip M. Berkowitz
March 29, 2005

It seems fitting to recall Samuel Morse's first telegraph message now that his telecommunications progeny Bernie Ebbers, former chief executive of WorldCom, has been convicted on all nine counts claiming that he helped mastermind an $11 billion accounting fraud at his former firm, now known as MCI. Ebbers had been charged with one count of conspiracy, one count of securities fraud, and seven counts of filing false statements with securities regulators. He could serve up to 85 years in prison. Meanwhile, another senior executive of a major corporation has been undone – not by business fraud, but by a personal affair.

Whistleblowing At Boeing

Boeing's chief executive, Harry Stonecipher, was recently forced to step down after an employee whistleblower disclosed his relationship with a female corporate executive. Stonecipher was evidently done in by a “secret tipster” who also revealed evidence of at least one very graphic e-mail written by the chief executive. The irony, of course, is that Boeing had hired Stonecipher in order to restore its scandal-ridden image. Shortly after his hire, Stonecipher hired outside ethics consultants and created a centralized Office of Internal Governance, reporting to him, which was responsible for handling ethical issues, internal audit and compliance with the new rules. He set up a toll-free hotline, called the Boeing Ethics Line.

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