“Whistleblowers And Sarbanes-Oxley Fallout” – Public Radio, KUOW News

Whistleblowers And Sarbanes-Oxley Fallout


Patricia Murphy   05/17/2011

In 2007, two auditors for The Boeing Company came forward to complain about security weaknesses in the way the company handled its financial data. They never expected they would be putting their jobs at risk. But that is exactly what happened.

That same year, Nicholas Tides and Matthew Neumann were fired; not for complaining, but for eventually going to the media with their complaints. Both men claimed they should be protected under whistleblower laws. They sued and lost. Now, a ninth circuit appeals court ruling has upheld the firing. The high court’s decision calls into question the rights of whistleblowers under the investor–protection law, Sarbanes–Oxley. KUOW’s Patricia Murphy reports.


Both Nicholas Tides and Matthew Neumann say that Boeing ignored their complaints and then pressured them to say there were no weaknesses.

Andrea James is a former Seattle Post–Intelligencer reporter. She’s now a research analyst. Back in 2007, she was investigating potential auditing problems at Boeing. James tried to contact Tides and Neumann for the story, but was unsuccessful. Eventually the two men say they grew so frustrated with Boeing they talked with her.

James: “You never want a story to put somebody’s livelihood at stake and I do believe that people don’t go to the press until they feel like they’ve exhausted all of their other options.”

Later, her story was published in the P–I. It focused on computer security risks at Boeing and didn’t mention Tides or Neumann by name. But afterwards the airplane maker investigated and fired the men because they weren’t authorized to talk to the media. As it turns out, Sarbanes–Oxley is very specific about to whom whistleblowers can reveal their information. Under the law, whistleblowers can go to supervisors, federal regulatory investigators or Congress.

But not the media.

Tides’ and Neumann’s attorney, John Tollefsen, says the court ruling sets a dangerous precedent, considering the role that the media played in revealing accounting scandals like Enron and WorldCom.

Tollefsen: “And in all those cases it was the attention of the media that, arguably, made Congress do something. In fact, the congresspeople, as soon as they found out about it, they would immediately have their own press conferences.”

Karpoff: “The broader policy question is whether it makes sense to have whistleblower protections for people who go to the media.”

Jonathan Karpoff is a professor of finance at the University of Washington’s Foster School of Business.

Karpoff: “There are certainly cases where having whistleblower protections for going to the media could cause internal control problems for the firm. You could have rogue employees threatening to go to the media unless they get stuff. Or employees who are fired and, after the fact, claim that it was a whistleblower event when in fact it may not have been. So that creates its own hornets’ nest of problems.”

Boeing never questioned the accuracy of Andrea James’ story. But the high court made it clear in its ruling that media plays no role in Sarbanes–Oxley, and that’s something James wishes she knew.

James: “There’s always a way to get the story. And I think I would have encouraged them to pursue an official channel, while still talking to me.”

Reporter: “I know this is difficult for you to talk about.”

James: “It is hard for me to talk about because I feel bad. And I, there’s nothing I can do. It’s so far out of my hands and, the thing is, that story was based on discussions with dozens of people.”

James isn’t sure why it was Tides and Neumann who were fired.

James: “That’s always puzzled me. But it’s clear that they made an example out of them.”

Boeing spokesman John Dern says the company has processes in place for employees to report their concerns and the court ruling reinforces that those should be followed. Of course, both Tides and Neumann say they did speak up and were ignored. Critics say Sarbanes–Oxley doesn’t go far enough to protect employees and needs to be changed. John Tollefsen hopes the Supreme Court will hear an appeal in the case, but until then —

Tollefsen: “You go to the media, you lose your rights under the statute. So you would be crazy to talk to the media. I don’t care if you get any kind of promise of confidentiality.”

As for Tides and Neumann, Tollefsen says both are finally working again, but at significantly reduced salaries.

I’m Patricia Murphy KUOW News.

© Copyright 2011, KUOW

KUOW – Tides-Neumann Fired for talking to Media

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