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Witness Protection

What will a new whistle-blower clause mean to you and the way you do business?

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This story appears in the April 2003 issue of Entrepreneur. Subscribe »

Don't slay the bearer of bad news. That's the message Congress sent companies when it finally hammered out a law last summer to curtail corporate misconduct. While the Sarbanes-Oxley Act of 2002 got plenty of media attention, chances are you haven't heard about this provision protecting whistle-blowers, which applies not only to publicly held companies, but also to those who advise them. Corporate scandals and the Time Persons of the Year brought whistle-blowers into the limelight, but the need for you to pay attention to their rights will continue long after the attention has died down.

Suppose an employee suspects his or her company is playing fast and loose with its financial reports. Being an upright citizen, he or she reports those suspicions to the federal government. The supervisor catches wind of this and fires the employee. Under the new provisions, that supervisor and company officers could face criminal fines or even jail time for such an action. It doesn't matter whether the employee's suspicions were correct; the key is reasonable belief that there are federal fraud violations.

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