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An Inconvenient Truth

Joanne S. Barry, CAE

Hollywood has a thing for whistle-blowers, a fascination that started well before Edward Snowden. You know the tropes: the enigmatic figure who lingers in underground parking lots, or the driven individual who puts it all on the line, only to emerge victorious by the time the closing credits roll.

In reality, corporate whistleblowers rarely get the red carpet treatment. Most often, they find themselves in an unenviable position, working quietly and without applause, at risk of retaliation, and with fewer friends than they may have had before they blew the whistle. What's more, their stories don't rise and fall in three short acts, but instead may play out slowly, over the course of several years.

Whistleblowing in the Real World

Take, for example, Tony Menendez, a Texas-bred CPA who blew the whistle on questionable accounting practices at his former employer, the oil field services company Halliburton.

Menendez said he spent months trying to convince higher-ups that the company's approach to revenue recognition broke the rules. In a nutshell, as Halliburton's director of technical accounting research and training, Menendez learned that the company had been recording the full value of expensive machinery it manufactured as revenue right away—in some cases, before the equipment had been assembled—even though customers could still cancel the contracts. It was 2005, and the country was still reeling from accounting scandals at Enron, World-Com, and Tyco; this same year that Menendez sounded the alarm, the AIG accounting scandal unfolded.

Menendez later recalled that Halliburton executives initially agreed with his judgment; however, with billions of dollars on the line, they decided to leave the company's accounting methods intact. Still worried, Menendez filed a confidential complaint with the SEC that didn't remain a secret for long: Halliburton discovered that he had been talking to the agency and had also shared his concerns with the company's audit committee. According to Menendez, Halliburton quickly struck back, identifying him by name and disclosing his actions in an e-mail distributed to many of his colleagues at the company—a violation of protections provided by the Sarbanes-Oxley Act of 2002, and an affront to Halliburton's own internal whistle-blower program. In 2014, after nearly a decade of legal battles, the courts awarded Menendez $30,000.

We first learned of this story from Pro-Publica, an independent nonprofit that produces investigative journalism in the public interest. (You can read the story for yourself at http://bit.ly/1IBR34D.)

Encouraging the Conversation

Indeed, the decision to blow the whistle is a commitment, in terms of time and energy, and often a difficult one. That's why we've started a conversation about it in the pages of The CPA Journal this year. Last month, we offered an overview of the IRS's whistleblower program (“An Overview of the IRS's Whistleblower Program,” by Juliet L. Fink, May 2015, p. 40). Next month, we'll publish a comprehensive guide to key federal whistleblower statutes and important considerations for CPAs who may decide to expose corporate malfeasance. This article will explore some of the harsh realities that many whistleblowers learn the hard way, including the fact that fighting retaliation can be difficult (as Menendez found), and that applying for financial awards, which might be viewed as a possible offset to unemployment or the financial difficulties that result from whistleblowing, is a long process that does not always end in success.

To be clear, however, these Journal pieces are not meant to discourage potential whistleblowers, whom the authors view, like I do, as serving a vital function. The goal, rather, is to arm accounting professionals with information. It's telling that, in a Q&A with Menendez on the social networking site Reddit in April, several users expressed surprise at the gap between the safety nets they assumed exist for whistle-blowers and the reality.

Ultimately, CPAs—more than most professionals—have an obligation to speak up and protect the public. It's a fundamental principle of the profession, one that pioneering CPAs unabashedly invoked. George O. May, one of the founding fathers of accounting, spoke of having “a zeal to protect the public trust.” Charles Waldo Haskins, the NYSSCPA's first president, spoke of the Society as acting “as a watchdog of the treasure house … to see that the unworthy are rejected, that the requirements of efficiency, character and professional spirit are maintained at the highest possible standard.” CPA Journal Editor-in-Chief Richard H. Kravitz has written about the CPA's institutional role being “to serve as the moral and ethical compass within our democratic society, to ensure that financial disclosure and reporting of government enterprises are truthful, fair, accurate, and responsible.”

At the same time, it's important to note that you don't have to be a whistleblower to protect the public or to work toward restoring public confidence in our institutions. There are opportunities for that in a CPA's everyday life, from how one advises clients and employers, to the direction and example offered to colleagues and staff.

Joanne S. Barry, CAE. Publisher. The CPA Journal Executive Director & CEO, NYSSCPA, jbarry@nysscpa.org.

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