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Enron, a former Houston, TX-based energy company, filed bankruptcy on Dec. 2, 2001 (McLean, 2008). Enron's failure was the culmination of a long-term systematic fraud perpetrated by its executive leadership in which enormous debt was hidden from investors even as its income was grossly overstated (Time, 2014). The $100 billion revenue colossus became defunct overnight, and a similar fate effectively befell 90 year-old accounting firm Arthur Andersen, which was accused of facilitating Enron's fraud (Gendron & Spira, 2009).
Corporate accounting fraud at the turn of the 21st century was not limited to the Enron fiasco. Other Wall Street giants such as WorldCom and Tyco (Walter, 2014) either collapsed or were embroiled in scandal during at the same time and for much the same reason: fraudulent recordkeeping for the sake of maintaining or increasing stock valuations.
These examples and others prompted the federal government to pass the Sarbanes-Oxley (SOX) Act into law (Public Law 107-204) in 2002 (Walter, 2014). SOX was enacted to help ensure accountability of corporations and the accounting firms they employ by specifying detailed financial reporting requirements and imposing financial penalties and criminal sanctions on those who personally participate in fraud (Walter, 2014). The government's message was clear: It would not tolerate damage to the public's confidence and undue financial loss to shareholders from fraud in publicly traded companies. SOX has 11 components (or titles):
1) Public Company Accounting Oversight Board;
2) Auditor Independence;
3) Corporate Responsibility;
4) Enhanced Financial Disclosures;
5) Analyst Conflicts of Interest;
6) Commission Resources and Authority;
7) Studies and Reports;
8) Corporate and Criminal Fraud Accountability;
9) White-Collar Crime Penalty Enhancement;
10) Corporate Tax Returns;
11) Corporate Fraud and Accountability.
Operational Risks & Whistleblowers
A perhaps largely unrecognized consequence of SOX pertains to OSHA's expanded role for investigating whistleblower complaints. Fletcher (2004) reports that OSHA enforces the whistleblower protections set out in SOX, and the agency published a final rule for doing so.
One example of OSHA exercising this responsibility in a non-OSH context followed its investigation of Bank of America Corp., which ultimately was ordered to reinstate and compensate a former employee $930,000 for its retaliatory behavior (OSHA, 2011). The employee allegedly had discovered "pervasive wire, mail and bank fraud" (OSHA, 2011, para. 3) in a Bank...