Top 3 Financial Fraud Whistleblowers
What makes a case really stand out from others? Well, some might argue it’s the success, but it ultimately comes down to the fallout. Here are some of the cases that shook the world as we know it, and the courageous people who directly impacted the change.
WHISTLEBLOWER Sherron Watkin
Who is she?
Watkins is a native Texan with a Bachelors in Business Administration, and the former Vice President of Corporate Development at Enron Corporation, one of the former electricity, natural gas, communications and pulp and paper giants.
What did she do?
Mid-2001, she noticed accounting irregularities in some financial reports and spoke to the CEO, Kenneth Lay, about it. She ended up testifying before committees of the Senate and the U.S. House of Representatives.
What was the consequence?
Prior to the discovery of the accounting fraud, Enron was named “America’s Most Innovative Company” by Fortune Magazine, for six years in a row. In 2000 alone, the revenue was almost $101 billion. Soon after the discovery of the fraud, a scandal erupted, which led to bankruptcy of the company.
More importantly, the huge scandal also brought attention to the accounting practices of various other US corporations and was a vital contributor to the enactment of the Serbanes-Oxley Act of 2002, which set new requirements for US public company boards, management and public accounting firms. It also prohibits privately held companies to willfully destroy evidence in order to impede a Federal investigation.
WHISTLEBLOWER Harry Markopolos
Who is he?
Markopolos is a former American securities industry executive, as well as an independent forensic accounting and financial fraud investigator who lives in Massachusetts.
What did he do?
He spent nine years investigating Bernard Madoff’s wealth management business and was convinced it was nothing other than an enormous Ponzi scheme. He tried alerting the US Securities and Exchange Commission (SEC) on three separate occasions, in 2000, 2001 and 2005, only to be ignored. Madoff’s fraud was eventually uncovered in 2008, after his sons contacted the FBI.
Markopolos testified before the US Congress House Financial Services Committee’s capital markets panel in early 2009. He is also known for widely criticizing SEC for both ignoring his tips and failing to properly investigate large companies under its supervision.
What was the consequence?
Madoff was charged with 11 federal crimes and was sentenced to 150 years in prison, after pleading guilty to all charges. The complaint stated that his client’s were defrauded of nearly $65 billion, which is the biggest Ponzi scheme in history, as well as the largest investor fraud committed by a single individual.
WHISTLEBLOWER Cynthia Cooper
Who is she?
Cooper is an American accountant and the former Vice President of Internal Audit at WorldCom.
What did she do?
Together with her team of auditors she secretly investigated and uncovered an accounting fraud at the company amounting to $3.8 billion. In 2002, when the scandal broke, this was the largest incident of accounting fraud in US history.
What was the consequence?
The blame fell on the company’s ex-CFO, Scott Sullivan, and ex-controller, David Myers, who were arrested and faced with 65 years in prison. The scandal had a major impact on the stock value of telecommunications companies everywhere, with investors losing billions.
