Menu

Health South Was Under Pressure

Earnings were strong for employees as well as shareholders. Many employees owned stock or were dependent upon a rising balance sheet to ensure that they received their bonus and salary. Additionally, as at HealthSouth, there can be kind of a groupthink effect, where people assume that something is okay because everyone else, including powerful upper-level managers, are doing it.

There are a number of laws that protect whistleblowers. The Dodd-Frank Wall Street Reform and Consumer Protection Act was established to encourage individuals to report financial fraud to the SEC (Securities and Exchange Commission). Recognizing the profound financial sacrifice many whistleblowers make, Section 922 of the Dodd-Frank Act mandates that the SEC reward individuals who provide original information that results in sanctions in excess of $1 million in civil or criminal proceedings against the offending company (Oswald & Zuckerman 2010).

In a HealthSouth-like situation, being a whistleblower is not simply a moral obligation: it also seems in the individuals self-interest, since no company can continue to perpetrate fraud for an extended period of time and not be found out. The longer the duration of the fraud, the greater the financial fallout for employees and investors is likely to be. However, while there may be legal protections and even financial rewards for whistleblowers, there is always a profound cost for individuals who come forth — quite often people are unwilling to hire them afterwards, and no matter how great the financial gain from their reward, whistleblowers may struggle to work and live normal lives afterwards.

References

Capitalize definition. (2010). Investopedia. Retrieved December 17, 2010 at http://www.investopedia.com/terms/c/capitalize.asp

Kelley, Pat. (2010). Definition of depreciation in accounting. Retrieved December 17, 2010 at http://www.ehow.com/about_7237480_definition-depreciation-accounting.html

Oswald, R. Scott & Jason Zuckerman. (2010). Whistleblower provision of the Frank-Dodd Act.

Employment law group. Retrieved December 17, 2010 at http://www.employmentlawgroup.net/Articles/ROswald/DoddFrankWhistleblowerProvisions.html

What are the generally accepted accounting principles for inventory reserves? (2010).

Investopedia. Retrieved December 17, 2010 at http://www.investopedia.com/ask/answers/05/070105.asp.

Leave a Reply

Your email address will not be published. Required fields are marked *