Dodd-Frank Does Not Protect Internal Whistleblowers

Last week the Supreme Court of the United States decided a case in favor of a company that fired a whistleblower who only reported their concerns about a potential fraud internally.  The Dodd-Frank Act was built upon the Sarbanes-Oxley Act and required the SEC to set up a process for whistleblowers to report potential fraudulent activity to the SEC. It provided that the SEC will pay a portion of any fines or other monies recovered to the whistleblower.  In addition, the Dodd-Frank Act had explicit language preventing whistleblowing targets from taking retaliatory measures against the whistleblower.

The Supreme Court ruled that the Dodd-Frank protections only apply if the whistleblower reports the potential fraud to the SEC.  The legal protections against retaliation do not apply if the whistleblower only reported their concerns internally within the company.  Many companies have internal policies against retaliation for reporting potential fraud, but the Dodd-Frank Act created an incentive to go to the SEC not just for the potential pay-off, but for the better legal protection afforded by the Act.

The Supreme Court decision should be a big concern for companies.  The case makes it more likely a whistleblower will go around an internal reporting process and go straight to the SEC.  The impact and repercussions of the fraud can be greater when an external regulator is doing the investigation rather than an internal party doing the work and then self-reporting to any regulators.  It also puts potential whistleblowers in an even more dangerous position in trying to decide what to do.

The reality is that whistleblowers’ careers are often derailed even if no one overtly retaliates against the whistleblower.  Opportunities for promotion just seem to disappear and often whistleblowers find the only way to keep their career moving is to change to a different employer.  Even changing employers can be difficult if the word gets out in an industry or a geographic area about a “troublemaking” employee.

The Supreme Court stated that the wording of the Act was unambiguous that protections only applied to those reporting information to the SEC.  In a strange twist, companies might want to consider asking Congress to address this issue by creating a more stringent standard on the companies themselves in order to avoid the possibility that internal whistleblower programs will be made impotent by their lack of legal protection.



Interviewees: Whatever You Do, Ask Questions! by Mark Goldman, CPA

I will always remember an interview I had at the end of my college years when I was trying to get a job as an entry-level tax accountant. Several firms had come to campus for interviews. I was fortunate enough to get past the campus interview with Ernst & Young and was invited to their offices for a chain of interviews that would last about 3 hours.

Things went well with the first four or five people I met. Then came the final step – to meet one of the partners. I waited outside his office for what seemed like forever (probably 5 minutes), and then was escorted in. I sat down and was prepared to answer any question he could throw at me… my goals, ambitions, strengths, weaknesses… whatever came up. He looked at me, sat back in his chair, and simply said, “So, what questions do you have for me?”

I was speechless. I was supposed to answer questions, not ask them! I didn’t know what to say. After a few moments, the only words I uttered were, “I don’t have any.” It wasquestion marks at that moment I realized I had blown it. I didn’t know what to do, but I knew I wasn’t getting that job. At the end of every other interview I had asked a few questions, but at this point I was out of things to ask. It was over.

The moral of the story… always have questions prepared for your interviewer. Asking questions shows many positive things about you, not the least of which is that you are taking the possibility of joining the organization very seriously. It doesn’t mean to interrogate the interviewer, but rather ask just a few meaningful questions to make sure you understand the position and expectations, and to show that you are thinking it through.

Not asking questions after being prompted by the interviewer makes the conversation come to an abrupt stop. The interviewer has no alternative other than to just awkwardly end the interview. It causes them to think you either are not that interested in the job, or are not really engaged in the process. Disinterested and unengaged people don’t get hired.

If nothing else, at least clarify what was discussed. Restating what was discussed shows the interviewer that you have been paying attention. It may not be as strong as a few in-depth questions, but at least it removes the abrupt ending that would otherwise be caused by a “No, I don’t have any questions” response.

In summary, the next time you are preparing for an interview, take the time to prepare a few questions. It may be the one thing that makes all the difference.

I wish you the best in your search.

Mark Goldman, CPA

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Mark Goldman is the founder of MGR Accounting Recruiters, a San Antonio based recruiting company whose primary business is the placement of accounting professionals in both permanent and contract positions.


Was the Individual Mandate Eliminated?

One of the more controversial aspects of the Affordable Care Act was the individual mandate.  The law required everyone to buy health insurance or pay a penalty to the government come tax time.  Some thought it was wrong for the government to force people to buy something they might not want; and others said if people weren’t required to buy health insurance then only sick people would buy insurance and health insurance would quickly become unaffordable.  The Tax Cuts and Jobs Act was said to have eliminated the individual mandate.  Some people are very happy about the mandate going away while others think it is a terrible idea.  This blog is not here to debate that point.  The question this blog is focused on is, was the individual mandate actually eliminated?

Because the Supreme Court determined that the individual mandate was a tax, Congress could address the amount of that tax in a piece of tax legislation even without touching any other aspects of the Affordable Care Act; and that is exactly what congress did in the Tax Cuts and Jobs Acts.  The law did not eliminate the individual mandate, instead it set the tax rate for not having insurance to zero.  What is the difference between eliminating the individual mandate and setting the amount to zero?  To someone not having insurance, the answer is not much, but to any other organization having to comply with the Affordable Care Act the answer is a lot.

For example, large employers must still provide insurance to their employees or face fines and penalties even though the employees no longer face a payment for not having insurance.  In fact, employers must still provide all the reporting to employees they were required to provide before the individual mandate rate was set to zero.  For example, the 1095-C form is still required to be sent to all employees.  That means everyone will still be getting their documentation that they have insurance through their employer even though there is no payment due for not having such documentation.  This means business and organizations will still be incurring a lot of cost to comply with reporting requirements around the individual mandate even though everyone is reporting that that individual mandate has been “repealed.”

So they next time you hear someone say the individual mandate has been eliminated, maybe you can have a little fun with them by pointing out it hasn’t been eliminated, only set to zero.


Lead by Example

Do what I say, not what I do not only doesn’t work for raising kids, it doesn’t work for setting a culture within an office either. How many times have you heard someone say “we allow flexible working arrangements, but we keep losing staff who say we aren’t flexible enough.” Or, have you heard someone say, “I tell my staff to shut down but they complain that there is no separation between family time and work time.”

When I’m feeling especially courageous, the question I like to ask is what do you do? Do you ever work from home, or do you show up at the office every day? Do you ever leave early to make it to your kid’s game that starts at 5:00? Let’s face it, our staff looks at what we are doing to understand the real rules of the work place. Maybe you are in a different life stage with all your kids gone and out of the house, so you don’t have as many family events, but then look at who you reward with better salary increases and promotions. Is it the person who utilizes the flexible working arrangements but still gets all their work done, or is it the person still working in the office when you leave every day?

On emails, are you responding, or worse, sending out emails at all hours of the day? Do you review and respond to emails even while you are on vacation? Your staff is watching you, and you are setting expectations with others based on your behavior. I hear people justify their late-night emails by saying that I didn’t want to forget that thought or idea, but I don’t expect people to actually reply. My response is, don’t you know how to use the tools in your email program? Almost every email program has the ability to delay the delivery of an email. Write your email, just set it for delivery the next morning. If you don’t know how to use that feature, then you must know how to use the draft feature. Write the email and save it as a draft and make a habit of going through your drafts and sending them out every morning.

My final question is how many of you tell your staff to stay home if they are sick, but then come into the office yourself when you are sneezing and hacking? Your staff sees that behavior and emulates it. Worse, you’re probably getting them sick, and hitting productivity even harder than if you stayed at home and got what work you could get down from there. And with today’s remote working tools, that is pretty much everything.

So are you walking the walk or are you complaining that people don’t believe what you say?

TSCPA Midyear Board Meeting

The Midyear Board meeting of TSCPA took care of business; got input on critical issues to the future of CPAs and TSCPA; and shared some critical perspectives from interesting speakers. Lei Testa from Fort Worth was presented as the next Chairman-elect of TSCPA along with a worthy slate of officers and directors. TSCPA finances are solid but looking to the future we made the decision to increase dues by $5 to make sure we can continue to provide the services and support needed by our members.

TSCPA received input from Board members covering three areas:

  •  Leveraging and Leading with Technology
  • Attracting and Engaging Younger Members
  • Improving the CPE Experience

The feedback is being processed by staff, and recommendations on actions TSCPA should take will be added to our strategic plan implementation, which already identified these as areas of focus in the coming years.

Dr. Jim Lee discussed the economic impact of Hurricane Harvey. One of the big questions is about the long-term impact. Looking at other major hurricanes in the last decade, Katrina and Ike, New Orleans and Galveston suffered permanent 15% drops in population. The question is will this also happen to Houston, Corpus Christi, Port Aransas and other places. If it does, such loss can permanently alter the economic prospects for those locations.

Donny Shimamoto discussed paths CPAs need to take to innovation. He looked at three major paths for external auditors, tax practitioners and B&I professionals. In B&I we have all experienced the move from processing transactions to managing processes as work is automated. The next steps are to move further along in providing analysis and, more importantly, information about those transactions so better business decisions can be made.

Donny also discussed some interesting insights that apply to all professional accountants. The era of “good enough” is dead. Expectations are higher and the ability to be more precise is available and expected. Learning “just in case” is being replace by learning “just in time.” And the only true way to make sure you are needed in an era of hyper automation and robotics is to provide things that rely on truly human traits like creativity, imagination, emotion, intuition and ethics.

To wrap up the meeting Bret Oliver provided an overview of the impacts of tax reform on Texas and Jimmy Martens discussed the challenges of sales tax audits. In the end, 200 plus CPAs headed back to the four corners of Texas to share what they learned and listen to their fellow CPAs, so they can be prepared to discuss what is important at the annual meeting in San Antonio in June.

Revenue Recognition Update

All public companies that had not early-adopted the standard started using the new ASC 606 rules to recognize revenue a couple of weeks ago. I also attended my first Financial Reporting Executive Committee (FinREC) meeting last week.  While the two topics may not seem related, they are, because FinREC has been overseeing the release of numerous papers from 16 industry task forces over the past couple of years to help everyone better understand how the new revenue standard will impact the accounting for revenue.  The task forces and number of topics are as follows:


Industry Papers Issued Additional Papers Anticipated
Aerospace & Defense 12  
Airlines 14  
Broker Dealers 8 1
Construction Contractors 7  
Depository Institutions 2  
Gaming 14 3
Hospitality 4 1
Health Care 6 4
Insurance Entities 1 1
Asset Management/Investment Co. 10  
Not-for-Profit 4  
Oil & Gas 5  
Power & Utilities 10  
Software 9 1
Telecommunications 10 2
Timeshares 6 1


There is still more work to be done, and some of the additional papers may have already been issued as you are reading this blog.  If you are in the private sector, I strongly encourage you to read papers that are related to your industry or topics that your company deals with regularly.  Additional resources from the AICPA can be found here. It may seem that we have crossed the finish line because the standard is now required, but I suspect there is still a lot of work and re-work to be done in the coming years are we fully understand and implement this once-in-a-lifetime change in accounting.

Employers: Four Mistakes Made On References by Mark Goldman, CPA

Getting references on a potential hire is an important part of the selection process, but there are several traps that it is easy to fall into during this phase.  I outline a few below in hopes of making your next hiring process that much better.

  1. Believing that someone has no available work references. Everyone has available work references if you ask enough questions. Granted, it may not be the specific reference you want, i.e. the last supervisor, but there is always a reference somewhere.  Whether it is a former supervisor prior to the current one, someone that left the company, another manager or internal customer, a peer level manager, or someone with an external relationship (such as an auditor), there is always someone that can be contacted for reference.
  2. Believing 100% of what a reference says – good or bad References are important sources of feedback on the potential hire, but you have to remember that they are never non-biased. The reference can be colored by many factors, such as how hard it was to find a replacement or even just how the individual is feeling that day.  The information you receive is important, but it should always be taken in context.
  3. Discarding a candidate due to 1 bad reference. Most of us have one person somewhere that would not give us a glowing reference if you look hard enough. In my own career, I’ve had six jobs.  Five would give you a glowing positive reference, and one would say I was fired.  Does that make for a bad hire?  Likely not, but obviously I’m biased J. In all seriousness though, one bad or neutral reference when coupled with several good references shouldn’t be the final deciding factor.  As with #2 above, take it in context.
  4. Not asking for more than ‘name, rank, and serial number.’ We occasionally encounter people that are under the impression that it is somehow illegal to ask for performance information. It may be against company policy for a former employer to give you that information, but it is not illegal for you to ask.  In general, if the reference liked the person and they did a decent job overall then the reference will tell you that.  References use the ‘against our policy’ line more frequently when the performance was less than stellar.  A good rule of thumb is that if the applicant did a good job, someone somewhere will be willing to tell you.

The next time you go to check references on a potential new hire, keep these items in mind and you will have information that is much more useful to you overall.

I wish you luck in your search.

Mark Goldman, CPA

Mark sketch blue background (3)

Mark Goldman is the founder of MGR Accounting Recruiters, a San Antonio based recruiting company whose primary business is the placement of accounting professionals in both permanent and contract positions.