WASHINGTON -- One day after President Bush signed legislation cracking down on corporate wrongdoing, the administration was accused Wednesday of weakening a provision of the law providing new protections to corporate whistle-blowers.

A member of the president's party, Sen. Charles E. Grassley (R-Iowa), and Senate Judiciary Committee Chairman Patrick J. Leahy (D-Vt.) assailed the White House's "narrow interpretation" of the whistle-blower protections. They said it could discourage company insiders from reporting fraud.

"I hope the White House will rethink its interpretation of this law and show it isn't going soft on corporate fraud before the ink is even dry," Grassley said.

The dispute over such a narrow issue gave the president's critics a new opportunity to question his commitment to business reforms.

"If this takes clarification, we will clarify it immediately," Senate Majority Leader Tom Daschle (D-S.D.) said. "But it does cause me to question how serious this administration is with regard to corporate accountability."

A White House spokesman said the president was deeply committed to ending accounting abuses and bringing corporate miscreants to justice.

The administration said that by its interpretation of the legislative language, only those employees who reported corporate wrongdoing to congressional committees conducting investigations were entitled to government protections against retaliation from their employers.

Leahy and Grassley, who wrote the provision, said they intended it to apply to employees who reported misdeeds to any member of Congress, regardless of membership on a committee investigating corporate fraud.

"Our intent was plain: to protect corporate whistle-blowers, period," Grassley said.

White House officials stood by their interpretation and said it was up to Congress to provide any clarification.

The whistle-blower protections are included in a far-ranging business reform law sparked by accounting scandals at Enron Corp., WorldCom Inc. and other companies. The law creates a board to oversee the accounting industry, requires corporate officers to attest to the accuracy of their company's financial statements and increases criminal penalties for white-collar crimes.

The whistle-blower provision is modeled after protections granted to airline workers who report safety problems. Under the new law, whistle-blowers who face retaliation from their bosses can file complaints in federal court if the Labor Department has not acted on them within 180 days. Previously, employees could not go to court until the Labor Department completed its review. If successful, whistle-blowers can be awarded reinstatement, back pay and compensatory damages.

The provision was partly triggered by Enron Vice President Sherron S. Watkins, who wrote the infamous letter to former Enron Chairman Kenneth L. Lay in August, warning that the company was about to "implode in a wave of accounting scandals."

Although Watkins did not lose her job, proponents of the new whistle-blower protections cited an internal Enron memo advising executives that she could be fired under existing law.

White House Press Secretary Ari Fleischer defended the administration's interpretation.

"There are different people who will look at different parts of each of these sections and come to different conclusions," he said.

In a statement issued shortly after Bush signed the bill, the administration noted that the whistle-blower protections were designed to shield employees from retaliation for "lawful cooperation with investigations" and that the executive branch would construe the section as "referring to investigations authorized by the rules of the Senate or the House of Representatives."

White House spokesman Claire Buchan said that the administration based its interpretation on the legislative language on Congress' own rules.

"If Congress chooses to ... say that individual members can investigate, that's up to Congress to decide, and we'll defer to Congress," she said.

Copyright 2002 Los Angeles Times

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