From: HRHotline [hrhotline@attbi.com]
Sent: Saturday, February 08, 2003 8:00 PM
To: rule-comments@sec.gov
Subject: Rules Comment S7-02-03

Re: Sec. 301 Sarbanes Oxley Act

Dear Secretary Katz:

The HR Hotline, Inc, an experienced third party provider of complaint 
reporting services, submits these comments with respect to the rules 
under consideration to implement Sec. 301 of the Sarbanes Oxley Act.

Criteria for Effective Complaint Reporting to Audit Committees

The implementing rules must strengthen the oversight role of audit 
committees by increasing their independence while, at the same time, 
holding all directors and officers of publicly traded companies more 
accountable. These twin goals are best served by moving the audit 
committee's complaint reporting function outside of the company over 
which the committee presides. The rules should establish a strong 
preference for third party complaint reporting systems that provide 
services directly to audit committees. The provider of third party 
complaint reporting services must be unaffiliated with the subject 
company just as public auditors must be unaffiliated with the companies 
that are the subjects of their audits.

The complaint reporting system must be easily accessed by employees, 
vendors, customers, and by anyone else who may have information about 
corporate fraud, particularly as it concerns the accounting function. 
This means that the existence of the complaint reporting system must 
be well publicized to those who come in contact with the subject company. 
While protecting the anonymity of reporters who desire confidentiality; 
a strong, independent complaint reporting system must be transparent in 
its operation and scrupulous in the speed and accuracy of its reporting. 
It must be free of manipulation by management. Reports must be sent 
directly to members of the audit committee. The audit committee may then 
address concerns directly with management.

Although the Self Regulating Organizations (SROs) have been designated 
to enforce these provisions of the Sarbanes Oxley Act, the SEC's rules 
must be sufficiently explicit to ensure that the reporting systems meet 
these criteria:

    a.. The complaint reporting system must receive complaints and convey 
	reports to the audit committee independent of management oversight; 
	
    b.. The existence of the complaint reporting procedures must be well 
	publicized at least through public postings on the premises of the 
	subject company and on the company's web site; 
	
    c.. Reporters, whether employed by the subject corporation or not, must 
	be ensured that their confidentiality will be protected; and 
	
    d.. Accurate reports of suspected misconduct must be quickly generated 
	and the reports must be maintained by the audit committees, independent 
	of management.

The HR Hotline, Inc. System

We believe that our company provides an independent complaint reporting system 
that could serve as a model for rulemaking in this area. We began operations 
shortly after the Supreme Court's 1998 decisions in the Burlington Industries 
v. Ellerth and Faragher v. City of Boca Raton cases. The Supreme Court, in 
these harassment and discrimination cases, recognized the importance of strong 
complaint reporting systems that both protect the rights of employees and 
enable employers to address discrimination problems as soon as they are known. 
The Court provided an incentive for employers to adopt competent complaint 
reporting systems by recognizing an affirmative defense against harassment 
and discrimination law suits when employees fail to timely notify their 
employers of complaints.

The HR Hotline, Inc. also helps employers solicit complaints of corporate 
fraud consistent with the Unites States Sentencing Guidelines directive for 
businesses to adopt an "effective program to prevent and detect violations of 
law." Employees use the same system to report complaints of corporate fraud 
or discrimination. People who wish to report information are not faced with 
a complex, myriad of choices. Employees report concerns to one entity and the 
HR Hotline, Inc., in consultation with the corporation, determines where to 
issue reports.

The HR Hotline, Inc. process begins with a brief rollout in which employees, 
vendors, and customers are advised of the complaint reporting services. 
Employers accomplish the rollout via e-mail, by written notices distributed 
by mail or with employee paychecks, by web site postings, and by the posting 
of notices in public locations much like required Department of Labor postings.

The notices and postings instruct complainants to report problems of a certain 
kind (e.g., harassment & discrimination, corporate fraud or accounting fraud) 
to the HR Hotline, Inc. The notices provide our mailing address, Internet 
address and our internationally accessible toll free telephone numbers. We 
accept calls in English and in Spanish. Phone callers follow prompts to provide 
relevant information. Internet filers complete a straightforward form. Complaints 
may be reported at anytime. All complaint reports are carefully documented 
either by preserving the actual written complaint or by recording the toll 
free call. 

The corporation is issued a detailed report of the complaint within one 
business day of its receipt. The HR Hotline, Inc. maintains documentation of 
the complaint. The employer, on receipt of our report, must then investigate 
the complaint and take prompt, appropriate remedial action. 

Use of the HR Hotline, Inc. complaint reporting system would permit an audit 
committee to collect confidential information free from management. Management, 
of course, would also be free to provide information to the audit committee. 
The maintenance of independent documentation of complaints by the HR Hotline, 
Inc. is also a strong disincentive to destroy information.

Conclusion

We hope this comment is helpful to your formulation of rules. At the very 
least, the Commission should describe safe harbors that encourage the use of 
third party complaint reporting systems by audit committees if those systems 
incorporate features similar to those offered by the HR Hotline, Inc. complaint 
reporting system. Please feel free to contact us at 800.352.8880 if further 
information is required.


Sincerely,

Andru H. Volinsky, Esq.
President,
HR Hotline, Inc.
PO Box 3442
Concord, NH 03302
800.352.8880
www.hrhotline.com