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Whistleblower Systems

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Severance Agreements Cannot Dissuade Whistleblower Reports

September 2016 The Securities and Exchange Commission (“SEC” or the “Commission”) protects whistleblowers through Rule 21F-17, enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which states that "[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.” Prior cases have [...]

CFTC Joins The Group Of Government Agencies Awarding 8 Figure Whistleblower Awards

May 2016 The U.S. Commodity Futures Trading Commission (“CFTC”) recently announced its largest ever whistleblower award, providing over $10 million to an unnamed individual whose information facilitated a successful CFTC enforcement action regarding violations of the Commodity Exchange Act (“CEA”). The CFTC’s whistleblower program derives from section 748 of the Dodd-Frank Wall Street Reform and [...]

Case Demonstrates the Limits of Whistleblower Protection

December 2014 The efforts to encourage and protect whistleblowers have been wide-reaching. However there are differences between the rewards and the protections based on the agency and laws involved. A recent case entitled Gary Vander Boegh v. EnergySolutions, Inc. demonstrated that not all protections are equal. The U.S. Department of Energy (“DOE”) hired Mr. Vander [...]

Whistleblower Program to Pay $30 Million for a Late Report from Overseas

October 2014 The Securities and Exchange Commission (“SEC”) has announced that it will award over $30 million in its latest high profile payout to a whistleblower who provided key original information that led to a successful SEC enforcement action. The award is getting a lot of attention for a number of reasons. This $30 million [...]

SOX Whistleblower Protection Covers Certain Private Company Employees

March 2014 The Supreme Court has held in the case of Lawson v. FMR LLC that the whistleblower protection available under the Sarbanes-Oxley Act of 2002 (“SOX”) properly extends to employees of privately held contractors and subcontractors who perform work for a public company.  Although the case in question was brought by employees of advisors [...]

DOL Rewrites Sox Whistleblower Provision to a New Employer-Friendly Standard

June 2007 Like most lawsuits, many cases settle for undisclosed amounts. Nevertheless, of almost 1,000 whistleblower cases filed under the Sarbanes-Oxley Act (SOX), not a singe whistleblower has survived the various company appeals and “won” the case formally. The case that might have otherwise been the first employee victory was just overturned. SOX Section 806 [...]

Whistleblower Protection Does Not Require Fraud On Shareholders

June 2013 A recent decision has clarified the reach of the protections offered to whistleblowers under Section 806 of the Sarbanes-Oxley Act of 2002 (“SOX”).  In the matter of Lockheed Martin Corporation v. Administrative Review Board, United States Department of Labor, it has been determined that SOX whistleblower protection extends beyond employee reporting of frauds [...]

IRS Whistleblower Program Provides Opportunities For Some, Pitfalls For Others

February 2013 The IRS has had a whistleblower program for decades, but it was not widely used and not much was paid to whistleblowers. However, the efforts to improve the program are bearing fruit.  The current program is outlined on www.irs.gov, where information is available regarding the purpose of the program, how to make a [...]

Conflicting Rulings About SOX’s Scope Cause Private Company Employees To Stay With DOL Adjudication

October 2012 The Administrative Review Board (ARB) for the U.S. Department of Labor (DOL) recently issued a decision regarding the scope of the whistleblower protections under Sarbanes-Oxley Act of 2002 (SOX). In Spinner vs. David Landau and Associates, SOX’s whistleblower protections were extended to employees of contractors of publicly-traded companies.  In the Spinner case, the [...]

DOL’s ARB Limits SOX & Dodd-Frank Whistleblower Protections To U.S. Employees

February 2012 By a 3-2 vote, the Department of Labor's Administrative Review Board (ARB) limited the jurisdiction of the Sarbanes-Oxley Act (SOX) whistleblower protection outside the United States. The case is Villanueva v. Core Laboratories, NV, ARB No. 09-108, ALJ No. 2009-SOX-6 (ARB Dec. 22, 2011) (en banc). The ARB received multiple amicus briefs setting [...]

Whistleblower Systems|

SOX Whistleblower Protections Again Interpreted Narrowly

May 2011   The Ninth Circuit took a narrow reading of the whistleblower protections provided under Sarbanes-Oxley, and thereby eliminated the applicability of any whistleblower protection. The would-be whistleblowers were two internal auditors at Boeing. Based on the Court’s description: “In January 2007, plaintiffs Matthew Neumann and Nicholas Tides began working as auditors in Boeing’s [...]

SEC Issues Final Rules On Their Whistleblower & Reward Program Under Dodd-Frank

June 2011 The Dodd-Frank Act, which was signed by President Obama on July 21, 2010, includes (in Section 922) a whistleblower program sponsored by the Securities and Exchange Commission (SEC). This law (i) makes significant changes in the existing whistleblower provisions of the Sarbanes-Oxley Act of 2002, and (ii) authorizes the SEC to pay between [...]

Employers Should Implement Whistleblower Reporting Changes Because Of The Dodd-Frank Act

November 2010 The Dodd-Frank Act, which was signed by President Obama on July 21, 2010, includes (in Section 922) a whistleblower program sponsored by the Securities and Exchange Commission (SEC). This law (i) makes significant changes in the existing whistleblower provisions of the Sarbanes-Oxley Act of 2002, and (ii) authorizes the SEC to pay between [...]

Ninth Circuit Reinstates More Lenient Standard For Whistleblower Protection

August 2009 Whistleblowers have had a difficult time obtaining the protection afforded under Sarbanes-Oxley (SOX) Section 806. This is largely because the Department of Labor (DOL), who administers whistleblower complaints, has taken positions hostile to employees seeking protection under SOX’s whistleblower provisions. For example, see DOL Rewrites Sox Whistleblower Provision to a New Employer-Friendly Standard. There is [...]

DOL Continues To Ignore And Rewrite Sox’s Whistleblower Law

September 2008 According to records maintained by the Department of Labor (DOL), the government has ruled in favor of whistleblowers 17 times out of 1,273 complaints filed since 2002. Another 841 cases have been dismissed. This data comes from Richard Moberly, a University of Nebraska law professor who has recently had his statistics reported by [...]

Nonprofit Organizations Need A Whistleblower Reporting Mechanism

February 2008 The IRS adopted a substantially revised Form 990 that calls for significantly expanded corporate governance disclosures. A charity’s Form 990 is publicly available, including most importantly to potential donors and regulators outside of the IRS. Because the new Form 990 disclosures apply to 2008 fiscal year activities for the largest nonprofits, time is [...]

U.S. Supreme Court Makes Recovery By Whistleblower Plaintiffs More Difficult

April 2007 The Supreme Court ruled that a qui tam informant cannot receive compensation if he lacked “direct and independent knowledge of the information upon which his allegations were based.” The Court’s ruling substantially increases the risk faced by a qui tam plaintiff, and therefore lessens the financial incentive for potential whistleblowers to come forward. [...]

Fraud Study Says Whistleblowers Are The Most Common Means Of Identifying Fraud, But This Comes At A High Personal Cost When Whistleblower Anonymity Is Not Maintained

February 2007  A February 2007 study by three professors looks at 230 of the U.S.’s largest public company frauds disclosed between 1996 and 2004. The study, entitled “Who Blows the Whistle on Corporate Fraud?” addresses how each fraud was discovered. Consistent with every other study on the subject, employee whistleblowers are the largest discovery mechanism. [...]

Best Practices In Whistleblower Systems

November 2012 A whistleblower hotline is probably the easiest and least expensive means available to improve corporate governance.  Waste, fraud, and the abuse of authority can all be combated by having an independent reporting mechanism that uses employees to report malfeasance. Public companies are required by Section 301(4) of the Sarbanes Oxley Act to have [...]

Regulators Find Whistleblower Hotlines To Be Effective…You (Or Your Clients) Should Be Talking To These Employees First

August 2004 Sarbanes-Oxley Act (SOX) Section 301(4) requires all public companies to establish a means to collect, retain, and resolve claims regarding accounting, internal accounting controls and auditing matters.  The system must allow for such concerns to be submitted anonymously.  SOX provides significant protections to whistleblowers, and severe penalties to those that retaliate against them. [...]

Fraud Survey Highlights The Value Of Whistleblower Systems

July 2003 Wilmer Cutler & Pickering and PriceWaterhouseCoopers recently released a survey that analyzes economic crimes caused by internal corporate fraud.  The results should be interesting to lawyers charged with implementing, investigating, or recovering fraud losses.  Important findings include: Internal frauds threaten most businesses.  Worldwide, 37 percent of the over 3600 companies surveyed reported significant [...]