Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

Today, the U.S. Court of Appeals for the Third Circuit issued a major precedential decision in the case of Wiest v. Tyco Electronics Corp., establishing the standards for protecting corporate whistleblowers under the Sarbanes-Oxley Act. In a 2-1 split ruling, the Court held that corporate whistleblowers who have a "reasonable belief" that securities laws are being violated are protected under the Sarbanes-Oxley Act (SOX).  The Court rejected arguments raised by Tyco and the Chamber of Commerce that the SOX whistleblower law only protected employees whose disclosures "definitively and specifically" related to a "violation of a statute."

The whistleblower, Mr. Jeffrey A. Wiest, had worked at Tyco for 31 years, and was fired after rejecting expense payments that "failed to satisfy accounting standards."  

The National Whistleblower Center filed an amicus brief in the case supporting Mr. Wiest, and Stephen M. Kohn, a partner in the law firm of Kohn, Kohn and Colapinto, LLP, co-argued the case before the Appeals Court on behalf of the NWC.  He joined Mr. Wiest's counsel, Richard Angino, in oral argument to strongly urge the court to reject the "definitively and specifically" standard. 



Mr. Kohn highlighted the importance of today's decision by stating: ”This is a major victory for SOX whistleblowers. Employees performing their duties discover many corporate frauds and violations and then report concerns to their supervisor. Whistleblower laws, such as SOX, would lose their effectiveness if this common form of raising reasonable concerns was not protected.”

A copy of the decision is available here. 

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Tune in tomorrow at 1:00pm EDT to Honesty Without Fear on Progressive Radio Network.

Richard Renner interviews Professor Richard Moberly of the University of Nebraska College of Law about his recent law review article, "Sarbanes-Oxley's Whistleblower Provisions - Ten Years Later." Professor Moberly has studied the SOX whistleblower protections since its enactment in 2002 and now presents an analysis of why it failed to protect us from the 2008 financial crisis. Professor Moberly's analysis offers a number of pointers for corporate fraud whistleblowers, including whether to stay with the Department of Labor process or file in federal court. Richard and Professor Moberly also discuss how SOX fits in with the web of other whistleblower protections.

Submit Your Question to be asked on air during the show or call in to 1-888-874-4888.

Missed last week's episode?? You can listen to the podcast.

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Yesterday, the National Whistleblowers Center issued a letter to the Securities and Exchange Commission (SEC) opposing recommendations by the “Corporate Lobby,” which threaten the integrity of the whistleblower provisions found in the Dodd-Frank Act. The proposals by the Corporate Lobby are not "user-friendly" as required by the statute and do not further the Congressional intent behind the whistleblower provisions.

In our letter to the SEC, the NWC cites several objections to these proposals. First, it would be unlawful to require employees to utilize internal corporate whistleblower procedures as a pre-requisite for whistleblower protection. To make whistleblower protection contingent on compliance with an internal reporting system would illegally subvert the right of the employee to anonymously disclose information to law enforcement agencies. In an article released Sunday by the New York Post, Stephen Kohn “called it ‘obstruction of justice’ for companies to discourage employees from taking their complaints to federal authorities.” Furthermore, such a rule would be at odds with the explicit wording of both the Dodd-Frank and Sarbanes-Oxley Acts. The whistleblower should maintain his/her autonomy in deciding how they will blow the whistle. While internal compliance programs ought to be present and protected, they also need to be consistent and functional in their operations, which they frequently are not.

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In 2002, Congress passed a sweeping corporate reform bill known as the Sarbanes-Oxley Act (SOX). This legislation was a direct result of the crimes committed by publicly traded companies such as Enron and Worldcom. In drafting the bill, lawmakers wisely recognized that SOX would be meaningless without the "teeth" of a strong whistleblower protection provision. And when President Bush signed the bill, it was hailed as a great day for corporate reform, and for corporate whistleblowers. 

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It's been a week since our last post, and a lot has happened in the world of whistleblower protection since then. Here are some of the high (and low) lights:

• ITS OFFICIAL! The CPSC Reform Act (HR.4040/S.2663) will contain strong whistleblower protections for private sector employees who report safety violations to their managers or through the Consumer Product Safety Commission. The President is expected to sign the measure within the next week, and it will protect over 20 million employees.
  
  The New York Times published this August 5 editorial calling for the President's prompt signature.
  
  
• David Welch, who was the first whistleblower to obtain protection under the Sarbanes-Oxley Act, was denied reinstatement by the 4th Circuit Court of Appeals in Richmond, VA this week. This is a terrible result for Welch, who has been battling his former employer for over 7 years, and a bad precedent for Sarbanes-Oxley whistleblowers. Of nearly 1,000 SOX whistleblower complaints, not one whistleblower has been victorious in court.
  
  More information can be found about this case at the Workplace Prof's blog.
  

• Here is an interesting story about Georgia Senator Saxby Chambliss and his rough treatment of a sugar plant whistleblower during a Senate hearing. It seems that Sen. Chambliss is blaming the whistleblower, company VP Graham H. Graham, for an explosion at his plant which killed  13 workers on February 7.
  
  Interestingly, it appears that Graham had only been working at the plant several weeks before the explosion, during which he had reported safety violations and was rebuffed by superiors. Also, the company, Imperial, is among Chambliss' campaign contributors.
  
  
• DoD contractor Pratt&Whitney has settled a False Claims Act suit, and over $52 million will be returned to US Taxpayers. The company was accused of manufacturing faulty engine parts for Airforce fighter jets which caused the june 2003 crash of an F-16. The company is also replacing parts for over 50,000 aircraft at its own expense. 
  

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What Federal laws protect whistleblowers who report corporate fraud?

In 2002, Congress passed the historic Sarbanes-Oxley Act which protects employees of publicly traded companies who report violations of Securities and Exchange Commission regulations or any provision of federal law relating to fraud against the shareholders.

Who is protected?

Employees of publicly traded companies and contractors, subcontractors, and agencies of publicly traded companies.

What is “protected activity?”

The Sarbanes-Oxley whistleblower law broadly defines protected activity to include reports made to federal regulatory and law enforcement agencies, Congress, an employee’s supervisor, internal corporate investigators. The law also protects employees who participate or testify in SEC regulatory proceedings or other federal proceedings related to fraud against shareholders.

What is illegal discrimination?

Adverse changes to the whistleblowers terms and conditions of employment are prohibited. This includes a wide range of actions from reprimands to termination and blacklisting.

Where should complaints be filed?

U.S. Department of Labor
Office of the Assistant Secretary
Occupational Safety and Health Administration - Room: S2315
200 Constitution Avenue
Washington, D.C. 20210
(202) 693-2000

What is the statute of limitations?

A complaint filed under the SOX whistleblower law must be filed with the Department of Labor in writing within 90 days of the time an employee learns that he or she will be, or has been, subjected to discrimination, harassment, or retaliation.

What remedies are available to employees under the Sarbanes Oxley whistleblower law?

Employees who prevail are entitled to

• Reinstatement
• Backpay with interest
• a complete “make whole” remedy (including restoration of seniority/sick leave, etc)
• “Special Damages” (for emotional distress and loss of professional reputation)*
• Attorneys’ fees and costs
• “Affirmative Relief” (such as requiring a letter of apology and formal posting of the decision)

*If an employee is seeking “special damages,” that relief should be requested in their initial complaint.

Do other laws protect corporate whistleblowers?

Many other federal and state laws have been enacted laws to protect whistleblowers. The National Whistleblower Center has produced several publications which outline these laws, some of which are offered as free downloads for whistleblowers and their advocates. For more information, visit the NWC publication page.

Also, the Occupational Safety and Health Administration operates an informative site for whistleblowers here.

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