Sarbanes-Oxley Whistleblowers

Whistleblowers would be protected and rewarded for exposing accounting misdeeds under a bill scheduled for a vote in the House this week. The bill would attach a whistleblower protection provision to rules governing the the Public Company Accounting Oversight Board (PCAOB) – often referred to as “Peekaboo.”

The PCAOB, according to the panels’website, “oversees the audits of public companies and SEC-registered brokers and dealers in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports.”

But, according to a recent investigation by the Project on Government Oversight (POGO), it’s doing a terrible job. Could better protections for whistleblowers get the effort back on track? One of the recommendations in the POGO report notes that “whistleblowers could help make enforcement of the audit firm industry easier and more effective.”


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On March 6, 2015, The Occupational Safety and Health Administration published a final rule finalizing procedures for handling whistleblower retaliation complaints filed under Section 806 of the Sarbanes-Oxley Act of 2002 (SOX).

Sox Act contains significant protections for corporate whistleblowers. It covers employees who report fraudulent activities and violations of Securities Exchange Commission rules that can harm investors in publicly traded companies. Given its diverse civil, criminal and administrative provisions, the statute may be considered, over time, one of the most important whistleblower protection laws.

“Silencing workers who try to do the right thing is unacceptable,” said Assistant Secretary of Occupational Safety and Health Dr. David Michaels. “This final rule safeguards investors by protecting whistleblowers who shine a light on illegal or fraudulent conduct that otherwise may go uncorrected.”
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Every whistleblower and every attorney who represents them should be aware of the U.S. Court of Appeals for the Fifth Circuit’s November 12, 2014 ruling in Halliburton v. Administrative Review Board.

Decided under the Sarbanes-Oxley Act’s anti-retaliation provision, the case was simple. Halliburton disclosed the name of one of its employees who had filed an SEC fraud report to other employees inside the company. Once identified, that whistleblower was subjected to foreseeable “undesirable consequences,” such as “ostracism” from fellow employees. The issue presented to the court was whether or not the disclosure of the whistleblower’s identify was an unfair labor practice under the Sarbanes-Oxley Act. The Court correctly found that it was.

In a unanimous decision the Fifth Circuit’s panel held as follows:
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On November 12, 2014, the Fifth Circuit Court of Appeals affirmed a U.S. Department of Labor Administrative Review Board (ARB) ruling against Halliburton for its retaliation against a whistleblower.

In 2005, Anthony Menendez, an employee of Halliburton, used the company’s internal procedures to submit a complaint to management about what he thought were “questionable” accounting practices. He also filed a complaint with the Securities and Exchange Commission (SEC) about the company’s accounting practices, which led to an investigation by the SEC.
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Blood MedicineKathleen Sharp’s book about pharmaceutical whistleblower Mark Duxbury will be released in paperback on September 1, 2012. It is Blood Medicine: Blowing the Whistle on One of the Deadliest Prescription Drugs Ever. I had the pleasure of interviewing journalist Kathleen Sharp on November 15, 2011.

Mark Duxbury was a star salesman for a subsidiary

Whistleblowers have succeeded in a $1.5 billion off-label marketing case against Abbott Laboratories Inc., the Department of Justice announced today. Combined, the $700 million criminal fines and $800 million civil fines are the second largest government recovery from a drug company in history.

The Department of Justice intervened after four whistleblowers filed suit against

Today the Department of Labor’s Administrative Review Board (ARB)ARB held its first oral argument in a case under the Sarbanes-Oxley Act (SOX). Last November, the ARB gave notice of today’s oral argument, and invited interested groups to submit friend-of-the-court (or “amicus”) briefs. The ARB asked the parties to address issues of how specific OSHA complaints have to be, whether Administrative Law Judges (ALJs) can grant motions to dismiss on the pleadings, and the nature of protected activity under SOX. A prior blog post covered the amicus briefs, including the briefs of the National Whistleblowers Center and Doug Evans. Pictured here are ARB Board Members Luis Corchado, Paul Igasaki (Chair), E. Cooper Brown (Vice-Chair) and Joanne Royce.

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Today, President Obama signed the FDA Food Safety Modernization Act (H.R. 2571), which contains landmark whistleblower protections for food safety employees.

Highlights of the Food Safety Whistleblower Provision:

  •   Covers all employers “engaged in the manufacture, processing, packing, transportation, distribution, reception, holding or importation of food;”
  • Allows workers have their case heard before a jury

In April, I wrote here about the request of the Department of Labor’s Administrative Review Board (ARB) for amicus (friend of the court) briefs on whether the Sarbanes-Oxley Act (SOX) protects employees of subsidiaries.  The National Whistleblowers Center (NWC) joined with the National Employment Lawyers Association and the Government Accountability Project to submit an amicus