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$1.4 Million Plus Settlement Under the Sarbanes-Oxley Act

Sarbanes-Oxley Whistleblower retaliation

The attorneys at The Employment Law Group® law firm have substantial experience representing employees in Sarbanes-Oxley whistleblower proceedings before the Department of Labor and have helped establish precedent on several key aspects of the Sarbanes-Oxley Act. For example, in Kalkunte v. DVI Financial Services, Inc., the Department of Labor held that a privately-held company acting as a contractor, subcontractor, or agent of a publicly traded company can be liable for violating the whistleblower provisions of the Sarbanes-Oxley Act (SOX).

In Leznik v. Nektar Therapeutics, Inc., The Employment Law Group® law firm established precedent on several significant substantive and procedural issues under SOX, including the following: (1) whistleblower relief is available for employees whose normal duties include reporting illegal conduct; (2) protected conduct is not limited to disclosures of shareholder fraud and instead includes disclosures about reasonably perceived violations of SEC rules; (3) individual liability does not require a showing of malice; and (4) formal rules of evidence do not apply to SOX claims.

What is the Sarbanes-Oxley Act?

The Sarbanes-Oxley Act of 2002 encourages the disclosure of corporate fraud by providing protection to employees of publicly traded companies who engage in whistleblowing activities. To ensure SOX whistleblowers are afforded adequate protection against reprisal, the Act contains both a civil and criminal whistleblower provision.

Under Section 806 of the Sarbanes-Oxley Act, employees who believe that they were subjected to retaliation because of their whistleblowing activities can file a civil complaint with the Secretary of Labor within 90 days of the retaliatory action. Unlike other whistleblower laws governed by the Occupational Safety Healthy Administration (OSHA), a SOX whistleblower can bring a de novo action in district court for his or her whistleblower case if the Secretary does not issue a final decision within 180 days of the filing of the complaint.

Section 1107, the criminal whistleblower provision of SOX, makes it a crime for a person to knowingly retaliate against another for disclosing truthful information to a law enforcement officer regarding an alleged federal offense. This provision of SOX is enforced by the U.S. Department of Justice.

What activities are protected under Section 806 of SOX?

An employee engages in protected activity by providing information that he reasonably believes constitutes a violation of federal mail, wire, bank or securities fraud; federal law relating to fraud against shareholders; or any rule or regulation of the Securities and Exchange Commission (SEC). Specific examples include:

• Reporting an employer’s nondisclosure of accurate financial statements to potential investors;

• Reporting an employer’s improper entries on financial statements;

• Exposing senior management’s alteration of delinquency reports;

• Reporting an employer’s use of an unregistered broker to solicit investors in exchange for a commission; and

• Raising concerns about a supervisor’s practice of backdating letters of credit.

What must a SOX plaintiff prove to prevail?

Under SOX provisions, an employee must prove the following:

• That he engaged in protected conduct;

• That the employer had knowledge of the protected conduct;

• That the employer took an adverse personnel action against him; and

• That the protected activity was a contributing factor in the employer’s decision to take adverse action.

What retaliatory acts are prohibited under SOX?

Section 806 prohibits publicly traded companies from taking adverse personnel actions against a SOX whistleblower. This includes demotion, termination, suspension, threats, intimidation, harassment, failure to hire, failure to promote and any discriminatory action that would negatively impact the terms and conditions of the whistleblower’s employment.

What can a prevailing whistleblower recover?

Under the Sarbanes-Oxley Act, a prevailing employee will be made whole, i.e., will be returned to the same position he or she would have been absent the retaliation. In particular, SOX authorizes reinstatement, back pay for lost wages, front pay for future lost wages, compensatory damages, and litigation costs, including attorney fees.

Disclaimer: This website is maintained by The Employment Law Group® law firm to provide general information about itself and the field of employment law. The information you obtain at this site is not, nor is it intended to be, legal advice upon which you should rely or act. If you would like to discuss your potential claim call us at 888-603-0983 or  inquiry@employmentlawgroup.us