The SEC released its Fiscal Year 2015 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 16, 2015. The Report analyzes the tips received over the last twelve months by the SEC’s Office of the Whistleblower (“OWB”), provides additional information about the whistleblower awards to date, and discusses the OWB’s efforts to combat retaliation against whistleblowers.
On September 9, 2015, Sean McKessy, Chief of the SEC’s Office of the Whistleblower (OWB) spoke at Thomson Reuters’ 4th Annual Corporate Whistleblower Program in New York. With the standard disclaimer that his comments and opinions were his own and not the official comments of the agency, McKessy spoke candidly about the SEC whistleblower program’s progress, challenges, and priorities as it enters FY2016.
On August 4, 2015 the Securities and Exchange Commission issued interpretive guidance elaborating its view that the anti-retaliation provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act apply equally to tipsters who claim retaliation after reporting internally, as well as those who are retaliated against after reporting information to the SEC. The guidance reflects that there is a split among federal courts over whether Dodd-Frank’s whistleblower retaliation provisions apply to internal as well as external reporting, and recognizes that the only circuit court to decide the issue to date, the Fifth Circuit, has taken a contrary position to that of the Commission in Rule 21F, the regulation the SEC adopted to implement the whistleblower legislation, holding that internal reports are not protected by Dodd-Frank. Whether internal reports qualify for Dodd-Frank coverage has important implications because, among other things, Dodd Frank provides enhanced recoveries (including two times back pay) and longer time frames (six years) for bringing a retaliation claim than would be available under the anti-retaliation provisions in the Sarbanes-Oxley Act of 2002.
On June 16, 2014, the SEC issued its first-ever charge of whistleblower retaliation under section 922 of the Dodd-Frank Act, charging a hedge fund advisor and its owner with “engaging in prohibited principal transactions and then retaliating against the employee who reported the trading activity to the SEC.”
Playboy Enterprises is suing its former defense counsel Sheppard Mullin after being hit with a $6 million jury verdict in a SOX whistleblower case, the highest jury award in a SOX case to date. In Zulfer v. Playboy Enterprises, Inc., Playboy’s former Controller Catherine Zulfer claimed her employment was terminated in part because she objected to an improper instruction by Playboy’s CFO to accrue $1 million in discretionary bonuses for executives when those bonuses had not been approved by Playboy’s Board. A jury agreed and found that Playboy unlawfully retaliated against Zulfer by firing her for her protected reports under SOX and also terminated her employment in violation of public policy under California law. The jury awarded $6 million in unspecified damages with no allocation between the SOX claim and the California wrongful termination claim.
In a much-anticipated move, the SEC on April 1, 2015 commenced a cease-and-desist action against KBR (formerly Kellogg Brown & Root) alleging its confidentiality agreements violated Dodd-Frank’s whistleblower regulations. KBR simultaneously agreed to settle the matter for $130,000. This is the first such case brought by the SEC, which had indicated over the last year or more that it was actively seeking examples of such alleged violations in order to enforce its Rule 21F-17, which provides, “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement…” In unofficial comments, SEC staff had expressed the view that standard confidentiality and non-disparagement provisions found in many employer agreements might violate the Rule to the extent they did not have express carve-outs stating that nothing in those provisions prevented employees from going directly to the Commission with concerns.
On March 2, 2015, the SEC announced a whistleblower bounty award of between $475,000 and $575,000, its 15th under the Dodd-Frank whistleblower program. While the SEC’s order is scant on detail, it does disclose that the award will go to a corporate officer, making it the first award to go to an officer under the program. This award is in keeping with the SEC’s approach to demonstrate in the relatively small number of awards made to date that a broad range of individuals can get bounties for providing original information of corporate wrongdoing under Dodd-Frank.
The new California paid sick leave law is now “in effect” (as we reported here and here) and you are ramping up your HR and payroll team to get ready for July 1 when employees can start accruing sick leave under the law. But now that you’re digging into the details, you’re realizing that this isn’t as easy as you thought. Don’t worry, you’re not alone. There are a few subtleties to the sick leave law that are catching more than a few employers off guard. But fear not, here are some tips to help you implement your sick leave plan:
The SEC released its Fiscal Year 2014 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 18, 2014. The Report analyzes the tips received over the last twelve months by the SEC’s Office of the Whistleblower (“OWB”), provides additional information about the whistleblower awards to date, and discusses the Office’s efforts to combat retaliation against whistleblowers.
On November 12, 2014, the Fifth Circuit affirmed a Department of Labor finding that Halliburton retaliated against a whistleblower by including his name in a document preservation notice. The court also held that emotional distress damages are available under SOX.
In Halliburton, Inc. v. Administrative Review Board, the whistleblower, Anthony Menendez, claimed that he was ostracized and isolated in violation of SOX after Halliburton’s General Counsel sent out a litigation hold notice stating that the SEC had opened an investigation into concerns raised by Menendez about alleged accounting improprieties. Menendez had previously raised these concerns internally to management.
