Outten & Golden: Empowering Employees in the Workplace

Posts Tagged ‘fraud’

Sarbanes Oxley Whistleblower Protection Law at 15 Years: Know Your Rights

Thursday, August 3rd, 2017

In the wake of Enron and other corporate scandals that wiped out retirement savings and left millions unemployed, Congress enacted the Sarbanes-Oxley Act (SOX), which contains a robust whistleblower protection provision.  The whistleblower provision is intended to combat a “corporate code of silence,” which “discourage[d] employees from reporting fraudulent behavior not only to the proper authorities, such as the Federal Bureau of Investigation and the SEC, but even internally.”  Congress sought to empower whistleblowers to serve as an effective early warning system and help prevent corporate scandals.

Congressional hearings about the Enron scandal probed why such a massive fraud was not detected earlier.  The testimony and documents revealed that when employees of Enron and its accounting firm, Arthur Andersen, attempted to report corporate misconduct, they faced retaliation, including discharge.  And essentially no legal protection existed for whistleblowers, such as Sherron Watkins, who tried to stop the fraud.

Fifteen years after Congress enacted SOX, internal whistleblowers remain the best source of fraud detection.  But corporate whistleblowers continue to suffer retaliation, and, therefore, widespread fear of retaliation persists.  A survey performed by the Ethics Resource Center found that nearly half of employees observe misconduct each year, and one in five employees who reports misconduct perceives retaliation for doing so.

SOX provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries.  Earlier this year, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.

On the fifteenth anniversary of SOX, whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.”  The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.  Workplace Fairness also has a summary of corporate whistleblowers available here.

The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery.  In particular, the guide addresses key issues for corporate whistleblowers to consider when they experience retaliation due to their protected whistleblowing:

  • What disclosures are protected under SOX?
  • What types of retaliation are prohibited under SOX?
  • Can a whistleblower sue an individual under SOX?
  • Is a whistleblower’s motive for engaging in protected activity relevant in a whistleblower-protection case?
  • Does SOX prohibit employers from “outing” confidential whistleblowers?
  • What is a whistleblower’s burden to prove retaliation under SOX?
  • What damages can a whistleblower recover under SOX?

Lead author Zuckerman commented, “Whistleblowers put a lot on the line when they expose wrongdoing, and they deserve an effective remedy to combat retaliation.  Hopefully this guide will help whistleblowers do the right thing and keep their jobs.  And for whistleblower that have suffered retaliation, the guide can help them explore options to hold their employers accountable.”

About the Author: Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, discrimination, non-compete, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2007 and 2009 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.

The SEC Whistleblower Program

Monday, July 10th, 2017

In 2011, a former executive at Monsanto, a large publicly traded company, raised concerns that the company was violating accounting rules and misstating its earnings. Despite being aware of these issues, Monsanto failed to remedy the accounting violations and continued to misstate earnings. Undeterred, the former executive reported his concerns to the U.S. Securities and Exchange Commission (SEC) through its new whistleblower program. Armed with this information, the SEC opened an investigation into Monsanto’s accounting practices and discovered that the company had indeed violated accounting rules and misstated company earnings for three years. Monsanto agreed to pay an $80 million penalty to settle the charges and the former executive received a $22 million award from the SEC.

Overview of the SEC Whistleblower Program  

The SEC Whistleblower Program was established to incentive whistleblowers, like the former Monsanto executive, to report violations of the federal securities laws to the SEC. Under the program, whistleblowers may be eligible for an award when they provide the SEC with original information that leads to successful enforcement actions with monetary sanctions totaling more than $1 million. A whistleblower may receive an award of between 10-30 percent of the monetary sanctions collected.

The SEC requests specific, timely, and credible information about any violation of the federal securities laws. The most common whistleblower tips relate to corporate disclosures and financials, offering fraud and market manipulation. Other notable areas of whistleblower tips relate to insider trading, trading and pricing schemes, foreign bribery, unregistered offerings, and EB-5 investment fraud.

Under the program, whistleblowers may submit tips anonymously to the SEC if represented by an attorney. Moreover, most whistleblowers, regardless of citizenship or position within a company, are eligible (or can become eligible) for an award under the program. This includes internal auditors, external auditors, officers, directors, and even individuals involved in the wrongdoing.

Since 2011, the SEC Whistleblower Program has received over 18,000 tips and has awarded more than $150 million to whistleblowers. Enforcement actions resulting from whistleblower tips have enabled the SEC to recover nearly $1 billion in financial remedies from wrongdoers, much of which has been returned to investors.

Free eBook on the SEC Whistleblower Program

The rules implementing the SEC Whistleblower Program are complex and there are many potential pitfalls for whistleblowers. Zuckerman Law has recently released a free eBook about the program that highlights important steps that whistleblowers should take to increase the likelihood of recovering and maximizing an SEC whistleblower award. The eBook covers the following topics:

Overview of the SEC Whistleblower Program

  • What is the SEC Whistleblower Program?
  • Can I submit an anonymous tip to the SEC Whistleblower Office?
  • What employment protections are available for SEC whistleblowers?
  • What violations qualify for an SEC whistleblower award?
  • What are the largest SEC whistleblower awards?

Whistleblowers Eligible for an Award

  • Who is an eligible SEC whistleblower?
  • Can I submit a claim if I had involvement in the fraud or misconduct?
  • Can I submit a tip if I agreed to a confidentiality provision in an employment/severance agreement?
  • Can compliance personnel, auditors, officers or directors qualify for an SEC whistleblower award?

Reporting to the SEC and Maximizing Award Percentage

  • When is the best time to report the fraud or misconduct to the SEC?
  • Do I have to report the violation to my company before reporting the violation to the SEC?
  • Can I submit an SEC Whistleblower claim if the SEC already has an open investigation into the matter?
  • How do I submit a tip to the SEC?
  • What type of evidence should I provide to the SEC?
  • What factors does the SEC consider when determining the amount of the award?

After Reporting to the SEC

  • What happens after I submit a tip to the SEC?
  • How long does it take to receive an SEC whistleblower award?

Click here to download your free copy of the eBook SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

About the Author: Jason Zuckerman represents whistleblowers nationwide in whistleblower rewards and whistleblower retaliation claims.  Recently Matt Stock and Zuckerman issued an ebook titled SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.

18 states are suing Betsy DeVos for putting for-profit college fraudsters over student borrowers

Friday, July 7th, 2017

Betsy DeVos is making it harder for students to get loan forgiveness after being cheated by for-profit colleges, but Democratic attorneys general across the country are challenging her in court. DeVos has had the Education Department put a hold on new rules that were supposed to take effect on July 1 protecting student borrowers—protecting student borrowers is definitely not what Betsy DeVos is about, let’s be clear on that—and 18 states are going to court to get the rules put back in place.

An existing federal law allows borrowers to apply for loan forgiveness if they attended a school that misled them or broke state consumer protection laws. Once rarely used, the system was overwhelmed by applicants after the wave of for-profit failures. Corinthian’s collapse alone led to more than 15,000 loan discharges, with a balance of $247 million.

Taxpayers get stuck with those losses. The rules that Ms. DeVos froze would have shifted some of that risk back to the industry by requiring schools at risk of closing to put up financial collateral. They would also ban mandatory arbitration agreements, which have prevented many aggrieved students from suing schools that they believe have defrauded them.

DeVos really is stepping in in favor of fraudulent schools over defrauded students—and taxpayers—in other words.

“Since day one, Secretary DeVos has sided with for-profit school executives against students and families drowning in unaffordable student loans,” said Maura Healey, the Massachusetts attorney general, who led the multistate coalition. “Her decision to cancel vital protections for students and taxpayers is a betrayal of her office’s responsibility and a violation of federal law.”

Two students left with debts after their school lied to them about their job prospects are also suing the Education Department over the same issues.

This blog was published at DailyKos on July 6, 2017.  Reprinted with permission. 

About the Author: Laura Clawson is labor editor at DailyKos.

The Great Escape, Lawsuit Edition

Thursday, October 29th, 2015

pop tortThis week, Sprint agreed to pay nearly $3 million in government fines after being caught by the Federal Trade Commission for cheating and deceiving people with low credit scores.  As the FTC’s Bureau of Consumer Protection explained, “Sprint failed to give many consumers required information about why they were placed in a more costly program, and when they did, the notice often came too late for consumers to choose another mobile carrier.…. Companies must follow the law when it comes to the way they use consumer credit reports and scores.”

Yes they must, and it’s wonderful to see the FTC on the job. But when consumers are cheated because of illegal corporate practices, neither government regulators nor law enforcers (like attorneys general) can usually do much to recover compensation for the victims. As we noted pretty recently in a post about the VW emissions scandal, class actions are the only realistic way to do that. But since the Supreme Court let them, corporations have been inserting clauses into contracts that ban class actions and force individuals to resolve disputes in corporate-controlled, secretive arbitration systems. Forced arbitration is bad enough. But without being able to join with others in a class action lawsuit, most claims simply disappear, allowing corporate wrongdoers to completely escape any legal accountability.

The Consumer Financial Protection Bureau has taken the bold step of moving towards a rule to ban such clauses in consumer financial “contracts.” We hope they hurry because the damage caused by these clauses grows every day.

Today, the Center for Justice & Democracy released a new, updated fact sheet listing nearly 50 important cases that were dismissed because of forced arbitration clauses and class-action bans. These tossed cases were brought by customers ripped-off by automobile dealers, banks, credit card companies, phone companies, payday lenders and for-profit colleges (to name a few). They involve employees suffering from discrimination and wage and hour abuse. And we know there are many more cases out there.

Notably, three cases were brought by customers defrauded by Sprint and, like the rest, were thrown out of court, leaving cheated customers with nothing.

This blog originally appeared at ThePopTort.com on October 22, 2015. Reprinted with permission.

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