By: George M. Wilson & Carol A. Stacey
Just a few weeks ago we did the latest in a series of posts about the SEC’s Whistleblower program. That post focused on two significant enforcement cases where companies attempted to impede whistleblowers. For other posts in our whistleblower series, see:
Our post discussing the background of the SOX and Dodd/Frank whistleblower programs
Our post about the total amount being paid-out to whistleblowers exceeding $100,000,000 (It is even more today!)
Our post discussing a company having to pay a $500,000 fine for firing a whistleblower
SEEMS LIKE THE MESSAGE SHOULD BE CLEAR BY NOW! Don’t try to limit how employees can blow the whistle.
But, the Enforcement Division is not done!
In a case announced on January 17 a company paid a $650,000 fine for including language trying to restrict whistleblower rights in over 1,000 severance arrangements. After removing the language the company also voluntarily agreed to conduct annual training for employees about their whistleblowing rights.
In a case announced on January 21 the SEC found a company that actively searched for a whistleblower, to the point of essentially threatening employees. The reason for the hunt was clear, the treasurer and the company had manipulated information related to hedge accounting and was actively trying to hide the fact that certain hedging relationships were not effective. When the SEC began to ask questions about the issue, the company suspected someone had blown the whistle. The company tried to ferret out the whistleblower, compounding their offenses. The company and the treasurer both paid fines.
There is a very important reason for these cases. In many situations a fraud would go undetected if it were not for the conscience and courage of whistleblowers.
It would seem that the SEC is actively searching for more enforcement cases to make the point that it is illegal for a company to try and prevent or impede employees from blowing the whistle.
Not to be too preachy, and hopefully to be a bit practical, here are two thoughts:
For all of us who may see a need to blow the whistle, know that this is never easy, and know that you have rights and protections.
For companies, don’t try to hide problems and make sure any agreements surrounding employee departures don’t have these kinds of restrictions!
As always, your thoughts and comments are welcome!
Whether you are new to SEC Reporting or need a refresher – attend an upcoming SEC Reporting Skills Workshop being held in March at a convenient location near you!