In October, 2016, the federal Office of Compliance Inspections and Examinations (OCIE) reported that they have been examining compliance issues concerning certain whistleblower provisions contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Out of this search for violations have arisen a number of cases concerning Dodd-Frank’s Rule 21F-17.
One of the changes Dodd-Frank brought about was adding Section 21F, known as the Securities Whistleblower Incentives and Protection, to the Securities Exchange Act of 1934. Rule 21F-17 of Section 21F, which became law on August 12, 2011, specifies that “no person may take any action to impede an individual from communicating directly with the Commission [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.” What this means is that any company’s internal regulations or agreements that prevent an employee from blowing the whistle are strictly prohibited. Often, such regulations or agreements have the intent of punishing the employee for whistleblowing by taking away benefits.
Several enforcement actions have come about because those at the OCIE have investigated the codes of ethics, compliance handbooks, and employment and severance agreements of a number of companies. A partial listing of the actions includes the following:
- September, 2016: Anheuser-Busch InBev was alleged to be in violation of Rule 21F-17(a) because it impeded a whistleblower who reported wrongdoing involving the Foreign Corrupt Practices Act. The total amount paid by the company regarding all allegations was $6 million.
- August, 2016: Health Net, Inc., a health insurance provider based in California, was charged with requiring employees who were leaving the company to sign severance agreements, forcing them to waive their rights to monetary awards received under the SEC Whistleblower Program. Health Net paid a penalty of $340,000.
- August, 2016: BlueLinx Holdings, Inc., an Atlanta-based distributor of building products, paid a $265,000 penalty to settle allegations that it violated securities whistleblower laws. The company was charged with requiring employees who leave the company to sign severance agreements that waived their rights to any monetary awards they might receive if they brought a federal whistleblowing case.
- April, 2015: the first enforcement action for violating the whistleblower protections spelled out in Dodd-Frank was carried out against KBR, Inc., a procurement, engineering, and construction company. KBR agreed to pay $130,000 without admitting wrongdoing.
As a part of these enforcement actions, the OCIE has also taken certain steps that are aimed at remedying the situation:
- Requiring companies to revise all employee-related documents to ensure none of them conflict with whistleblower protection statutes, and to keep the documents in compliance with the laws going forward
- Giving all employees notice that they have the right to contact the SEC or other authorities with regard to whistleblowing actions and attempts to restrict their whistleblowing rights
- Getting in touch with former employees who signed restrictive agreements to inform them that the company does not bar them from pursuing whistleblowing awards or from communicating with the SEC.
If you believe you have signed an illegally-restrictive agreement, we at the Louthian Law Firm hope that you will come forward.
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If you think you have the facts needed to bring a whistleblower case, the experienced whistleblower attorneys at the Louthian Law Firm can review your case and help you file the appropriate disclosure statement. Under some circumstances, the government will intervene, or join in your lawsuit.
Your chances of succeeding are greater if your whistleblower claim is substantive, clear, and to the point. Because of this, meeting with a qualified whistleblower attorney can increase your chances of winning. The Louthian Law Firm can help you form your claim so that the government will be more inclined to intervene in your case; government intervention can sometimes increase the chances of recovering reward money. Even if the government decides not to intervene, it could still be a good idea to pursue your case without government involvement. Our strong support system can assist you through every step of the process.
For a free, confidential evaluation of your case, call the Louthian Law Firm today at 1-803-454-1200 or, if you prefer, you can fill out our online contact form.