SOX And Whistleblowers - Any Fraud Will Do

June 13, 2013  |  The Insider: White Collar Defense and Securities Enforcement

Section 806 of the Sarbanes-Oxley Act (“SOX”) prohibits publicly-traded companies from retaliating against employees who report various acts of wrongdoing to their employers. Employers have consistently attempted to narrow the protections afforded employees under this section, arguing that SOX covers only reports of conduct amounting to a fraud on the company’s shareholders. Now, a recent Tenth Circuit opinion, Lockheed Martin Corp. v. Admin. Review Bd., U.S. Dep’t of Labor, 11-9524, 2013 WL 2398691 (10th Cir. June 4, 2013), has held that the employers’ narrow reading is wrong and that Section 806 is significantly broader, essentially finding that a report identifying any fraud or violation of an SEC regulation, even if it does not impact shareholders, triggers SOX’s protections. Although attorneys representing management have suggested that this opinion will not change the way employers deal with whistleblowers, it should. […]

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