Facebook whistleblower Frances Haugen’s testimony in front of Congress has increased the pressure on the U.S. Securities and Exchange Commission (SEC) to investigate Facebook’s handling of toxic and illicit content on its platform. Following Haugen’s testimony, SEC Chair Gary Gensler responded to questions about whether the SEC was investigating her allegations.
On October 6, Gensler appeared on MSNBC where he spoke to Stephanie Ruhle about a variety of topics related to the SEC. During his appearance, Ruhle asked Gensler about Haugen’s allegations and whether the SEC was investigating them.
Gensler refused to comment on the specifics of the allegations, noting that it is against the SEC’s confidentiality protections to speak about whistleblowers. He did state, however, that “if executives of companies that are public companies mislead the public…that can be a violation of securities laws.”
It is upon this legal theory — that Facebook is violating securities laws by misleading the public about risks associated with its handling of illicit content — that Haugen submitted whistleblower disclosures through the SEC Whistleblower Program.
Haugen is not the first whistleblower to file such a complaint. Her allegations further supplement multiple other whistleblower disclosures filed over the last several years. The legal theory was first developed by lawyers working with the National Whistleblower Center (NWC), whistleblower law firm Kohn, Kohn & Colapinto (KKC), and the Alliance to Counter Crime Online (ACCO).
Whistleblowers working with those groups have filed SEC disclosures detailing a systemic failure at Facebook to establish internal controls that would restrict and remove toxic and illicit content including illicit drug sales, human trafficking, and terrorist financing. According to the disclosures, this systemic failure creates financial risk because commercial advertisers do not want to see their products placed next to this illicit content and because it has mired Facebook in costly litigation and hefty fines from regulators.
For example, a 2020 whistleblower disclosure filed in connection with the groups details Facebook’s failure to properly police the sale of opioids on its platforms. The Washington Post reported that the disclosure “includes dozens of pages of screenshots of opioids and other drugs for sale on Facebook and its photo-sharing site Instagram, with some having seemingly obvious tags such as ‘#buydrugsonline.’”
“‘Facebook executives were made aware the scale of counterfeit OxyContin being sold across their platforms was enormous,’” the complaint states according to The Washington Post. “‘But while other tech firms and the pharmaceutical industry invested heavily in resources to mitigate the damage of illegal narcotic sales online killing tens of thousands of Americans, Facebook executives aggressively lobbied other social media platforms including Twitter not to take action or to engage in the counterfeit OxyContin removal initiative.’”
In response to Haugen’s testimony, NWC released an action alert pushing for an investigation into Facebook. “Since 2017, whistleblowers have been making disclosures about Facebook’s inability to stop organized crime, wildlife trafficking, terror financing, and human trafficking,” the action alert states. “Today, we heard that Facebook knows its products are also unsafe for children, following the pattern of choosing profits over people. Failure to stop this activity is not just immoral — it puts shareholders at risk. Enough is enough. It is time for real accountability.”
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