Yesterday, the National Whistleblowers Center issued a letter to the Securities and Exchange Commission (SEC) opposing recommendations by the “Corporate Lobby,” which threaten the integrity of the whistleblower provisions found in the Dodd-Frank Act. The proposals by the Corporate Lobby are not "user-friendly" as required by the statute and do not further the Congressional intent behind the whistleblower provisions.
In our letter to the SEC, the NWC cites several objections to these proposals. First, it would be unlawful to require employees to utilize internal corporate whistleblower procedures as a pre-requisite for whistleblower protection. To make whistleblower protection contingent on compliance with an internal reporting system would illegally subvert the right of the employee to anonymously disclose information to law enforcement agencies. In an article released Sunday by the New York Post, Stephen Kohn “called it ‘obstruction of justice’ for companies to discourage employees from taking their complaints to federal authorities.” Furthermore, such a rule would be at odds with the explicit wording of both the Dodd-Frank and Sarbanes-Oxley Acts. The whistleblower should maintain his/her autonomy in deciding how they will blow the whistle. While internal compliance programs ought to be present and protected, they also need to be consistent and functional in their operations, which they frequently are not.
The NWC strongly supports the rights of employees to work with their supervisors and compliance departments to ensure safety or expose fraud, and has vigorously condemned legal rulings that have stripped protection for these activities. In fact, the NWC requests that the SEC make all those publicly traded corporations and their subsidiaries regulated under the Securities and Exchange Act and/or the Dodd-Frank Act, accountable to one uniform standard for compliance programs. This ensures shareholders, investors, and taxpayers receive the same level of protection in detecting and preventing corporate fraud.
The law firm of Baker Donelson is requesting that a series of provisions be implemented to prevent “abusive and frivolous whistleblower claims.” The fear of frivolous complaints is unwarranted and not supported by the facts. For example, the Sarbanes-Oxley whistleblower law contains a provision, sanctioning those whistleblowers that file a frivolous or abusive complaint. In more than 1,000 cases over eight years, the Department of Labor only lists five employer requests for sanctions and every request for sanctions was ultimately denied.
Lastly, the NWC is highly opposed to Baker Donelson’s proposal to have the SEC place restrictions on attorneys representing whistleblowers. Such restrictions are completely contrary to the requirement that the Dodd-Frank whistleblower rules be “user-friendly,” and would make it almost impossible for corporate whistleblowers to find an attorney willing to represent them in Dodd-Frank cases.
The SEC is holding a public meeting tomorrow at 10:00 am to consider whether to propose rule to implement the whistleblower provisions of the Dodd-Frank Act. We hope that the SEC has not been swayed by the Corporate Lobby and that the proposed rules uphold the Congressional intent to protect whistleblowers.
Read the NWC Letter to SEC opposing corporate lobby position
Baker Donelson letter representing corporate lobby position
Arent Fox letter representing corporate lobby position