Thursday, August 7, 2008

It Ain't Easy Being a SOX Whistleblower

Whistle Thanks to Richard Moberly (Nebraska) for putting out to me that the Fourth Circuit ruled against the first whistleblower (and only one of 6) to have won a case in front of an ALJ in a Sarbanes-Oxley Act (SOX) whistleblower act.   The case, Welch v. Chao, upheld the ARB’s decision to overturn the ALJ.  The opinion can be found here

BNA writes that the:

Fourth Circuit affirm[ed] a ruling by the Labor Department's Administrative Review Board that the Sarbanes-Oxley Act did not prohibit the firing of a bank executive who complained about accounting irregularities that could not reasonably have been considered violations of federal securities laws . . . . Writing for the court, Judge Motz says the ARB properly found that the former chief financial officer of Cardinal Bankshares Corp. failed to show that he engaged in activity protected by SOX because he failed to demonstrate how the company's conduct could have violated any of the federal laws referred to in the statute's whistleblower protection provision.

I am not an expert in this area like Richard, but from all I have read in this area it is nearly impossible for a whistleblower to succeed under SOX.  Either procedural or substantive hurdles inevitably get in the way.

Which leads to the question of why these whistleblowers should even bother reporting in the first place?  This state of affairs is consistent with the lack of First Amendment retaliation protection in the public workplace.


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... and it's inconsistent with good government.

Posted by: Rick Bales | Aug 7, 2008 8:12:48 AM

As a SOX whistleblower myself who also got the case dismissed under the unreasonable "reasonable belief" test I feel for Mr. Welch. As far as SOX is concerned the federal judicial system has made the whistleblower provision completely useless. They are enjoying doing legislation from the bench.

Posted by: Nell Walton | Aug 7, 2008 10:04:56 AM

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