United States: SOX, Dodd Frank, Retaliation And Rewards ---Tips For SEC Whistleblowers And Their Lawyers

Hardly a week passes when we read of a corporate scandal, a major SEC settlement, and a huge whistleblower award. It seems that numerous individuals or entities are either becoming a whistleblower, or the target of one. Dodd Frank is "trending".  Lawyers in many fields of practice may eventually become involved in a whistleblower case, either as counsel for a whistleblower or his or her current or former employer. That potential whistleblower may come in also describing a potential retaliation case. This article discusses how such cases can raise complicated issues of whether the client should, or can, become an SEC whistleblower, or pursue a retaliation case, or both. The analysis of these issues requires some familiarity with the complex SEC whistleblower rules and claims process. In weighing a Dodd Frank vs. SOX retaliation case the employee's lawyer also has to understand the judicial food-fight that has erupted among the federal courts and the SEC over what it takes to qualify as a Dodd-Frank retaliation claimant. Some cases have been dismissed over this issue. The chances to unwittingly make things more difficult for your client, or to lose it on a timing issue that turns on your venue alone, are abundant.

THE SEC WHISTLEBLOWER PROCESS—BIG MONEY FOR A FEW, FRUSTRATION FOR OTHERS1

The practice area of employment law focused on whistleblowing and retaliation has changed dramatically in the five or so years since the Dodd-Frank Act launched what has been informally been called the "age of the whistleblower." The SEC program has accelerated to the point where it has as of December 2016 distributed more than $136 million to 37 whistleblowers, and reached settlements with defendants of more than $874 million in those cases. Some 14,000 tips have poured into the agency, and the multi-million dollar awards now seem to be coming quicker that Powerball jackpots. The SEC Office of the Whistleblower, in its 2016 Report to Congress, stated that it was "currently tracking over 800 matters in which a whistleblower's tip has caused [an inquiry] or investigation to be opened or which have been forwarded to [SEC] Enforcement staff for review and consideration in connection with an ongoing investigation."

But, as an attorney who has been representing SEC whistleblowers since the beginning of the program, I am well aware that the award winners in the program are vastly outnumbered by those whose tips were never acted upon (many for good reason), or are waiting for the seemingly endless process of evaluation, investigation, settlement, claim submission, and award decisions by the SEC.  In my experience, this process can take not just months, but years. The SEC is a law enforcement agency, and while it welcomes and encourages tips, and vigorously supports whistleblowers, the whistleblower is not exactly a partner in the process, but rather an important provider of evidence, one piece of a much larger picture.

Moreover, the whistleblower rules are complex, with many "off ramps" which can derail a potential award. The agency lawyers, while welcoming to the whistleblower, cannot share their strategy or progress with the whistleblower, nor provide much if any information as to whether the matter is moving toward a favorable conclusion for the whistleblower, or has been basically put on the proverbial shelf, or was DOA2. It is pretty much a one-sided process: "you give us the information, and we will take it from there. If we need more information, we will contact you. Thanks very much for your help." Then, when the time for consideration of an award comes, if at all, there will be another set of senior Enforcement Division lawyers (the "Claims Review Staff") making the decision as to whether to give your client an award, and for how much. Neither you nor your client will ever meet these folks. It's all done on paper, between them, the enforcement lawyers who handled the case, and the Office of the Whistleblower.

Thus, representing an individual who is trying to decide whether to start this process and become a whistleblower, or perhaps a client in a retaliation lawsuit based on whistleblowing, or both, involves some life-altering decision making by the client, guided by advice given by her counsel. The purpose of this paper is to give would-be whistleblower counsel, and whistleblower clients, the benefit of my experience, in some cases learned the hard way, in making some of these recommendations over the first five years of the program as an active SEC whistleblower lawyer. 

The putative whistleblower and her lawyer face key decisions early in the process, especially if there are options, such as filing a retaliation claim under SOX or Dodd Frank instead of making a huge bet on a whistleblower claim, or doing both (or neither). The client and counsel deal with issues such as the choice to remain anonymous, if taking the whistleblower route, and the tricky situations that may arise as the SEC conducts an investigation while the whistleblower remains employed at the target company, essentially a mole laying low while fellow employees are called in for testimony, including the whistleblower's supervisors and co-workers, and company lawyers seek and expect to represent everyone involved  (perhaps including, unknowingly, the client whistleblower) under the  umbrella of the company's attorney-client privilege. 

As practicing lawyers know, no two cases are identical, there are many "shades of grey," and balls can bounce in many directions in the course of the representation. Rarely is a course of action clear, especially in the early stages of the matter. I find that working off a set of hypothetical facts is usually a more interesting way to present some of these issues than just reviewing a list of rules or case citations, so that is how I will proceed here. I apologize if this exercise begins to resemble a law school or bar exam question (perhaps generating unpleasant flashbacks), but of course it isn't so relax and enjoy the process.

THE CLIENT

I will proceed to describe a hypothetical client who seeks legal advice from an attorney. She may be a whistleblower, may have been retaliated against, or maybe not. Like most clients, she comes with a good story, some good facts, some not so good. As we proceed, it will become clear this has become a complicated and tricky area of the law for lawyers and clients.

MARY'S STORY (as related to you as her potential attorney).

A pleasant individual we will call Mary comes to an attorney for advice around mid-July.

Mary is a mid-level manager at a mid-size public company, Amalgamated Widgets ("AM") (these are not the widgets lawyers talk about in law school, but much more sophisticated devices which can somehow interact with the "Cloud" and turn on your stove while you are 100 miles away, among other things).  She has been with the company for seven years, and has a family which depends in part on her income. The company has not been doing all that well, as the Chinese have perfected what may be a superior widget. The employees are worried. Sales have to improve. Some folks have been laid off. There is talk of a takeover and a possible sale to a foreign controlled buyer. Stock price is down. Analysts are negative, and short-sellers are beginning to circle overhead and spread negative rumors. An encounter now with regulators like the SEC would not be good for the company.

Mary works in retail sales for a senior-level manager named Bill.  She has some background in accounting but is not an accountant. Her good friend, Liz, is a recently hired compliance officer. Another friend, Sue, also works at the company. They often ride to work together. Mary has been getting good performance reviews for years, but for the past six months she has noticed that Bill seems to be under stress. More ominously, she has come to believe he may be "cooking the books."

Bill has been staying late on many evenings, hunched over his computer. He has asked Mary how to access certain files in the company's accounting system, and she noticed while in his office that he appeared to be making various "top side" accounting entries, especially toward quarter-end. This has been going on for about four months. Mary has access to his computer, and has learned his password from looking in his desk drawer after hours. She has reviewed some of his emails to other managers which seem to suggest that he has been reversing some accounting entries, changing others, and in general making performance look better by reducing or deferring expenses. Mary took some "screen shots" of these entries with her IPhone camera, and has made copies of some emails.  She brings these documents with her to her lawyer's office in a big brown envelope. She has also brought a copy of her employment agreement.

Quietly, she mentions to her lawyer that on several occasions Bill asked her for help in making some of the entries on his computer. She admits that, not being sure what to do, she reluctantly sat at his computer and to some extent assisted him making some entries. He seemed nervous and secretive while doing this. When she asked him if this was proper, he seemed perturbed and told her to simply help him figure out the process of making entries, and not ask a lot of questions. Several days later he made a random reference to her upcoming performance review. A few days after that, Bill's boss Jerry called her into his office to ask her how things were going with Bill, also mentioned the performance review, and reminded her that the review has become very important to all employees given the downsizing that may be coming in the near future at the company. At that point she blurted out to Jerry what she had seen Bill doing with the accounting records, but did not tell him she had helped Bill to a limited extent. To Mary, Jerry's reaction to her statements was curious, as he just listened and said nothing other than "don't worry about it, Bill has a lot on his plate."

After that, Mary observed that Jerry has been in Bill's office more frequently, and they appeared to be arguing.  Mary does not know Jerry well, but he had been pleasant to her over the years until their recent meeting, after which he seems to be avoiding her. He has done nothing about their conversation about Bill, as far as she knows. 

Mary has also told her friend Liz in compliance that there may be something afoot in her department relating to accounting records, but did not tell her about the changing of entries made by Bill in her presence. Mary says Liz is new to the company, just out of college, and not too sure of herself. Mary does not know if Liz has done anything about Mary's comments to her. Mary's friend Sue has noticed that she has not driven home with her lately and that she has been spending more time with Bill after hours. Sue has told Mary not to get too involved with Bill, but gave no explanation.  Last week, Mary was surprised to hear from HR that Jerry had just inserted into her personnel file a note that Mary seems to be somewhat "anxious of late, and according to her immediate supervisor her attention to work and concentration on finishing assignments has slipped." Her performance review is due in about two months.

Mary comes to an attorney for advice. She mentions that she was considering becoming a whistleblower, and has read about large awards, but is concerned that she may not be able to bring a whistleblower case because of language in her employment agreement. She asks if she can be a whistleblower, what that may involve, and what are her chances of prevailing. She wonders if her limited assistance to Bill will get her in trouble, and whether she should just keep her head down and do nothing, especially since her job seems to be in jeopardy already. However, she also wonders whether she may have some kind of retaliation case against her employer because of the comments made by Bill and Jerry about her upcoming performance report, and because of the negative information already placed in her file by Jerry shortly after they met. She does want to keep her job. Her husband is nervous about all this as well, and has asked her not to do anything that will hurt her at the company. 

Maybe the lawyer, especially an employment lawyer, has had a number of SOX retaliation cases over the years, but never a Dodd-Frank retaliation case or an SEC whistleblower case. Before the client meeting the lawyer may have taken a look at the SEC's Office of the Whistleblower website, which has a helpful set of "Frequently Asked Questions." Also on the site are the "Final Rules" of the SEC regarding whistleblowers, which run for 27 pages and are, to put it mildly, quite complicated.

WHAT ABOUT MARY?

Mary is clearly on to something troublesome within this company. A manager is apparently engaging in some kind of accounting fraud. She has voiced concerns to him, but may also have abetted his actions. She may have some exposure. Senior managers such as Jerry may be involved. She has informed Jerry, but he has taken no action. She appears to be headed for a bad performance review, possibly in retaliation for her questioning of Bill's actions to him and Jerry. She needs legal advice now, and is clearly concerned that she might lose her job.

Should she go above Jerry and report the situation to legal or compliance?  She has already spilled some of the beans to Liz, her friend in compliance, and to her friend Sue.  She tells her new lawyer she is afraid to go any higher in the company, as Bill and Jerry are powerful managers close to the CEO, and she fears the consequences if she surfaces as an in-house whistleblower. The company has a tip-line but others say they have had little results with prior complaints, and may even have suffered some form of retaliation after making the calls. She fears if she uses the help-line her identity as the tipper may be apparent. Mary does not think anyone else knows about the limited help she gave Bill with the computer, but in any investigation she would almost surely be asked about her interactions with Bill and her potential involvement. For the lawyer, it may often be the case that no other lawyers in the office have had any experience with Dodd Frank retaliation or whistleblower cases, or SOX retaliation cases.

SHOULD MARY BECOME A DODD-FRANK WHISTLEBLOWER?

Mary has seen the headlines about big whistleblower awards being given out by the SEC and wants to know if this is an option. On the surface, this looks like a potential accounting fraud case. These types of fraud are the kind frequently reported to the SEC (the SEC received almost 1,000 tips in FY2016 regarding corporate disclosures and financial reporting issues).  The SEC has gone after many companies for similar practices. A review of the SEC's helpful Office of the Whistleblower website indicates that a number of individuals have received multi-million dollar awards.  But, having made the quick review of the 27 pages of detailed "Final Rules" issued by the SEC to flesh out the whistleblower provisions of Dodd-Frank (Sec. 240.21F-1 through F-17, available on the SEC website), one sees a complicated labyrinth of rules, definitions, exceptions to the rules, and qualifications of who can be a whistleblower and when.

Moreover, the massive "Final Rule" issued by the SEC in 2011 to further explain the law,  runs to 83 pages of fine print in the Code of Federal Regulations (also available on the Office of Whistleblower website)3 You do not consider yourself to be a "securities lawyer."  The stark fact is that, over five years and 14,000 or so tips under the program (many of which were probably frivolous), 37 awards have been given out (as of December 2016). Because the SEC strenuously guards the identify of its whistleblowers, it is impossible to tell from the award Orders listed on the SEC website what the facts of the cases were all about, just the approximate amounts awarded. There are also a number of cases in which claims were denied, again without much explanation. What are the odds that Mary, on her facts, could get an award?

The rules are detailed, and specific. For example, the SEC can pay awards to eligible individuals "who voluntarily provided original information to the Commission that leads to the successful enforcement" of actions brought by the SEC, and potentially other agencies, which result in monetary sanctions of more than $1 million." 4 Note the "voluntary" requirement. This means the whistleblower has to submit information to the SEC before any "request, inquiry, or demand that relates to the subject matter of [the] submission is directed to" her or anyone representing her.5

Mary's information must be "original information."  It must come from her independent knowledge or independent analysis, and not be known to the SEC from any other source, unless she is the original source of that information, which she has to "establish to the Commission's satisfaction." There could be a successful case, but if the result is a penalty short of $1 million, she does not get an award. If the company fails, or for any reason the penalty cannot be collected, there is no award.  Mary has to give "specific, credible, and timely" information that causes the SEC to open or re-open an investigation or "inquire concerning different conduct as part of a current...investigation."  If the conduct was already under investigation by the SEC, her information must have "significantly contributed to the success of the action." At this point the SEC says that about 40% of the awards involved such cases. There are no judicial opinions construing any of these terms, they are all decided on a case-by-case basis by the SEC, which so far has given very little guidance as to what they mean. As noted, the Orders issued with the awards are heavily redacted to protect the whistleblower's identity, and generally give little insight into the decision-making process.

Should Mary first make a full report to legal or compliance? This is encouraged by the SEC and by every company. But this involves Mary identifying herself, with all that will entail. In these cases, the SEC has interesting rule: if Mary first reports the information internally (which is not required) and the company later reports this matter to the SEC, she will be considered to have reported to the SEC on the same date she originally reported internally, if she reports to the SEC herself within 120 days of reporting to the company.6 I have had some whistleblower candidates who mistakenly think this means they must report to the SEC within 120 days, which is not the case—they can submit a report anytime. But the whistleblower and her counsel must assume that company counsel is also aware of this rule and could be advising their client to make a quick initial report to the SEC to insure the company is not in the position of having to respond to an SEC inquiry before it has made any disclosure. This has in fact become a standard practice of companies who want to appear cooperative with the SEC but need time to start an internal investigation. The SEC likes to get the information and let the company find the evidence, which can take many months or more. But this also benefits the whistleblower who gets full credit as if she had come in first. She then gets the benefit of all the work done by company counsel to investigate the case, even if facts are found (as they often are) of which the whistleblower was completely unaware.

Thus, in Mary's case, if, for example, her compliance friend Liz reported what Mary told her to Liz's superiors, as she should have, Mary would probably not get credit if the SEC contacts her first. In general, the SEC rules harshly treat whistleblowers who sit on information, even if they had some cause to do so. Same problem with co-worker Sue, who might have decided to go to the SEC or the company herself with Mary's information about Bill. Even Bill, figuring things could be going south,  could decide to "turn himself in"  to the SEC, claim he was under pressure by Jerry and others to make the false entries, and become a whistleblower himself (this can and has happened, and as long as he is not convicted of a crime he may still qualify for an award, albeit probably a reduced one7). There are numerous possibilities that this information could come to the attention of the SEC or some other regulatory agency, or the company, without her involvement. She could easily then become a witness, or worse come under investigation herself, but most likely would not be treated as a whistleblower.

Thus, as Mary looks to counsel for advice, she and her lawyer have no way of knowing if the company knows about Bill and is running to the SEC to cover itself. There are powerful incentives for the company to do so. Likewise, if anyone outside the company, such a Bill's poker buddy or his girlfriend, learns of his actions from him and reports it to just about any state or federal law enforcement agency, including the SEC itself, and they contact Mary first, she will not qualify for any award and may in fact be in trouble.

The attorney should review all these issues with her promptly, and make a record of the conversation. If Mary sits tight and does nothing, but is later contacted by the SEC after it opens an investigation, she will need a defense attorney, not a whistleblower lawyer. If her lawyer did not advise her of her options early on, she may claim the lawyer failed to advise her of better options. Likewise, if Mary never goes in (even for her own reasons), and someone else eventually gets a huge SEC award for being the whistleblower, Mary might find a new lawyer who will allege you failed to properly advise her.

There are a number of other restrictions affecting employees in the legal, accounting, or compliance operations which could disqualify them as whistleblowers. But then there are even exceptions to the rules that will allow them to become whistleblowers, which have been cited by the SEC in several award cases.8 In our case, Mary does not appear to fit into these categories, but if Liz the compliance officer were a client she probably would.

The worst case scenario for the lawyer is to encourage the client to make the whistleblower submission, only to find out, perhaps years later after the SEC settles its case and the client makes an award claim, that the she does not qualify for some technical reason. The SEC enforcement staff that receives the tip and launches an investigation, while being very appreciative for your client's information, will normally not be concerned about whether the whistleblower technically actually qualifies to be one (this is not their obligation nor their area of expertise)9: they want the information to make their case, and have no obligation to warn the whistleblower that he may not qualify. But the senior lawyers in the SEC's Enforcement Division who will eventually review the claim after a successful SEC enforcement case to consider the award will be very much attuned to these complex rules, and can deny or reduce an award on any of a multitude of grounds. This is very serious business, with potentially millions for the client and the lawyer at stake. It is truly a minefield, paved with good intentions but full of traps. My advice to any lawyer asked to advise a potential whistleblower to spend a long-afternoon carefully reading the SEC Final Rules, and the Office of the Whistleblower website, and if that attorney still wants to get into this area of the law, become at least semi-educated before making recommendations to individuals like Mary.

Finally, as noted above, there has to be penalty exceeding $1 million actually recovered by the SEC to make the whistleblower eligible for an award. If the case comes in under that amount, as many do, there will be no award. This could happen here if, for example, the SEC determined that Bill alone was responsible, or maybe just Bill and Jerry, but no one else at the company was at fault. If the company cooperates quickly and effectively it might escape a large penalty, or any at all. It could end up with a Deferred Prosecution Agreement with a smaller or no fines. Or maybe Bill and Jerry are fired, and they are sued by the SEC but have minimal assets to pay a judgment. Whistleblower Mary may get a pat on the back and the thanks of the SEC, but no award. The whistleblower and her lawyer will not be able to know any of this for sure up front.

While it is hard to tell, as the award notices are heavily redacted, it appears that many of the awards to date may not have hit the 30% of the penalty maximum the statute allows. The rules state: "The determination of the amount of an award is in the discretion of the Commission." There are listed in Rule 21F-6 four factors that may increase the amount of the award (between 10% and 30% of the recovered financial penalties), and three that may decrease the amount of the award. These factors also need to be reviewed carefully at the beginning to see if there are circumstances in the case which would tend to reduce the award significantly.

The ideal case is one in which the whistleblower stops a major ongoing fraud scheme which is ripping millions off investors and which would never have been discovered without the whistleblower, or an FCPA case against a solvent multinational corporation involving millions in bribes. There have been a number of such cases, and they take time to investigate, but often generate large settlements.10 The most significant negative factor, other than serious personal culpability on the part of the whistleblower (which I suspect is rare), is "unreasonable reporting delay." This factor is often present, as whistleblowers sometimes wait for varying reasons for substantial periods to report wrongdoing to the SEC. Some need time to make their decisions to come in, some wait until they leave or are dismissed by the company, some learn of the wrongdoing well after the fact, and some are just tardy, but the SEC frowns on delay and may be inclined to reduce the award.11 It also does not like cases where the statute of limitations (usually five years) has run or is close to running. If the case is well beyond five years old it is probably not worth the effort to submit a whistleblower claim, unless it is a big fraud against a big company and there may be a way to extend the statute (and your client has a good explanation for the delay, like maybe he just learned of it).

CAN MARY KEEP HER NAME CONFIDENTIAL?

Most whistleblowers want to remain anonymous, which the SEC rule writers allowed as long as the whistleblower retains counsel. Thus the document filed with the SEC, called a TCR (for "Tips, Complaints, and Referrals") is done through the attorney. It can be filed through the mail or electronically. I recommend the latter, as the critical TCR number (which for some reason runs to 13 numbers) is issued immediately after the attorney hits "submit" on the filing. When I file an SEC case I generally don't try to fill in the facts in the boxes provided but submit as an attachment to the TCR form a cover letter briefly describing the matter and the client, and a detailed document fully describing the claim and attaching exhibits. I find "time-lines" effective. Emails are always appreciated by government lawyers, as long as no privilege issues are involved.12

Depending on the subject matter and the location of the company, I may contact certain SEC attorneys I have previously worked with to alert them to the TCR in hopes they will pull it up and get interested in the case. New TCR submissions that appear qualified (i.e. involve the securities laws and are not simply claims for losses on stock purchases and the like) are routed by the Office of the Whistleblower to the Office of Market Intelligence at the SEC where attorneys determine to which division, and which office (DC or regional offices of the SEC), the submission will be referred). They have a quick turnaround time. Sometimes, if the company is (or has been) under investigation, the case will be routed to the staff attorney who has handled that case. It is important that the case gets into the hands of a staff attorney who has the time and interest to work the case, but the whistleblower will have no control over that decision.

A client should also be cautioned that the "anonymous" designation is not guaranteed.  By law the SEC has to keep the name of the whistleblower confidential, up until the point when that person makes a formal claim for an award, on a second form called a WB-APP, where she has to disclose her identity to the SEC (but to no one else).  But as the investigation progresses, there are naturally points where a whistleblower's identify could be disclosed outside the SEC. Frequently documents produced by the whistleblower, such as emails, may contain his or her name. That can be deleted from copies shown to a company witness during the investigation but the deletion of a name on a relevant document may allow the witness (or more likely the company lawyer) to figure out whose name has been removed. In my experience the SEC enforcement attorneys view their legal duty to protect the whistleblower's identity very seriously, and will work with whistleblower counsel to maintain confidentiality throughout the long investigation process. That said, the lawyer should caution the potential client that the odds are that the company may deduce the identity of the whistleblower eventually. 13

Likewise, there is the possibility that if the case, be it a civil SEC enforcement proceeding or a criminal case brought by the Department of Justice, is actually litigated the defense will probably be able to obtain the whistleblower's name in the discovery process.14 Fortunately, the vast majority of these cases are settled well before discovery, but the increased emphasis by the SEC and the DOJ on charging individuals (as emphasized in the now-infamous Yates Memo from the DOJ) may eventually lead to cases in which a defendant refuses to settle or plead out early and discovery will be required to be made to the defense by the government, which may reveal the identity of the whistleblower. In Mary's case, given her close connection and previous statements to company employees involved in the matter, she will probably be suspected to be the whistleblower in any event.  But given the harsh penalties the SEC can level against a company that retaliates against a Dodd-Frank whistleblower, the company may never take action against Mary, other than perhaps quietly blackballing her in the industry, something I suspect happens frequently. Of course retaliation can take many forms, and raise its ugly head in many contexts. And there may be no redress for former employees or foreign-based whistleblowers, under current law. And if your client has already suffered retaliation by the time she comes to seek counsel, the issue gets more complicated, as we discuss below.

MARY'S OPTIONS

Based on the above facts, consider the following possibilities for Mary:

Option One: File An Anonymous SEC Whistleblower Case, but no retaliation case

Mary has direct evidence of what may be an ongoing accounting fraud being orchestrated by a high-level manager, perhaps with the knowledge and involvement of individuals above him as well. She has documents, including some emails. The case could be significant, and might be relatively easy for the SEC to prove. Accounting fraud is a major target for the SEC, as it involves misrepresentation of financial statements, serious internal control violations, and direct injury to investors. Mary should eventually get full credit for bringing it to the SEC. If the activity has been going on for a while, and significant amounts are involved, it could be a case which would easily exceed one million in penalties. Moreover, there is a fair chance that if Mary does not go to the SEC, someone else will. Hers is a case I would probably take on.

Mary does have some "exposure" in that she did assist Bill to some extent, but coming in as a subordinate being pressured by a superior, she would be a good candidate for non-prosecution, and her actions would probably not indicate a significant reduction in her award. It would be prudent to raise this complication with the SEC counsel early on, and seek a non-prosecution deal, which is an option the SEC has available to it. Even if that is not offered, on these facts I seriously doubt the SEC would choose to charge her with securities fraud. 

Another advantage for Mary to remain anonymous, at least for the time being, is that she can remain at her job. She does not have to identify herself to the company as a whistleblower (although she could be asked about that by the company if an investigation is opened and she is interviewed, and she and her counsel will have to discuss how she would respond). My opinion is that she has every right not to disclose her status as a whistleblower, even if asked about it by company counsel (which would be a dumb move by the company anyway) for no other reason than that she is proceeding anonymously with the SEC. Plus, if she continues to work there, she can supply information to the SEC regarding Bill, Jerry and perhaps others, possibly strengthening her case for an award. Of course she should steer clear of Bill as much as possible, and not assist his fraud in any way.

She can also continue to supply documents to the SEC. In general, providing corporate documents relating directly to the fraudulent activity has been treated by many courts as protected activity on public policy grounds, and has recently been protected by a new federal law (see below), but this is a complicated area. A recent decision by a federal magistrate even held such materials to be attorney work product protected from discovery in civil litigation.15 You may choose to supply a limited number of such documents to get the SEC to open a case, and then leave it to them to issue a subpoena, or let the SEC subpoena the company for documents or provide them voluntarily through an internal investigation. Of course, if the client has a non-privileged "smoking email" or two, it is tempting (and usually advantageous) to put them into the initial submission. But it is important that this is the client's decision, as such disclosure will almost certainly be forbidden by an employment agreement or severance confidentiality provision. Fortunately, the SEC is vigorously enforcing its Rule 21F-17 (see below) which makes it difficult for an employer to punish whistleblowers for providing documents directly relating to a violation of law.

The new (May 2016) Defend Trade Secrets Act also provides immunity from civil or criminal liability under federal and state trade secret laws for whistleblowers who make disclosure of a trade secret if it is made in confidence to a government official or to an attorney for the purpose of reporting a violation of law. The law also allows the use of such evidence to prosecute or defend a retaliation case by the whistleblower. Properly applied, this law should protect whistleblowers who provide confidential documents to the SEC or other enforcement agencies, as long as they relate to illegal activity, of any sort, and can be considered "trade secrets" under the broad terms of the Act.16

Is Mary's Employment Agreement an Issue?

If Mary files an SEC whistleblower submission she should also provide her employment agreement to the SEC if, as she has indicated, it has language in any way discouraging or forbidding her to provide information to the SEC, or forbidding her from receiving any whistleblower award, or similar language. Apparently many companies got a bit too aggressive over the years and figured they could get employees to give up their rights under federal law and try to undermine the SEC Whistleblower program. In response, the SEC, led by the efforts of the Office of the Whistleblower, has been aggressively enforcing Rule 21F-17(a), which provides that "no person may take any action to impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement."

An August 2016 SEC Order  fined a company for language in severance agreements requiring outgoing employees to waive their rights to monetary recovery should they file a complaint with the SEC or other federal agencies.17 A second case fined another company $265,000 for similar conduct. 18 An SEC settlement charged Anheuser-Busch InBev with FCPA violations and for including language in a separation agreement that stopped an employee from continuing to voluntarily communicate with the SEC about such violations by imposing a financial penalty for violation of strict non-disclosure terms.19 The head of the SEC Office of the Whistleblower Jane Norberg told a recent legal forum that such agreements "target our program" by trying to take away the key incentive for whistleblowers, the award. She also was concerned by severance agreements, which are usually very important to departing employees, which contain language requiring the employee to certify that she knows of nothing illegal at the company. If such person has already been to the SEC, or is contemplating a disclosure, this language effectively forces the employee to lie to the company or potentially lose the severance payment. 

OSHA has also come down hard on such language, releasing new policy guidelines for its review of private settlement agreements presented for approval in whistleblowing actions. The OSAH guidelines make clear that agreements that contain language restricting the complainant's ability to assist the government or waive monetary awards for providing information to the government, will be rejected.20

Documents which in any way reflect company efforts to muzzle or penalize employee notification to the government of any form of wrongdoing or in any way interfere with the functioning of the SEC whistleblower program will be a big red-flag to the SEC and may get it to open an investigation based such evidence, even if there are no allegations of other violations. The Anheuser-Busch fine was $1 million, leading me to think that amount was set just high enough to generate a whistleblower award without other evidence of securities law violations. 

WHEN TO FILE MARY'S SEC WHISTLEBLOWER CASE?

If Mary decides to move ahead with an SEC whistleblower submission, it should be filed right away. In her case, there is no advantage to waiting. If further information or developments arise, she can supplement her submission by contacting the SEC Office of the Whistleblower.  Although it is encouraged by the SEC, she does not need to "report up" within the company before submitting the TCR. The process of filling out a TCR takes about 30 minutes on the SEC website. Even if she and her counsel are not certain there are securities violations present (and in fact there are here) the important thing is to get it filed. The whistleblower can normally allege internal control violations, which can themselves be violations of the securities law (ironically, prohibited under the FCPA). Any corporate practice which allows accounting fraud and misstated financial reports (or just about any other variety of corporate wrongdoing) will probably involve internal control violations. Even if the whistleblower gets it wrong, and the case goes nowhere, there is an important benefit to having promptly filed with the SEC, as it can greatly impact a Dodd-Frank whistleblower retaliation case (see below).

Mary (and her counsel) will then have to wait to see if the SEC responds to her submission. It may take weeks, or less if the SEC immediately like the case. If nothing happens after a few weeks, counsel can try to get the SEC to let him or her know if it has opened an investigation, and if so how the case is going (in my experience, this is not easy, but there are sometimes clues, like the fact the staff has contacted you, or failed to do so within say three months or so). But I have had cases where there is an investigation ongoing and neither my client nor I were aware of it, and cases where months have gone by before the SEC contacted me about a submission I had assumed had gone nowhere. The best indication is a request by SEC staff to talk to your client, but even that does not insure there will be a case pursued.

If the SEC opens an investigation it will involve a lengthy process, hopefully followed by a settlement with the company which as noted before must collect at least one million dollars or more. Counsel should then carefully read the SEC Order issued when the case is resolved for an indication of how much the client's information may have impacted the outcome. Then as much as several more months pass before the case is posted on the SEC website as one eligible for an award (make sure you follow those announcements, posted at the end of each month, for the Office of the Whistleblower should, but does not have to, call counsel to urge that a claim be filed), and then three months more are allowed for the whistleblower to file an award claim (Form WB-APP). Then the whistleblower and her lawyer must wait potentially for months before the award decision is made and communicated to them. I have been told this process can take as much as 18 months or more, depending on the case. Once a decision is made on the award, if the client accepts the decision of the Claims Award Staff as to the percentage--10 to 30% -- of the penalty assessed and collected from the company as the client's award, the SEC Commissioners have 30 days more to ask for the matter to be reviewed by the Commission itself. To my knowledge this has not happened but there is always the chance one Commissioner might want to review an award, which could add additional months to the process. To make all this worse, the award process has been gummed up by bogus claimants whose claims have to be investigated and, even after being rejected, they are allowed 60 days to file a request for reconsideration.21 It is my hope that the SEC will recognize how difficult it is for legitimate whistleblowers to have to wait these many months for a life-changing decision by the agency on their submissions, and will either streamline the rules to shorten this process, or add to the now very modest size of the staff of the Office of the Whistleblower, or both, to expedite this process.

If there is any form of retaliation against Mary, and she wants to file a retaliation case, she and her counsel will need to decide if it is filed under the Sarbanes-Oxley Act (SOX) or Dodd Frank, or both. This decision has gotten more complicated by recent case law (see below). Also, if it is a SOX case she will have to watch the calendar for she has only 180 days to file a claim with OSHA. In contrast, she has at least three years to file a Dodd-Frank retaliation case.

INTERVIEWS, CONFLICTED COUNSEL, AND OTHER CLOSE CALLS

Mary should understand that filing an SEC whistleblower case anonymously while still working at the company, or even after that if she leaves voluntarily or otherwise, may get dicey if the SEC, as she hopes it will do, opens an investigation. If the SEC immediately undertakes to conduct the investigation on its own it will surely want to interview her. If and the company undertakes an internal investigation as well, as is usually the case, the SEC may leave it to company counsel to interview its own employees. If so, the company will probably find sooner rather than later that Mary could know something about Bill's activities, and will want to talk to her. Indeed, as one of his direct assistants, she would be a logical early interview. If she was a former employee, she could decline the interview, leaving only the SEC to seek to interview her, which it has presumably already done. But as a current employee, chances are it will be the company that seeks to interview her first.  She is proceeding as an anonymous whistleblower, and still employed at the company.

Declining to be interviewed could be a legitimate justification for her termination. As long as the company does not know she is a whistleblower it is hard to call it retaliation. Assuming she is still employed, and does agree to an interview, the company will assume she has no need for counsel. But Mary has a problem. She does not want to discuss her involvement in the accounting manipulation, however minor it may have been. She certainly does not want to reveal she is the whistleblower. If she insists on having her own lawyer, the company will conclude she is hiding something (although in the wake of the DOJ Yates memo stressing the need for more individual prosecutions, more company employees may be asking for their own counsel). If she goes in alone to the interview she will probably be asked anyway who she has spoken to about these matters, and will have to decide if she is willing to disclose her identity as a whistleblower, or lie about it, or simply refuse to answer. If she admits she helped Bill change the accounts, she might be fired.

To flip back to the other situation, an early SEC investigation, Mary (and the SEC) also have a tricky situation. It can get very awkward if company counsel, in house or outside counsel, unaware of Mary's role as a whistleblower, wants to represent her along with other employees in any SEC interviews, as is often the case. This would be the case even if she was a former employee and the company was volunteering to provide counsel. This makes sense for the company as a way to keep informed of the situation and know going in what she is going to say.

As mentioned above, the SEC enforcement lawyers may assist by purposely not requesting an interview with her early-on, but that may just be another red-flag to company counsel. Sometimes it may be better that the SEC does include her on a list of interviewees to be interviewed later, to make it appear she is not a whistleblower. The SEC clearly does not want to expose her as the whistleblower.

However, it is still the case that Mary really can't have a company lawyer representing her and operating on the assumption that she is just another employee and the lawyer's conversations with her are covered by the company's attorney-client privilege. That lawyer would obviously have a disqualifying conflict representing her if he knew her status as a whistleblower against the company, and the SEC would not want such a situation to develop either as it assiduously stays away from any attorney-client privilege issues. As noted above, one possibility is for Mary to ask for her own counsel (although the company may want her to cover the cost). Mary could also simply decline the company's offer of counsel, which would be easier if she is a former employee, but would raise concerns and questions if she is still employed.

What should Mary do? One option, if the request for an interview comes, is for her to just explain up front in full what she knows and that she is concerned somewhat about her exposure and thus felt the need for an independent lawyer of her own.   She is not obligated to disclose that she has filed an SEC whistleblower case, and presumably her actions in that regard involved privileged conversations so company counsel probably won't have the nerve to ask, and if he does she can just decline to answer. Let the company worry about getting in trouble with the SEC if it presses for an answer or appears to be attempting to hinder her communication with the SEC, which is also illegal. Maybe she has some leverage in this situation. But there is another factor, which we consider below, which could make her want to tell the company up front that she is an SEC whistleblower.

But there is still the concern that in being candid she may lose her job. If she does go in and discloses everything other than her status as a whistleblower the company will be looking for a reason to fire her so that it can explain her termination to the SEC without it appearing it may be retaliation (even though the company does not know for sure she is a whistleblower). The company could justify either firing her for her involvement with Bill in the accounting manipulation or retaining her but transferring her to another department and in effect demote her. Her role as accomplice to Bill will probably be discovered by her fellow employees, in which case she may be seen, not as a hero, but as a snitch for trying to save herself by throwing Bill and Jerry too under the bus. Are there really any good options for Mary which include outing herself as a whistleblower?   

Option Two: File An SEC Whistleblower Case and bring Mary in the same day to tell her story in full to the company, and then consider filing a timely SOX retaliation and possibly a Dodd-Frank retaliation case in the future if needed.

Mary is truly between the proverbial rock and a hard place. But there is another option that may allow her to thread the needle and come out relatively unscathed. It is now August 1. Start the day by going to the SEC website and filing out the TCR form to file a whistleblower case with the SEC. Fill out the form as we have described above, and tell the entire story to the SEC in detail. File anonymously. Then have Mary contact the office of the General Counsel or the office of the Chief Compliance Officer (or both) to inform them she is coming in today to report serious fraud in the company. Insist on seeing someone high up in management that day. Tell them she has her own counsel who will accompany her. I guarantee this will get their attention.

In the meeting, Mary can inform the General Counsel and/or the CCO (or their deputy) of all the facts, including the fact that she has that morning filed a whistleblower case with the SEC. Describe Bill's actions in detail, describe her meetings with Bill, and Jerry. Describe the intimidation both have directed at her, including the note placed in Mary's personnel file. Perhaps show them the documents she has collected, and let them know the SEC now has them too. Be totally truthful and candid, including a full description of whatever assistance Mary may have given Bill, and why she did so.

Hopefully, after Mary takes this good faith action the company will be reluctant to fire or demote her (even if they have some justification in doing so) because of the fear it could look to the SEC like retaliation for her filing the SEC whistleblower case. The company will have no choice but to treat her very carefully. Once the General Counsel hears Mary's story, he will report it up to the CEO and the Board. Steps will be taken immediately to deal with Bill and Jerry. They will probably be fired. The SEC will eventually want to know how the company dealt with them.

Realizing that Mary has been to the SEC already, the company will probably retain experienced outside counsel, who will probably advise the company to move quickly inform the SEC that it will cooperate fully and launch its own investigation.  Mary will have some leverage in this situation given that company knows she has filed the TCR and is cooperating with the SEC. She should not suffer any negative consequences for reporting this information, for this is the very action the company has traditionally indicated it expects from its employees. Outside counsel will want the company to start immediately building its defense with the SEC, which will include complete and immediate cooperation. A document hold order will go out to all employees. Bill's and Jerry's (and Mary's) computers will be confiscated and sent out to the forensic accountants for analysis. Consideration will have to be given to a public disclosure of some kind, and perhaps the filing of a Form 8-K to offer some limited explanation to the SEC and investors. The company's stock may take a hit, but that is normal. The market is used to such announcements. and they are not necessarily fatal.

Mary should be able to keep her job. But it will still probably be difficult for Mary on a personal level, for the word will get out and, sadly, whistleblowers are usually not well received by most fellow employees. As we have noted, she should also expect that Bill, and probably Jerry, will lawyer up and possibly come back at her with an exculpatory story, or maybe even try to blame her in some fashion. But Mary has clearly strengthened her position by becoming an SEC whistleblower early on, and reporting up through the right channels on the same day. She gains the respect of both the SEC and the company for her forthright actions, and hopefully will have provided herself some protection from adverse action by the company, at least in the short run.

SHOULD MARY FILE A RETALIATION CASE, AND IF SO UNDER WHAT LAW?

Mary has three options for filing a retaliation case. She can file a traditional SOX case by filing an OSHA complaint; she can file a Dodd-Frank retaliation case; or she can file both. Let us examine the outlook for a Dodd-Frank retaliation case. Recall that Dodd-Frank has some obvious advantages over a SOX retaliation case; a much longer statute of limitations (3 years as opposed to the 180-day limit to file with OSHA), and double back-pay damages. It does not, however, provide for emotional distress damages. It does allow for filing the action immediately in federal court, as opposed to waiting 180 days after which, if OSHA has not issued a final decision, a federal case could be filed. 

The SEC recently filed its first stand-alone retaliation case, under Sec. 21F9(h) of the Securities and Exchange Act, which "prohibits and employer from...threatening [or] harassing, directly or indirectly, or in any other manner discriminating against, a whistleblower in the terms or conditions of employment because of any lawful act done by the whistleblower in, among other things, providing information regarding potential violations of the securities laws to him employer or the Commission."  International Gaming Technology (IGT) agreed to pay $500,000 to settle the SEC's enforcement action. It charged IGT just with retaliation, and not with the violation of any other securities law. IGT had fired an executive whistleblower because he reported to his employer and the SEC that the company's financial statements might be distorted. He had also personally filed SOX, and Dodd Frank, whistleblower cases. Interestingly, the company conducted an internal investigation with the assistance of outside counsel and found that the financial statements were not distorted as alleged by the whistleblower.

The elements of a SOX and Dodd Frank retaliation case are virtually the same. Without going into a detailed analysis, I would think Mary probably has a prima facie retaliation case here under either statute. She engaged in "protected activity" as she had an objective and subjective reasonable basis to believe that Bill's actions in creating false accounting entries (a specific type of illegal conduct) violated one of the provisions enumerated in 18 U.S.C. Sec. 1514A. The courts, and the Administrative Review Board for SOX cases, have been relaxing the standards for what constitutes reasonable belief (in fact the pleading standard is more relaxed than that in federal court for a Dodd-Frank case. This could change under a Trump administration as new judges are appointed, but that could take a few years, hopefully). Mary does not have to identify a specific act of securities fraud.  She reported Bill's actions to Jerry, a supervisor with authority to investigate such misconduct; the company, through Jerry, was aware of her protected activity; adverse action was taken against her (the personnel file entry by Jerry) and the circumstances (and the timing) were sufficient to raise the inference that the protected activity was likely a contributing factor in the unfavorable action.

As noted above, Mary has to watch the 180 statute of limitations, which began to run when Mary learned that Jerry put the unfavorable personnel note in her file. The case would be stronger if Mary had actually received an adverse performance review, which is still several months off, before the 180-day limit for a SOX case. There is no way to know yet how her revelations to the company will impact that report. The company may actually give her a good report in the wake of her reporting the accounting fraud. Section 806 of SOX provides for uncapped compensatory damages. Section 922 of Dodd Frank does not. SOX includes an express exemption from mandatory arbitration agreements, while Dodd Frank claims are subject to such arbitration.22 So Mary has some good options should she go the retaliation route. The SOX must be filed soon, but could later be merged into a Dodd-Frank case in federal court which could be filed after Mary sees if the company fires her or retaliates in other ways. Whether any retaliation case would be worth the effort and expense, especially if she was still employed, is another question.

RETALIATION AND MARY'S STATUS AS AN SEC WHISTLEBLOWER

One major reason to get the TCR filed quickly is that filing it can have a direct impact on Mary's ability to file a Dodd Frank whistleblower lawsuit.  Mary (and her counsel) would have to be careful not end up on the losing side of the ongoing dispute in federal the courts about whether a whistleblower has to have first filed a case with the SEC to then bring a Dodd-Frank whistleblower case. The Fifth Circuit has said you have to be an SEC whistleblower first; the Second Circuit says you do not have to be an SEC whistleblower to file a retaliation case under Dodd-Frank, after reporting internally.  The SEC addressed the issue in its Final Rule and has filed amicus briefs in several cases in which the issue has arisen, supporting the Second Circuit position that going to the SEC is not required. The SEC argues that the statute is ambiguous and under the Chevron doctrine giving deference to administrative agency decisions the SEC's stated interpretation should control.

Since 2011, there have been over 20 decisions (not including controlled district court decisions following circuit court rulings) in which courts have reviewed the issue, and at least 16 have decided the SEC's broad interpretation is correct while at least 7 have not.23 But four of the six federal appellate judges that have ruled on the issue have rejected the SEC's position. Since the Supreme Court is probably going to have to resolve this rather important issue, it seems prudent for Mary to file an SEC whistleblower submission before she files a retaliation case under Dodd-Frank.

In this scenario, Mary filed the SEC TCR form, thus becoming a statutory "SEC Whistleblower" the same day she reported internally to the company regarding the accounting fraud. Thus, if she were retaliated against after that, she could file a Dodd-Frank case without fear, as she would qualify under both the Fifth and Second Circuit rules, and presumably under whatever decision the Supreme Court makes if and when the issue comes before it. Mary now has the comfort of having three years to see if any of her SEC whistleblowing activities, or her earlier reporting to Jerry, lead to any retaliation. Any negative performance report issued after she becomes an SEC whistleblower would presumably be evidence of retaliation. However, the earlier negative performance note issued by Jerry would be usable in the Dodd-Frank case as well, as the retaliation provision in Dodd-Frank which covers SOX violations would be available to her as a "SEC whistleblower."  Also, if the company caused Mary to have difficulty being hired by other firms if she left the company, and she could prove it was related to her being a whistleblower, she could file, or amend if needed, her Dodd Frank retaliation case.24

CONCLUSION

If the reader is a potential whistleblower, your situation will undoubtedly not be just like Mary's. But if you are considering becoming one, the SEC whistleblower provisions and the potential for retaliation cases under Dodd-Frank, SOX, or both, must be considered in advance. This decision is very important, and if one "crosses the Rubicon" to become a whistleblower, one needs to know how to do it within the strict requirements of the law and SEC regulations. It is my hope that the exercise set forth above will help you to evaluate that case, either as a whistleblower or a lawyer considering the representation of such an individual. Brave and honorable people like Mary need not just courage but also good counsel to navigate through the legal and practical thicket they will confront in making one of the most significant decisions of their lives, and trying to maximize its chance of success.  

Footnotes

1 A version of this article was originally presented at the 2016 Labor and Employment Law Conference of the American Bar Association. Everywhere I say "SEC" one can also substitute "CFTC" (Commodities Futures Trading Commission"). They both have nearly identical whistleblower programs. To date the SEC has made far more awards, but the CFTC's wide jurisdiction over commodities and derivatives should not be overlooked, as well as its massive settlements in benchmark fixing cases which suggest the potential of enormous awards for a savvy whistleblower in a similar case.

2 Technically the SEC can inform the subject or target of an investigation that it has been closed. The SEC staff has been given the authority to inform a whistleblower of a case closure. But it still does not routinely encourage them to give a progress report on her case. The only way to be somewhat confident is when the staff asks to speak to your client, and keeps coming back for more information over the months, or years.

3 17 CFR Parts 240 and 249, Release No. 34-64545, Vol. 76 FR 34300 et seq., June 12, 2011.

4 15 U.S.C. Sec. 78u-6(b)(1)

5 Rule 21F-4(a).

6 Rule 21F-4(c)(3) and 21F-4(b)7.

7 Rule 21F-6(b)(1) and 21F-8(c)(3).

8 Rule 21F-4(b)(4)(v)(A)-(C). The broadest exception, (C), requires whistleblowers such as compliance officers or auditors to wait 120 days to bring the information to the SEC after they have brought it to the company (or the company already knows it), i.e. the mirror opposite of the 120 limit described above during which others must make their submission. This makes an initial understanding of your client's job description very important.

9 There are a few automatic disqualifiers listed on the TCR form which must be checked off, but this is just the tip of the iceberg of issues than can disqualify a whistleblower.

10 See Daniel J. Hurson, "The FCPA and SEC Whistleblowers: Major Opportunities," Mondaq, January 6, 2016.

11 Cases in which the whistleblower comes in after the investigation has been ongoing can also be difficult to assess at the outset. The whistleblower's contribution has to be "significant," a judgment which will turn on the facts of each case and how the Claims Review Staff sees it from their perspective as enforcement lawyers.

12 If the client has privileged material, the lawyer can inform the SEC of that, give a brief "privilege log" kind of description, but wait for them to contact you about sending it to their "taint unit" for review. Or, to be even safer, if you are certain it is privileged, give it back to the client and discuss it no further. Of course, companies frequently claim documents as privileged when they probably are not, and the SEC lawyers are quite knowledgeable about these issues.

13 I humbly suggest that potential whistleblowers and their counsel read "Ten 'Rules' for Becoming A Successful SEC Whistleblower," Daniel J. Hurson, Mondaq, September 11, 2013 (available on Mondaq, on the internet or at www.hursonlaw.com).

14 See Dodd-Frank confidentiality provisions at 15 U.S.C. Sec. 78u-6(h)(2).

15 BofI Federal Bank v. Erhart, 15 CV 2353 BAS (NLS) U.S.D.C. So. CA, Aug. 15, 2016).

16 See Daniel J. Hurson, "The Whistleblower Protections Of the Defend Trade Secrets Act Could Have a Broad Impact—But Only if Employees Are Told About Them," Mondaq, September 13, 2016 (included in ABA Conference materials).

17 In the Matter of Health Net, Inc. Administrative Proceeding File 3-17396 (August 16, 2016).

18 In the Matter of BlueLinx Holdings, Inc. Administrative Proceeding File No. 3-17371 (August 10, 2016).

19 In the Matter of Anheuser-Busch InBev SA/NV, Administrative Proceeding File No. 3-17588 (Sept. 28, 2016).

20 U.S. Dept. of Labor, OSHA. Memo re: New Policy Guidelines for Approving Settlement Agreements in Whistleblower Cases (Aug. 23, 2016).

21 In a recent speech, SEC Enforcement Director Andrew Ceresney discussed these issues:

"... [S]imilar to our investigations, the award process takes time. There are sometimes multiple claimants applying for an award in a matter — we have had up to 16 in one matter. Our Whistleblower Office gives each one the attention and due diligence that it deserves. The award applications also often present unique, first impression issues that require careful review and thought."

22 See Jason Zuckerman, "The Evolution of SOX: A Powerful Remedy For Retaliation", Law 360, May 24, 2016 and "SOX Whistleblower Protections Are Not Obsolete," Law 360, Sept. 21, 2015.

23 Asadi v. F.E. Energy (USA) L.L.C., 720 F.3d 620 (5thCir. 2013)(must become a defined SEC "whistleblower" to file a Dodd-Frank retaliation case), and Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2d Cir. 2015) (need not be an SEC whistleblower). A federal district court in Wisconsin recently agreed with the Fifth Circuit's position. Lamb v. Rockwell, No. 15-CV-1415-JPS (E.D. Wisc. Aug. 12, 2016). The Lamb court found that the plaintiff had submitted her SEC complaint long after her internal reporting activity and her termination. As such, she had failed to meet an element of the prima facie case. "[The employer] is only prohibited from retaliating against a 'whistleblower'—one who has reported to the SEC—and at the time it allegedly retaliated, Lamb was not one. Thus, not only does Lamb fail to state a Section 922 [Dodd Frank] claim, she can never do so." Several recent federal district courts outside the Second Circuit also rejected its and the SEC's interpretation. Verble v. Morgan Stanley Smith Barney, LLC 148 F.Supp. 3d 644, 652  ( E.D. Tenn.2015);

24 In the Asadi case, the Fifth Circuit opinion actually used an example very much like Mary's to demonstrate that an individual who became an SEC whistleblower on the same day he reported the violation to his employer and was immediately fired could utilize the Dodd-Frank retaliation provision which covered SOX cases, even if the employer was unaware of the SEC whistleblower filing. Here, while Mary is unlikely to be fired on the day she reports up to the General Counsel about Bill, but she would be protected from any retaliation from that day on. Also, even if she did not tell the company that day that she had gone to the SEC, she would still be protected from retaliation taken against her thereafter for reporting to the company under the SOX provisions of the Dodd-Frank anti-retaliation law. Sec. 78u-6(h)(1)(A)(iii).

Daniel J. Hurson practices law in his own firm in Washington DC. A graduate of Harvard Law, he was an Assistant Litigation Counsel at the SEC and an Assistant US Attorney at the Department of Justice. He represents whistleblowers before the SEC and CFTC and defends individuals in SEC, DOJ, and FINRA investigations. His website is www.hursonlaw.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.