Major US contractor settles first SEC case over confidentiality pacts that silence whistleblowers
In what is being hailed as a landmark federal enforcement action protecting the rights of whistleblowers, the Securities and Exchange Commission on Wednesday announced a settlement with a major federal contractor over provisions in its confidentiality agreements for workers.
Overly broad language in the Kellogg Brown & Root confidentiality pacts could prevent employees of the international technology and engineering company from alerting the feds to wrongdoing, the SEC says. The company admitted no liability, but agreed to pay a $130,000 fine and revise language in the agreements. At issue were provisions that required employees to notify the company before contacting the SEC.
“We take our reporting and compliance obligations very seriously,” Mark Lowes, the company’s vice president of litigation, told the Washington Post (reg. req.). “We want to be, and try to be, a good corporate citizen.
“The only reason we used the agreement was during our confidential investigative process, and the SEC is trying to make clear that these agreements should not be used,” Lowes continued. “It never dawned on us that an attempt to protect attorney-client privilege would be seen this way.”
The SEC said the enforcement action is the first of its kind and lawyers who represent whistleblowers predicted that it will have a major impact, the Post reports.
“This is a huge win for corporate accountability and transparency,” sad attorney Jason Zuckerman, a former senior legal advisor to the U.S. Office of Special Counsel. “Many of my whistleblower clients have feared coming forward to the SEC and other regulators because of agreements and policies that muzzle whistleblowers. Now every company will have to review and revise their policies.”
