SOX Protections for Whistle-Blowers Don't Go as Far as Drafter Intended
Some corporate whistle-blowers who cooperate in fraud investigations are being rejected for protection from retaliation under the Sarbanes-Oxley Act because they work for a corporate subsidiary.
The Department of Labor contends the law covers only publicly traded corporations—and not necessarily their corporate subsidiaries, the Wall Street Journal reports.
University of Nebraska law professor Richard Moberly told the publication that 841 out of 1,273 whistle-blower complaints filed with the government since 2002 have been dismissed, and in many cases the reason was because of employment with a subsidiary. The government has ruled in favor of whistle-blowers only 17 times.
Sen. Patrick Leahy, D-Vt., helped draft the whistle-blower provision. He told the newspaper it was intended to cover subsidiaries. “Otherwise, a company that wants to do something shady, could just do it in their subsidiary,” he said.
The provision at issue bars retaliation against whistle-blowers exposing fraud by publicly-traded companies or “any other officer, employee, contractor, subcontractor, or agent of such company.”
