Sarbanes Misused, Expert Says
Whistle-blower complaints brought under the Sarbanes-Oxley Act are failing because claimants are “misusing the law as a club in garden-variety workplace disputes,” according to an expert in the field.
Michael Delikat, a lawyer with Orrick, Herrington & Sutcliffe, writes in a Wall Street Journal commentary (sub. req.) that 1,000 whistleblower claims have been brought under the five-year-old law, but only six have succeeded after full evidentiary hearings before administrative law judges. The law passed in the wake of Enron’s collapse to encourage reports of corporate fraud and protect investors.
The losses should not be used as a reason to amend the law to make such complaints easier, says Delikat, who wrote the book Corporate Whistleblowing in the Sarbanes-Oxley Era. Critics are asking for changes such as a longer statute of limitations and an easier burden of proof.
Delikat gives some examples of cases that appeared to have little to do with investor protection. In one, a physician complained of poor ventilation in her workplace. In others, employees were fired for wrongdoing or insubordination rather than reports of corporate fraud.
“The last thing that Congress should do is make it easier for employees with an ax to grind to use Sarbox whistle-blower provisions,” he concludes.