The Corporate Code of Silence is a condition within a company when employees are discouraged from reporting fraudulent behavior to the proper authorities.
Employees with knowledge of executive's fraudulent behavior would be threatened with termination and face discrimination by coming forward.
Congress sought a way to empower these whistleblowers in order to avoid future corporate fraud. This was accomplished by the SOX Act under Section 806.
Provisions of SOX Section 806
- Section 806 of Sarbanes-Oxley provides protections for whistleblower employees that disclose corporate fraud. The Act authorized the Department of Labor to protect whistleblowers from employer retaliation. SOX also authorized the Department of Justice to bring criminal charges against those responsible for the retaliation. This makes employer retaliation illegal.
Types of Employer / Corporate Retaliation
- Retaliatory conduct prosecutable under SOX includes any discrimination against an employee whistleblower. Termination, demotion, transferring, harassing, suspending and reduction in pay are all actionable offenses. Revealing the employee as a whistleblower is also a violation.
Who is protected under Section 806?
- Any employee, or employee of a contractor or sub-contractor employee of a publicly traded company that reports what they believe is fraud.
- These employees should report what they reasonably believe is fraudulent behavior to the FBI or DOL. Whistleblowers should contact a qualified attorney before considering any action.
Whistleblower protected conduct and activity.
- Section 806 provides protection for employees who report what they reasonably believe is:
- Corporate Fraud including Shareholder fraud, securities fraud, bank fraud, wire fraud or mail fraud
- Violations of SEC rules and/or regulations that govern corporate financial reporting.
Whistleblower retaliation penalties for executives and employers were also enacted.
- “Whoever knowingly, with the intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense, shall be fined under this title or imprisoned not more than 10 years, or both.’’ (Title 11: Section 1107)
- This means for any retaliation by an employer (termination, demotion, discrimination, etc.) against an employee who discloses fraudulent behavior can face up to 10 years in federal prison.
What is the SEC Reward Program? The SEC knows reporting wrongdoing can be difficult in the corporate environment. The legal settlements and potential job difficulties may not be enough to entice whistleblowers to come forward. With this in mind the SEC offers rewards for people who want to do the right thing and prevent fraud.
Issuing of Rewards to Whistleblowers (a.k.a. Relator) The program rewards those whistleblower employees that provide unique and original information. This information has to provide the SEC with enforceable actions greater than $1 million dollars. This action will include penalties, disgorgement and interest. Whistleblowers can receive between 10-30 percent of the money collected.
The pursuit of Whistleblower or 'relator' rewards is a process the should be undertaken with proper legal representation. An experience “qui tam” or SOX Lawyer should be consulted so you understand your legal options.
Need a Lawyer?
FILL OUT THE FORM BELOW
TO REQUEST YOUR CASE REVIEW