Thursday, May 29, 2008

Lawsuits may expand Sarbanes-Oxley

Two lawsuits filed by former employees against Fidelity Investments may resolve a simmering dispute in the securities industry: Whether mutual fund employees are protected by a whistle-blower law adopted in the wake of corporate accounting scandals.

The Sarbanes-Oxley Act does not specifically apply to the Fidelity Investments chairman's firm and other privately held companies.

Congress gave whistle-blowers at public companies strong protections against retaliations when it passed the Sarbanes-Oxley Act in 2002 after the collapse of Enron Corp. and WorldCom. But the law does not specifically extend to privately held firms such as Fidelity that invest in public companies.

Lawsuits may expand Sarbanes-Oxley

Labels: employee lawsuit, Fidelity Investments, whistleblower

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Wednesday, March 05, 2008

Ignore a Whistleblower — at Your Peril

A financial scandal at biotech company Dyadic International offers a telling lesson about how whistleblower memos can come back to haunt the executives who ignore them.

Dyadic's internal dirty laundry first came to light at the company last April, when then-CFO Wayne Moor went to the company's Asian subsidiary to pick up the pieces after the unexpected death of an executive. While there, he learned of accusations about tax fraud and kickbacks that had been made against other executives — allegations that a whistleblower had first presented in late 2003 and 2004 to founder and CEO Mark Emalfarb.

By the end of the month, Emalfarb took a leave of absence after the company realized that he had not shared with others at the company the initial emails that had been sent to him four years ago, alleging impropriety. Emalfarb was fired in September, and Moor has since taken his place as CEO.

Ignore a Whistleblower — at Your Peril

Labels: Dyadic International, Mark Emalfarb, Wayne Moor, whistleblower

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Tuesday, February 19, 2008

Overseas whistleblowers protected by Sarbanes-Oxley?

Overseas employees of US-listed companies that uncover fraud that took place in the US can be protected under the US corporate governance legislation, according to a ruling made in New York.

Judge Victor Marrero of the US District Court, found that Rosemary O’Mahoney, a Accenture employee based in Paris who claimed that the consultancy had carried out tax fraud, is entitled to protection under the Sarbanes-Oxley Act.

The judgement is at odds with previous cases at federal level, where courts have ruled that employees based outside the US are not entitled to protection as this would represent a unintended application of US law abroad.

Overseas whistleblowers protected by Sarbanes-Oxley?

Labels: abroad, protection, whistleblower

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Whistle-blower site taken offline

Wikileaks.org, as it is known, was cut off from the internet following a California court ruling, the site says.

The case was brought by a Swiss bank after "several hundred" documents were posted about its offshore activities.

Other versions of the pages, hosted in countries such as Belgium and India, can still be accessed.
However, the main site was taken offline after the court ordered that Dynadot, which controls the site's domain name, should remove all traces of wikileaks from its servers.

The court also ordered that Dynadot should "prevent the domain name from resolving to the wikileaks.org website or any other website or server other than a blank park page, until further order of this Court."

Whistle-blower site taken offline

Labels: whistleblower, wikileaks.org

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Tuesday, February 05, 2008

WorldCom Whistle-blower Cynthia Cooper

Think of her as the mother of 404.Not that that's a goal she ever imagined or one she has embraced. But the odyssey that began when Cynthia Cooper, the then–vice president of internal audit at WorldCom, decided to investigate anomalies in the company's accounting entries ended by inspiring critical — and heavily criticized — legislation: the U.S. Senate responded to revelations about massive accounting fraud at the telecom giant by adding Section 404, on the assessment of internal controls, to the Sarbanes-Oxley Act. For public companies, the rest is history. For executives, Cooper's experiences challenging then-CEO Bernie Ebbers and then-CFO Scott Sullivan, brought to life in her new book, Extraordinary Circumstances (John Wiley & Sons, February), offer lessons that are as fresh today as when the scandal first broke.

WorldCom Whistle-blower Cynthia Cooper

Labels: Cynthia Cooper, whistleblower, WorldCom

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Tuesday, February 27, 2007

Phoning It In

What's the best way for an employee to blow the whistle on fraud or related infractions? The most popular way seems to be via hotlines or similar reporting tools. According to a joint report from the CSO Executive Council, an organization of corporate and government security executives, and The Network (a hotline provider), almost two-thirds of the nearly 200,000 reports it studied were made via hotlines without first alerting anyone in management.

Few of those alerts prove to be false alarms. The study, which tracked incidents at 500 organizations over the past four years, found that 65 percent of the reports were serious enough to warrant investigation, while 46 percent led to some type of action being taken. Corruption and fraud accounted for 10 percent of the incidents, well behind personnel-management situations (51 percent). Company and professional-code violations accounted for 16 percent and employment-law violations 11 percent.

Phoning It In

Labels: fraud, whistleblower

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Wednesday, January 17, 2007

Federal Court Rejects Fired Employee’s Sarbanes-Oxley "Whistleblower" Claim

Because the Sarbanes-Oxley Act (SOX) is still fairly new, federal courts are just now being asked to decide what kinds of activities will be considered "protected" for purposes of triggering a whistleblower claim under the statute. A Michigan district court managed to duck the issue recently when it held that, even assuming the former employee had satisfied the "protected activity" requirement, he had failed to establish a causal connection between those activities and his termination. See Sussberg v. K-Mart Holding Corp., 2006 WL 3313766 (E.D. Mich. Nov. 17, 2006).

SOX Whistleblower Protection

Employees of publicly traded companies who believe they have been subjected to retaliation because they engaged in "protected" whistleblower activity may assert a claim under the Sarbanes-Oxley whistleblower provision. SOX prohibits employer retaliation against an employee who provides information or assists in an investigation regarding conduct that the employee reasonably believes constitutes a violation of federal laws and regulations relating to fraud against shareholders. 18 U.S.C. § 1514A(a)(1). The burden is on the employee to demonstrate that the protected activity was a contributing factor to the adverse employment action.

Federal Court Rejects Fired Employee’s Sarbanes-Oxley "Whistleblower" Claim

Labels: law, whistleblower

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