By guest author Sercan Ercinler, who was born in 1987 in Istanbul, and currently lives in Vienna, Austria. He is a Certified Fraud Examiner (CFE) with a master’s degree in accounting and author of the two books: Corruption, Money Laundering and Financing of Terrorism (2017, English) and The U.S. Sarbanes-Oxley Act of 2002 and Internal Control (2016, Turkish).
Employees, who spare no sacrifice to report their organizations to competent judicial and/or administrative authorities because of the heir illegal activities, are widely appreciated by the public opinion in this day and age. According to the detailed information contained in the ACFE Reports to The Nations on Occupational Fraud and Abuse, the most common fraud detection method is tips from employees and some other parties such as customers or vendors when it comes to the financial crimes.
Whistleblowers come forward publicly when something illegal is going on in their organizations after they do not receive an acceptable reply through their organizations. This situation causes the risk of retaliation against a whistleblower by the employer. For this reason, authorities take legal measures to protect whistleblowers from retaliation.
Other than employer retaliation, whistleblowers face the risks of industry blacklisting, professional violations, legal consequences etc. Therefore, employees should get a legal counseling to minimize or eliminate the risks of being a whistleblower before reporting an illegal activity to competent authorities. Section 806 of the U.S. Sarbanes-Oxley Act of 2002 (the SOX Act), which is titled as “Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud” states that reports must be filed with some specific authorities in order for the reports to be handled properly. These authorities indicated in Section 806 are:
- a Federal regulatory or law enforcement agency;
- any Member of Congress or any committee of Congress; or
- a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct).
Otherwise, it will not be possible for the whistleblowers to be protected in accordance with the provisions of the SOX Act. A case which occurred in 2007 (Los Angeles Times, Two auditors not entitled to whistleblower protection, court rules, 4-May-2011) can be given as an example to the importance of legal counseling. The case involved two internal auditors assigned to assess Boeing’s compliance with stricter financial reporting regulations and safeguards imposed by the Sarbanes-Oxley Act. The two were fired after the Seattle Post-Intelligencer carried an article on July 17, 2007, headlined “Computer security faults put Boeing at risk.”
The story said Boeing had been unable for the previous three years “to prove it can properly protect its computer systems against manipulation, theft, and fraud.” These two auditors, Matthew Neumann and Nicholas Tides were not entitled to whistleblower protections because they leaked the information to a newspaper instead of the appropriate authorities indicated above.
Boeing legally fired Matthew Neumann and Nicholas Tides for the reason that they violated Boeing’s Company Principles:
- PRO-3439* prohibits the release of company information to the news media without prior review by companies’ communications department
- PRO-2227* considers information protection and
- PRO-1909* considers companies’ reputation and its relation with the elements of business environment such as customers, creditors, and shareholders.
This case proves the importance of legal counseling in whistleblowing issues.
SILVERMAN, Circuit Judge:
We hold today that by its express terms, the whistleblower provision of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A(a)(1), protects employees of publicly-traded companies who disclose certain types of information only to the three categories of recipients specifically enumerated in the Act—federal regulatory and law enforcement agencies, Congress, and employee supervisors. Leaks to the media are not protected
*Source: Tides and Neumann v. BOEING appeal of 2011 (13 pages, section OPINION)