Washington, DC., November 15, 2004. In a letter to the Chairman of the Securities and Exchange Commission (SEC), the principal sponsors of the Sarbanes-Oxley (SOX) whistleblower protection laws encouraged the SEC to criminally investigate Wall Street whistleblower cases.
These criminal penalties were incorporated into the SOX in order to
address the "corporate culture" which prevents employees from reporting
wrongdoing. The SOX law broadly authorizes the SEC to investigate
whistleblower cases, and provides strong penalties against corporations
which illegally retaliate against their employees, including steep
fines ($5,000,000.00 per violation) and criminal sanctions (up to
twenty years imprisonment) against corporations which illegally
retaliate against whistle blowers. The two Senators asked that the SEC
formally advise the Senate regarding the actions it has taken to
enforce the law.
In their letter, Senator Patrick Leafy (D-VT) and Charles Grassley
(R-IA) urged the SEC to utilize its broad enforcement powers to protect
whistleblowers: "In order for Sarbanes-Oxley to be effective, it must
be vigorously enforced and subject to vigorous oversight."
Senator Leahy and Senator Grassley's efforts were sparked by findings
made by the Department of Labor (DOL) in the case of Lawrence Hogan v.
Check Free Corporation. On July 16, 2004, the DOL issued preliminary
findings against Check Free, finding that Hogan made protected
disclosures regarding Check Free's deceptive business practices,
improper recognition of revenues, and fraud against shareholders.
Thereafter, on October 7, 2004 the DOL concluded that Check Free
violated the SOX whistleblower laws when it illegally terminated Hogan.
Hogan was awarded special damages and all legal fees. Check Free
appealed this order.
Kris Kolesnik, the Executive Director of the National Whistleblowers
Center (NWC) stated: "The Senator's letter constitutes a major step
forward in enforcing ethical standards on Wall Street. The SEC must
properly fulfill its duties under Sarbanes-Oxley and fully investigate
documented cases of retaliation." "The best way to prevent another
Enron scandal is to fully enforce the law, including criminal
prosecutions against corporate officials who illegally attempt to hide
misconduct by harassing and intimidating their own employees," Kolesnik
The following documents may viewed in pdf format by clicking the links:
The November 9, 2004 letter from Senators Leahy and Grassley to SEC
Chairman William H. Donald son and the July 16, 2004 and October 7,
2004 DOL determinations. Related articles: