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 added.
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: