SOX Whistleblowers Protection

PROTECTED ACTIVITY; REPORTS OF MAIL OR WIRE FRAUD NEED NOT BE LINKED TO FRAUD AGAINST SHAREHOLDERS TO BE PROTECTED UNDER THE SOX

In Reyna v. Conagra Foods, Inc., No. 3:04-CV-00039 (M.D.Ga. June 11, 2007), the Plaintiffs (who were employees in the Defendant’s HR Department) contended that the Defendant violated the whistleblower provision of the Sarbanes Oxley Act when they were terminated for reporting two incidents of fraud: (1) a fraudulent insurance scheme in which a supervisor falsely requested that individuals he identified as his wife and son (who were in fact his sister and nephew) be added to his company provided health insurance as dependents, and (2) an instance in which a HR supervisor and a benefits coordinator provided a fake social security card for an employee in order to satisfy the I 9 requirements of the immigration law. The Plaintiffs contended that these fraudulent activities necessarily involved the use of mail or the internet, and thus the reporting of the activities was protected under the SOX. The Defendant filed a motion for summary judgment arguing that the reporting was not protected activity because the reports of mail fraud and wire fraud did not relate to “fraud against shareholders.” Employing principles of statutory interpretation, the court denied summary judgment, holding: The statute clearly protects an employee against retaliation based upon that employee’s reporting of mail fraud or wire fraud regardless of whether that fraud involves a shareholder of the company. The Court rejects Defendants’ interpretation that the last phrase of the provision, “relating to fraud against shareholders,” modifies each of the preceding phrases in the provision. Defendants seek to redraft the statute to read that the employee is protected only if he reasonably believes that the conduct constitutes a “violation of section 1341 [mail fraud] ‘relating to fraud against shareholders,’ section 1343 [wire fraud] ‘relating to fraud against shareholders,’” etc.Slip op. at 39.

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