SOX Whistleblowers Protection

PROTECTED ACTIVITY; CASE INVOLVING IN-HOUSE PATENT COUNSEL.

In Van Asdale v. International Game, Technology, No. 3:04-CV-00703-RAM (D.Nev. June 13, 2007), the Magistrate  concluded that under SOX, an employee’s act must implicate securities fraud definitively and specifically. The court found that “implicate” in this context does not mean merely to “imply,” but “‘to bring into intimate or incriminating connection’ See Webster’s Third New International Dictionary, Unabridged, 1135 (entry for ‘implicate’).” Slip op. at 10. The Magistrate Judge stated that a better synonym for “implicate” in this context would be “incriminate” or “accuse.”

The Magistrate found that:

• the whistleblower must “reasonably believe” that there has been a SOX violation,
• the reasonableness threshold is intended to include all good faith and reasonable reporting of fraud, and there should be no presumption that reporting is otherwise, absent specific evidence,”

• the “reasonable person” standard should be applied,

• in order for an employee to reasonably believe that a violation occurred, he or she must have a subjective and objectively reasonable belief that fraud occurred,

• under the subjective portion of the reasonableness requirement the employee must actually believe that the employer was in violation of the relevant law or regulations,

• under the objective portion of the reasonableness requirement the employee’s belief must be objectively reasonable,

• reasonableness is “determined on the basis of the knowledge available to a reasonable person in the circumstances with the employee’s training and experience.”

Slip op. at 14-15. In Van Asdale, the Plaintiffs, who were in-house intellectual property attorneys for the Respondent, alleged that they met with the Defendant’s General Counsel to express their views on the invalidity of a patent held by a company which the Defendant was considering acquiring by merger, and to express concern that fraud had occurred. In regard to the objectively-reasonable belief element, the Magistrate rejected the Defendant’s argument that fraud would have only occurred if the target company had intentionally failed to disclose documents bearing on the invalidity of the patent, and that the Plaintiffs therefore could have only had an objectively reasonable belief if they ruled out other non-fraudulent explanations for the non-disclosure. The Magistrate found that SOX does not require an attorney whistleblower “to investigate and rule out other possible explanations for what appears to be fraud before ever reporting the apparent fraud to any one at the company.” Slip. at 16.

SOX whistleblowers

whistleblowers help

whistleblowers protection

wrongful termination