SOX Whistleblowers Protection

PROTECTED ACTIVITY; ALLEGED FRAUDULENT POLICY OF SINGLE STORE FOUND NOT TO HAVE BEEN OF SUFFICIENT MAGNITUDE TO MATTER TO A REASONABLE INVESTOR

In Frederickson v. The Home Depot, U.S.A., Inc., 2007-SOX-13 (ALJ July 10, 2007), the ALJ found that the Complainant failed to establish a prima facie case of a SOX whistleblower complaint where he did not, under the facts presented, show that he had a reasonable belief of actionable fraudulent activity. Specifically, the Complainant maintained that he had a reasonable belief of fraud relating to the recording of items as damaged rather than for “store use,” whereby refunds for such merchandise were wrongfully extracted from vendors (the Complainant had used some hooks in his department, and was instructed to record them in the store computer as damaged). The ALJ found, however, that the Complainant had no reasonable basis to believe that this policy extended beyond the store at which he worked, and that such an alleged fraudulent policy, isolated to a single store, even if true, would not have been of sufficient magnitude to believe that a reasonable investor would rely on such information.

 Moral of story — to be covered by SOX your complaint has to be of a magnitude that it affects the financial condition of the entire company.  

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