More on Why Sarbox Whistleblowers Don't Win

Lora Bentley

Not long ago, I talked to University of Nebraska College of Law professor Richard Moberly about the apparent failure of Sarbanes-Oxley's whistleblower provisions to actually provide protection to whistleblowers. According to a study he conducted last year, the problem is not in the provisions themselves.


The problem, he suggests, is that potential whistleblowers think what they are reporting is "protected activity" under Sarbox, when it isn't actually protected. The misconception began with the high-profile whistleblower from Enron, whose story was trumpeted around the world. Employees know that protection exists because everyone has heard Sharon Watkins' story. But they don't know exactly how far the protection extends -- or doesn't. Says Moberly:

...[E]mployees believe that they will be protected by the law if they report things like theft or fraud. In many cases, that's just not true. Or they believe they have some sort of "just cause" protection and they can only be fired for cause. The details and the twists and turns of what protects you and what doesn't don't make it to the normal employee.

The advice Moberly would offer those considering reporting questionable activity at their companies is this: Consult an attorney before disclosing anything to make sure that what you're about to disclose falls within the Sarbanes-Oxley provisions. That way, you'll know ahead of time whether whistleblower protection would be available, and you'll save yourself years of headaches.


This week, the Government Accountability Project is also speaking out on Sarbanes-Oxley's whistleblower provisions. FT.com quotes a GAP report as follows:

Access to jury trials has proved elusive, and other institutions . . . have engaged in systematic, hostile activism against the congressional mandate.

As an example of that activism, the story points to the pending case of former UBS financial adviser Timothy Flynn. Flynn argues that he was fired after cooperating with a state investigation into the Swiss bank's auction-rate securities sales. The Department of Labor has asked Flynn to prove that the UBS subsidiary that employed him is subject to the Sarbanes-Oxley whistleblower provisions.


"UBS did not raise the defense, and the agency's request to have us address that issue appears to be highly unusual," Flynn's attorney, Jason Archinaco, told FT.com.

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Add Comment      Leave a comment on this blog post
Sep 18, 2008 8:54 AM Richard Richard  says:
You've got to love a lazy attorney. The key provision that Mr. Flynn should be invoking (or more properly, his attorney should be arguing) is right there in Section 806 of th Act: "No company... that is required to file reports under section 15(d) of the Securities Exchange Act... may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee... because of any lawful act done by the employee to... assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation... when the information or assistance is provided to or the investigation is conducted by a... law enforcement agency."UBS is the parent company and is publicly traded in the US, and therefore must comply with the terms of US law. That's UBS' responsibility. As long as Mr. Flynn "reasonably believed" he was following the protected actions of the Sarbanes-Oxley Act, he should be covered.I am not an attorney, and this does not constitute legal advice. I'm just a reasonably intelligent person who thinks the law should be interpreted based on what it says. Reply

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