Corporate and Accounting Fraud Attorneys
In response to the financial scandals involving Enron and Arthur Andersen, the U.S. Congress passed the Sarbanes-Oxley Act in 2002 – sweeping legislation designed to prevent the recurrence of widespread financial reporting fraud that distorts information investors rely upon. “SOX,” as it is popularly known, requires publicly traded companies to make certifications about their financial conditions, and imposes stiff penalties on companies and their officers for misrepresenting their finances to shareholders and would-be investors. The stated purpose of SOX is “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws,” and SOX mandates corporate responsibility, public disclosure, and improved methods of auditing and financial reporting to effectuate this goal.
“To prevent the recurrence of such chicanery in the future, Congress examined the ethical standards and accounting and reporting systems flaws and failures which, in some instances, allowed fraud to flourish. Intent upon reforming the regulatory and private sector enforcement which allowed the fleecing to take place, Congress was determined to reassure the markets that effective preventive and exposure measures could be formulated, and it turned, among other remedies, to a valuable deterrent resource it had used in the past to help insure compliance with its mandates: the employees within an organization who were willing to blow the whistle.”
SOX “prohibits discriminating against an employee for “provid[ing] information … regarding any conduct which the employee reasonably believes constitutes a violation of” a listed law.”
Section 806 of SOX prohibits covered employers from dismissing or discriminating against an employee who files, causes to be filed, testifies, participates in, provides information, or assists in an investigation regarding employer conduct that the employee reasonably believes constitutes a violation of:
- mail, bank, wire, or securities law;
- any rule or regulation of the Securities and Exchange Commission (“SEC”);
- any provision of Federal law relating to fraud against shareholders.
To qualify as an employer, the company must be publicly traded. That is, the prohibition of section 806 only applies to companies that either hold a class of securities registered under section 12 or are required to file reports under section 15(d) of the Securities Exchange Act of 1934, as well as “any officer, employee, contractor, subcontractor, or agent of such company.” If a plaintiff can successfully mount a whistleblower claim, both civil and criminal penalties may be sought.