Sarbanes Oxley Whistleblower Cases

Something that cannot be denied is that popular culture has effectively glorified whistleblowers and has put them on a pedestal as heroes. In today's times employees feel more courage to expose a malpractice on the part of their employer. There is now an increasing attempt to address this form of litigation.

The Sarbanes-Oxley Act was passed in the year 2002. It was as a response mechanism to a slew of scandals related to corporate accounting. Many of these scandals shook up the financial markets and so the Sarbanes-Oxley Act was introduced to create tougher standards on financial reporting.

Congress began to implement the most extensive whistleblower protections for the publicly traded companies. The employees who belong to such companies are well protected from retaliation when they report on a very wide category of legal violations. These violations could be primarily relating to any form of financial misconduct, fraud, securities violations or more.

The very first adverse Sarbanes-Oxley decision was issued in the year 2005 and it involved a company that was in fact quite far displaced from Wall Street. It was brought on by David Welch who was the CFO of a holding company for numerous small town banks situated in the Blue Ridge Mountains. More often than not, even a single share never changed hands. The audit committee of the bank actually consisted of three farmers, a school official and a local dentist. What Welch did was that he brought a number of irregularities in accounting to the attention of the president of the bank. He claimed that these were issues that needed to be addressed. When he was asked to certify the financial reports belonging to the company, Welch refused. He was then terminated on grounds of insubordination.

Welch then went on to file a claim with the Department of Labor. However, his claim was dismissed. On appeal he won in the court of a federal Administrative Law Judge. In complete disbelief, the lawyer representing the bank was quoted in the local newspaper as stating that the law had never been intended to protect employees in the face of a dispute with management. He said that it was actually intended to remove corruption in big companies that have a large employee base. This should give you a perspective of Sarbanes Oxley whistleblower cases.

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