Sarbanes-Oxley and Dodd-Frank Doing their Job


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The goals of two pieces of legislation passed within the past decade that included new whistleblower protection standards seem to be accomplishing their goals in sending a message to companies nationwide.  No longer does it seem that insiders feel threatened to make the ethical decision to disclose potentially illegal activity to the federal government or appropriate institutions.  Recent settlements have also indicated that doing moral good can also lead to quite a good financial ending as well, providing even more incentive for blowing the whistle.

April, 2010 Complaint Filed

An April, 2010 complaint filed with The Occupational Safety and Health Administration (OSHA) by the former CFO of Clean Diesel Technologies Inc. has resulted in a $1.9 million payment by the company to its former employee after he blew the whistle on illegal activity surrounding a potential company merger.  The CFO believed that a conflict of interest existed involving the chair of the company’s board of directors that violated internal company controls mandated by the SEC.  It was found on September 30, 2013 by OSHA that the complaint filed by the CFO was correct and the company therefore was ordered to pay him roughly $1.9 million for lost wages, bonuses, stock options, severance pay, compensatory damages for pain and suffering, damage to career and professional reputation, as well as lost 401(k) employer matches and expenses.  To further expand upon the defense of the whistleblower, OSHA ordered the company to rid its system of all file related to disciplinary action against its former CFO.

While this exists as one specific example held under Sarbanes-Oxley, the SEC also recently announced on October 4, 2013 that it had awarded its largest “bounty” under Dodd-Frank since the bill’s inception.  An unidentified whistleblower was granted a $14 million bounty under Dodd-Frank, making it the third award of over $25,000 but by far the biggest to date.  This award as well as the one under Sarbanes-Oxley in the Clean Diesel Technologies Inc. case have sent a strong message to companies and employers nationwide.  In changing times that find whistleblower gaining both increased protection in the workplace as well as more incentive to report misdoings, employers must strive to strengthen their internal reporting measures.  One way of doing so being employed at many companies is to create an internal reward system similar to the one in Dodd-Frank in which whistleblowers are rewarded for reporting violations internally so that the company can address them from within.  The overall takeaway from cases such as these seem to “send a clear message to publicly traded companies that silencing those who try to do the right thing is unacceptable,” as said by Dr. David Michaels, the Assistant Secretary of Labor for OSHA.



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