The Fourth Circuit affirmed a final order of the Administrative Review Board, finding that the termination of the former CFO of a public company did not violate the whistleblower protection provision of the Sarbanes-Oxley Act. The ex-CFO alleged that his termination stemmed from his repeated refusal to certify the company’s quarterly reports filed with the SEC. He argued that the reports were based on fraudulent accounting practices that he had brought to the company’s attention.

The Court noted that after the ex-CFO reported his concerns, he refused to meet with the board of directors to discuss them without his personal attorney present. After concluding that the ex-CFO’s charges lacked merit,the company terminated him for refusing to explain his charges. Thereafter, the ex-CFO filed a complaint with the Department of Labor under the whistle-blowing provision of the Sarbanes-Oxley Act. Although an Administrative Law Judge concluded that the ex-CFO’s rights were violated, the Administrative Review Board reversed, which led to the ex-CFO’s appeal to the Fourth Circuit.

The Fourth Circuit found that an employee asserting a claim under Sarbanes-Oxley’s whistleblower protection provision bears the initial burden of making a prima facie showing that he was retaliated against because he engaged in “protected activity.” In order to meet this burden, the employee must show that he had both a subjective belief and an objectively reasonable belief that the conduct he “blew the whistle on” constituted a violation of one of the laws enumerated in the statute (e.g., the federal securities laws). After determining that the employee had failed to demonstrate an objectively reasonable belief that the company’s accounting practices violated any federal securities law, the Court held that he could not make a prima facie showing that his activity was protected under the whistleblower protection provision and, accordingly, upheld the dismissal of the complaint. (Welch v. Chao, 2008 WL 2971800 (4th Cir. August 5, 2008))