Director of SEC whistleblower office to staff: I want to pump you up* to find whistleblower retaliation cases
According to Law360, the director of the SEC’s whistleblower office, Sean McKessy, is exhorting the staff of that office to set a high priority on cases involving employer retaliation for whistleblower complaints. During an interview, McKessy “said his office was actively looking for cases to bring against errant employers.” The article reports that McKessy has been “acting as a ‘cheerleader’ for the agency’s anti-retaliation powers,” encouraging competition among staff members to find whistleblower retaliation cases. So far, the office has brought only one retaliation case, but “staff members are ‘on the hunt’ for the next big case.”
Looking for potential retaliation is now often part of the investigation of the underlying fraud case: “’It’s fair game to ask what happened to the employee that reported it….Ask if you have an internal hotline, anybody who reported this type of conduct; give us their personnel records.’ While many companies may tout perfect compliance programs on their websites, McKessy said he was more interested in what happens to employees who speak up. ‘If it turns out that everybody who reports something ends up getting demoted, or is now in a different office or is gone, it doesn’t matter if your website says, ‘We encourage our employees to come forward,’ because the employees are going to know what’s happening,’ he said.”
The whistleblower office is “also on the hunt” for instances involving “illegal” severance, employment or confidentiality agreements. Companies may want employees to report violations internally before reporting to the SEC, but that could be problematic if the language of the agreement crosses the “fine line” from “encouraging” to effectively “forcing” internal reporting to the exclusion of reporting to the SEC, even if the prohibition on external reporting is not explicit. McKessy refused to be specific in the interview, adding that “’[y]ou’ll see it when we bring it….We are going to bring cases that will show there is language out there.” However, McKessy has provided one example of offending language in prior remarks. As previously reportedby Law360, McKessy has cautioned against offering incentives to employees that preclude SEC reporting: “’[W]e are actively looking for examples of confidentiality agreements, [separation] agreements, employee agreements that … in substance say ‘as a prerequisite to get this benefit you agree you’re not going to come to the commission or you’re not going to report anything to a regulator.’” In those instances, he commented, both the company and the individual drafter of the agreement could be at risk. According to McKessy, improper contract provisions are “’now the new thing that I’ve got people really enthusiastic for.’”
*For those of you too young to remember SNL’s Hans and Franz as the Governator.