The Dodd-Frank Act protects any employee whistleblower—as long as he reports directly to the SEC. But a district court's recent decision in Egan v. TradingScreen Inc. may have created a loophole for internal reporting at a private company.

The plaintiff in this case, Patrick Egan, reported internally that he suspected the CEO was diverting company assets. The company hired outside lawyers to launch an internal investigation, and they released a report confirming Egan's allegations. But the CEO regained control of the board and fired Egan. Egan claimed that he qualified for Dodd-Frank protection because he and the lawyers were working jointly as whistleblowers. The court wrote that if Egan could prove the knowledge from the investigation was sent to the SEC, he might qualify for Dodd- Frank protection. The court granted Egan leave to amend his causes of action.

“This decision expands the reporting,” says Tammy Marzigliano, a partner at Outten & Golden. “The whole point of the Dodd-Frank Act is to capture corporate fraud, so the intent behind it is they want to be able to have these laws give protection, not close the door for people.”

The Dodd-Frank Act protects any employee whistleblower—as long as he reports directly to the SEC. But a district court's recent decision in Egan v. TradingScreen Inc. may have created a loophole for internal reporting at a private company.

The plaintiff in this case, Patrick Egan, reported internally that he suspected the CEO was diverting company assets. The company hired outside lawyers to launch an internal investigation, and they released a report confirming Egan's allegations. But the CEO regained control of the board and fired Egan. Egan claimed that he qualified for Dodd-Frank protection because he and the lawyers were working jointly as whistleblowers. The court wrote that if Egan could prove the knowledge from the investigation was sent to the SEC, he might qualify for Dodd- Frank protection. The court granted Egan leave to amend his causes of action.

“This decision expands the reporting,” says Tammy Marzigliano, a partner at Outten & Golden. “The whole point of the Dodd-Frank Act is to capture corporate fraud, so the intent behind it is they want to be able to have these laws give protection, not close the door for people.”