Litigants and regulators have debated the scope of protections provided to whistleblowers under the Sarbanes-Oxley Act ever since its enactment in 2002. Some tribunals have held that whistleblowers seeking protection under Sarbanes-Oxley must allege fraud with adverse effects on investors, and that allegations of fraud in the abstract would be insufficient to state a claim for relief. Others have suggested that no such showing is necessary to trigger the whistleblower protections of the act.
We will discuss in this month’s column two cases that addressed this issue but arrived at divergent conclusions. In Platone v. Flyi Inc., ARB Case No. 04-154, 2006 WL 3246910, at *7 (Dep’t of Labor Sept. 29, 2006), aff’d, Platone v. U.S. Dep’t of Labor, 548 F.3d 322 (4th Cir. 2008), cert. denied, 130 S.Ct. 622 (U.S. Nov. 16, 2009), the Administrative Review Board of the U.S. Department of Labor held that while complaints of employer fraud are not limited to fraudulent activity that directly or indirectly affect investor interests, “when allegations of mail or wire fraud arise under the employee protection provision of the Sarbanes-Oxley Act, the alleged fraudulent conduct must at least be of a type that would be adverse to investors’ interests.”
