I. INTRODUCTION 1
II. OVERVIEW OF SOX’S CIVIL WHISTLEBLOWER PROVISION 2
III. COVERED EMPLOYERS 3
A. Companies 3
B. Subsidiaries 6
C. Individual Liability 8
D. Former Employees, Applicants & Third Parties 9
E. Criminal Provision 9
IV. PROTECTED CONDUCT 10
A. 18 U.S.C. § 1514A(a)(1) 10
1. “Reasonable Belief” 10
2. Fraud 14
3. Materiality 15
4. Complaint to a Member of Congress 17
5. “Information” 17
6. “Authority to Investigate, Discover, or Terminate Misconduct” 17
B. 18 U.S.C. § 1514A(a)(2) 18
V. VIOLATIVE CONDUCT - RETALIATION 19
A. Statutory Language 19
B. Proof Issues 19
1. Prior knowledge, particularly by the decisionmaker, of plaintiff’s protected conduct. 19
2. Causal nexus. 20
3. Performance problems. 22
4. Previously planned decisions. 22
VI. PROCEDURES 23
A. Procedures and Burden of Proof 23
1. Filing of Complaint 23
2. Preliminary Prima Facie Showing 27
3. Notice Of Receipt 28
4. Notice to SEC 29
5. Respondent’s Statement of Position 29
6. Investigation and Determinations 30
7. Objections 31
8. Discovery and Hearing Before ALJ 32
9. Appeal to Administrative Review Board 38
10. Appeal to Court of Appeals 41
11. Removal to Federal Court on or after 180 Days 41
12. Burdens of Proof 43
13. Confidentiality 45
B. Retroactivity 46
C. ADR 46
D. Settlement Agreements 47
VII. REMEDIES 49
A. Civil 49
1. Equitable Relief 49
2. Attorneys’ Fees 49
B. Criminal 50
VIII. ATTORNEY OBLIGATIONS/ETHICAL ISSUES 50
A. SEC Rulemaking 50
B. Ethical Obligations, Outside and In-House Counsel 52
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002 (“SOX” or “the Act”), Pub. L. 107-204, 116 Stat. 802. Enacted in the wake of the Enron and WorldCom scandals, the Act was designed to restore investor confidence in the nation’s financial markets by improving corporate responsibility through required changes in corporate governance and accounting practices and by providing whistleblower protection to employees of publicly traded companies who report corporate fraud.