The federal Sarbanes-Oxley Act of 2002 (“SOX”) was enacted in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems, and WorldCom.  The Act’s “Whistleblower Protection for Employees of Publicly Traded Companies” provision protects whistleblower employees of publicly traded companies.  It provides that no publicly traded company, including officers, employees, contractors, subcontractors, or agents of the company, may “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment” because of any “lawful act” done by the employee to:

  • Disclose or assist in an investigation regarding conduct that the employee “reasonably believes” is a violation of federal mail fraud, wire fraud, bank fraud, securities fraud laws, any SEC rule or regulation, or any provision of federal law that relates to fraud against shareholders;
  • File, participate in, or assist with a proceeding relating to an alleged violation of federal mail fraud, wire fraud, bank fraud, or securities fraud laws; any SEC rule; or any provision of federal law that relates to fraud against shareholders. 18 U.S.C. § 1514A(a).

The Act does not require the employee to correctly identify fraud to receive its protections.   The employee need only have a reasonable belief that the conduct reported constitutes a violation of federal securities laws.   Further, private companies that plan to go public must also comply with 
SOX regulations.

I have conducted many whistle-blower investigations involving different state and federal statutes, but on SOX investigations, it may sometimes be necessary to bring in an experienced forensic accountant/CPA to work with you.  In such cases, I team up with a very experienced forensic accountant (CPA) in the San Diego area who has developed a highly efficient SOX compliance methodology, understands the complex issues involving Section 404 compliance, state of the art data mining and analysis tools, environment and process activity documentation, risk identification, control identification and deficiency detection, baseline testing, remediation, and many other related accounting issues.  

An employer facing a Sarbanes-Oxley whistle-blower claim will want to make sure to retain an investigative team possessing the right tools (employment law experience + forensic accounting experience) to conduct an accurate and thorough investigation of the allegations.