A U.S. federal district court issued a ruling strengthening corporate whistleblower protections. The court held that the Dodd-Frank financial reform act provides protection to employees of subsidiaries as well as those who work directly for the parent companies, and that the protection applies retroactively to cases that predate the enactment of Dodd-Frank.
The Sarbanes-Oxley Act of 2002, adopted in the wake of the collapse of Enron, prohibited retaliation by publicly-traded employers against employee whistleblowers. The Dodd-Frank act expanded that protection to employees of subsidiaries.
U.S. District Judge J. Paul Oetken took it a step further, ruling that the protection applies retroactively to cases that predated Dodd-Frank, on the ground that the amendment was just “a clarification of Congress’s intent” concerning whistleblowers (“US judge: Dodd-Frank beefs up protection for whistleblowers,” by Jonathan Stempel, Reuters).
The case before Judge Oetken was Leshinsky v. Telvent GIT SA et al, U.S. District Court, Southern District of New York, No. 10-04511. It involved Phillip Leshinsky, who had worked for the non-public Caseta subsidiary of Telvent GIT (a Spanish company), and sued over his alleged wrongful termination in July 2008.
Leshinsky alleged he was fired in retaliation for objecting to a fraudulent scheme in connection with Caseta’s bid for a Metropolitan Transportation Authority contract in the New York City area. Telvent denied that Leshinsky was fired because of whistleblowing activity, and denied the existence of the alleged scheme to defraud the MTA.
Without deciding the merits of the case, Judge Oetken stated that Congress considered it important to protect whistleblowers in order to root out financial fraud within “large, complexly structured” companies. “In light of the fact that corporate malfeasance can — and often does — occur within subsidiaries of a public company, and that such malfeasance was precisely what precipitated the passage of Sarbanes-Oxley, it is certainly reasonable to infer that, in enacting whistleblower protections, Congress intended to protect the employees of a corporation’s subsidiaries in addition to employees of the parent itself,” Judge Oetken was quoted as writing.
Quoting from an SEC filing in an unrelated 2011 case, Judge Oetken concluded: “[I]t seems quite unlikely” that Congress would distinguish between employees of parents and subsidiaries, “even though the consequences of his reporting misconduct would be exactly the same in both situations.”
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.