A
company human resources officer and member of the pension plan committee alleged
sufficient facts about the underfunding of the pension plan to support a
Dodd-Frank Act whistleblower claim based on his intra-corporate communications
and external communications to the SEC, ruled a federal judge. The employee alleged sufficient facts to infer
that he possessed a reasonable belief that he was reporting a possible
securities law violation. In a letter to the SEC, the employee informed the Commission
that the company had failed to submit its 2009 amendment to the pension plan to
its board of directors for approval and had failed to file its amendment with
the SEC. (Kramer v. Trans-Lux Corp, DC
Conn., No. 3:11cv1424 (SRU), Sept 25, 2012).
Although the company argued that it actually filed
a Form 10-K/A with the SEC on the date of the 2009 amendment to the plan and thus
there had been no violation, the court noted that in order to qualify for
whistleblower protection the employee need not demonstrate that there has been
a violation, but only that he reasonably believed there had been such a
violation. The court found that the language of the employee’s internal communication
to the audit committee, and in the letter to the SEC, raising his concerns
demonstrated that he may have reasonably believed the company to be committing
violations of SEC rules or regulations.
In Section 922, the Dodd-Frank Act defines a
"whistleblower" as any individual who provides information relating
to a violation of the securities laws to the Commission, in a manner established,
by rule or regulation, by the Commission. In order to have provided information
in the manner provided by the SEC, an individual would have either had to
submit the information online, through the Commission's website, or by mailing
or faxing a Form TCR. Mailing a regular letter is insufficient.
Thus, the company argued that the employee is not
be entitled to sue under the retaliation provision of the Dodd-Frank
whistleblower statute because he has not provided information to the SEC in the
manner required by the SEC, and is therefore not a whistleblower. The court rejected this reading
as inconsistent with the goal of the Dodd-Frank Act, which was to improve the
accountability and transparency of the financial system, and create new
incentives and protections for whistleblowers. The court did not believe that it
is unambiguously clear that the Dodd-Frank Act's whistleblower retaliation
provision only applies to those individuals who have provided information
relating to a securities violation to the Commission, and have done so in a
manner established by the Commission. In the court’s view, the company’s
interpretation would dramatically narrow the available protections available to
potential whistleblowers.
The court also rejected the company’s claim that the
employee’s disclosures were not required by Sarbanes-Oxley, and thus not
entitled to whistleblower protection Section 922 protects disclosures that are
required or protected under the Sarbanes-Oxley Act, the Securities Exchange Act,
and other rules or regulations that fall under the SEC's jurisdiction. The
language of this section indicates that disclosures that are protected under
Sarbanes-Oxley's whistleblower provision are also protected under the Section
922, the Dodd-Frank Act's whistleblower provision.
Sarbanes-Oxley protects persons who disclose
information they reasonably believe constitutes a violation of SEC rules or
regulations, when the information is provided to, among others, a person with
supervisory authority over the employer or such other person working for the
employer who has the authority to investigate, discover, or terminate
misconduct. The employee alleged that he internally provided information to a
person with supervisory authority over him, and to the audit committee, which
may have had the authority to investigate, discover, or terminate misconduct.
Sarbanes-Oxley's whistleblower protections also extend to persons who disclose
information to a federal regulatory agency.