When a corporation speaks through a public filing or informally, e.g., by issuing a press release, the half-truth doctrine requires the corporation to include all additional information necessary to make the statement not misleading. See 17 C.F.R. §§ 230.408, 240.12b-20 (public filings). See also Craftmatic Sec. Litig. v. Kraftsow, 890 F.2d 628, 641 (3d Cir. 1989) (incorporating the requirement into the 10b-5 context). A statement violates Rule 10b-5 if it would give reasonable shareholders a “false impression” of the relevant facts. SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 862 (2d Cir. 1968).
Many cases have found that the duty to complete a half-truth exists even where the omitted information is unlawful – but uncharged – conduct. See, e.g., In re Marsh & McLennan Cos. Sec. Litig., 501 F. Supp. 2d 452, 469 (S.D.N.Y. 2006); In re Sotheby’s Holdings, Inc., No. 00 Civ. 1041(DLC), 2000 WL 1234601, at *4 (S.D.N.Y. Aug. 31, 2000); In re Par Pharm., Inc. Sec. Litig., 733 F. Supp. 668, 675 (S.D.N.Y. 1990) (“The illegality of corporate behavior is not a justification for withholding information that the corporation is otherwise obligated to disclose.”); Ballan v. Wilfred Amer. Educ. Corp., 720 F. Supp. 241, 249 (E.D.N.Y. 1989) (“The fact that a defendant’s act may be a crime does not justify its concealment.”).
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Guide to Sarbanes-Oxley Whistleblower Protection
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. Earlier this year, a former in-house counsel at a biotechnology company recovered $11 million in a SOX whistleblower retaliation case alleging that the company fired him for disclosing violations of the Foreign Corrupt Practices Act.
On the fifteenth anniversary of SOX, leading whistleblower law firm Zuckerman Law released a free guide to the SOX whistleblower protection law: “Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.” The guide summarizes SOX whistleblower protections and offers concrete tips for corporate whistleblowers based on lessons learned during years of litigating SOX whistleblower cases.
The goal of the guide is to arm corporate whistleblowers with the knowledge to effectively combat whistleblower retaliation, avoid the pitfalls that can weaken a SOX whistleblower case, and formulate an effective strategy to obtain the maximum recovery
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