Establishing Knowledge of SOX Protected Conduct
The second element of a SOX claim is knowledge of protected conduct. A whistleblower may establish employer knowledge by demonstrating that a supervisor or senior executive knew of the activity (actual knowledge) or that a person with knowledge of the disclosure influenced the official who decided to take the retaliatory action (constructive knowledge).
In a SOX retaliation suit against an employer, a whistleblower need only make a protected disclosure to someone who has either supervisory authority over them or authority to investigate and address misconduct. The supervisor’s knowledge is imputed to the final decision maker.[i]
SOX whistleblowers can demonstrate knowledge of protected conduct using the cat’s paw theory, i.e., by showing that the decision-maker followed the biased recommendation of a subordinate without independently investigating the reason or justification for the proposed adverse personnel action.
In Jayaraj v. Pro-Pharmaceuticals, Inc.,[ii] the employer was a start-up biotechnology company whose primary executives were a chief executive officer (“CEO”) and a chief operating officer (“COO”). The CEO testified that when he decided to terminate the complainant’s employment, he was unaware that she had engaged in protected activities. However, based on evidence that the CEO and COO worked closely together since the founding of the company, the ALJ found that the COO had likely told the CEO about the complainant’s protected activity.
The Supreme Court has held that a “cat’s paw” theory of causation can apply in retaliation cases. Staub v. Proctor Hosp., 562 U.S. 411, 419-22 (2011). A “cat’s paw” theory of causation applies when the protected activity has no bearing on the decision-maker, but does bear on the actions of a lower-level supervisor, who in turns influences or causes the decision-maker to take the adverse action. Id. at 415; see also Bobreski v. J. Givoo Consultants, Inc., ARB No. 09-057, ALJ No. 2008-ERA-003, slip op. at 16 (ARB June 24, 2011).
Yes. A decision denying summary judgment in Erhart v. BofI Holding, Inc., Dist. Court, SD California 2017 (Sept. 11, 2017) illustrates the type of evidence that can establish knowledge of protected whistleblowing:
Erhart must allege that BofI “knew or suspected that [he] engaged in the protected activity.” 29 CFR § 1980.104(e)(2)(ii); see also Tides, 644 F.3d at 814. This requirement is satisfied. Erhart alleges he reported much of the conduct he discovered to members of BofI’s management team—particularly VP Ball. Some of Erhart’s discoveries also made their way directly to SVP Tolla. As for Erhart’s “two whistleblower tips to the SEC,” he alleges that “BofI had knowledge of his whistleblowing.” (Id. ¶ 31.)
Further, the events that allegedly transpired around the time Erhart called off sick from work indicate BofI, at the minimum, “suspected that [he] engaged in the protected activity.” See 29 CFR § 1980.104(e)(2)(ii). These circumstances include BofI accessing Erhart’s work computer, BofI “going through all the documents” in Erhart’s locked file cabinets, SVP Tolla locating Erhart’s review of CEO Garrabrants’s personal accounts, BofI preparing a letter terminating Erhart, BofI’s alleged statements to the OCC about Erhart, and BofI’s general counsel demanding that Erhart “come to a conference room to speak” when he returned his work laptop. (See FAC ¶¶ 56-74.) If these allegations are true, a factfinder could draw the inference that BofI suspected or knew Erhart engaged in protected activity. Accordingly, Erhart’s pleading meets the second element of a prima facie case for whistleblower retaliation under Sarbanes-Oxley.
Sarbanes-Oxley (SOX) Whistleblower Protection Law
We represent corporate whistleblowers nationwide in high-stakes whistleblower retaliation cases and have obtained substantial recoveries for CEOs, CFOs, auditors, accountants, risk managers, CISOs, and other executives and senior professionals. We have recovered more than $15 million for corporate whistleblowers and have obtained settlements in excess of one million dollars in at least five SOX matters. Click here to read reviews from senior executives and professionals that we represented in whistleblower retaliation matters.
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We are also one of the leading law firms representing whistleblowers worldwide before the SEC, and indeed our attorneys represented whistleblowers at the SEC before the enactment of the Dodd-Frank Act. We helped shape the SEC rules implementing the SEC Whistleblower Program, and have represented whistleblowers in disclosing a wide range of violations of federal securities laws, including:
- Accounting fraud;
- Investment and securities fraud;
- Foreign bribery and other FCPA violations;
- EB-5 investment fraud;
- Manipulation of a security’s price or volume;
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- Hedge fund fraud;
- Unregistered securities offerings;
- Investment adviser fraud;
- Anti-money laundering program violations;
- False or misleading statements about a company or investment;
- Inadequate internal controls;
- Deceptive non-GAAP financial measures; and
- Violations of auditor independence rules.
See our recent article in Forbes: One Billion Reasons Why The SEC Whistleblower-Reward Program Is Effective. If you have information you would like to report to the SEC, contact an experienced SEC whistleblower attorney at Zuckerman Law for a free, confidential consultation by calling 202-262-8959.
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Qualifying for an SEC Whistleblower Award: Tips for SEC Whistleblowers
SEC Whistleblower Program and SEC Whistleblower Awards
Whistleblower Law Firm Representing Sarbanes-Oxley (SOX) Whistleblowers
We have assembled a team of leading whistleblower lawyers to provide top-notch representation to Sarbanes-Oxley (SOX) whistleblowers. Recently Washingtonian magazine named two of our attorneys top whistleblower lawyers. U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 Law Firm in the Washington D.C. metropolitan area.
The whistleblower lawyers at Zuckerman Law have substantial experience litigating Sarbanes Oxley whistleblower retaliation claims and have achieved substantial recoveries for officers, executives, accountants, auditors, and other senior professionals. To schedule a free preliminary consultation, click here or call us at 202-262-8959.
- Matt Stock is a Certified Public Accountant, Certified Fraud Examiner and former KPMG external auditor. As an auditor, Mr. Stock developed an expertise in financial statement analysis, internal controls testing and fraud recognition, and he uses his auditing experience to help whistleblowers investigate and disclose complex financial frauds to the government and obtain damages for retaliation. He is lead author of SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award.
- Both Bachman and Zuckerman served in senior positions at the Office of Special Counsel, where they oversaw investigations of whistleblower retaliation claims and whistleblower disclosures, and enforced the Whistleblower Protection Act.
- Eric Bachman has substantial experience litigating precedent-setting employment cases. His wins include a $100 million settlement in a disparate impact Title VII class action and a $16 million class action settlement against a major grocery chain. Having served as Special Litigation Counsel in the Civil Rights Division of the Department of Justice and as lead or co-counsel in numerous jury trials, Bachman is ready to go the distance to obtain the relief that you deserve.
- Bachman and Zuckerman served on the Department of Labor’s Whistleblower Protection Advisory Committee, which makes recommendations to the Secretary of Labor to improve OSHA’s administration of federal whistleblower protections.
- Jason Zuckerman was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2017, 2015, 2009, and 2007, selected by his peers to be included in The Best Lawyers in America® in the category of employment law (2011-2017), and selected by his peers to be listed in SuperLawyers(2012 and 2015-2017) in the category of labor and employment law. Zuckerman is rated 10 out of 10 by Avvo, based largely on client reviews, and rated AV Preeminent® by Martindale-Hubbell based on peer reviews.
- The firm has published extensively on whistleblower rights and protections, and regularly speaks nationwide at seminars and continuing legal education conferences. We blog about new developments in whistleblower law at the Whistleblower Protection Blog.
Client Testimonials from Executives and Senior Professionals in SOX Whistleblower Retaliation Matters
- “Jason is the consummate professional when it comes to SOX retaliation claims. He is, without question, one of the most deeply knowledgeable, technical, and astute attorneys in this very specialized body of law. During one of the most difficult times in my professional career, Jason not only provided exceptional legal guidance, but equally as important, he provided emotional support that was vital to my family and me. Jason ran circles around the “major national law firm” team that was assigned to defend my employer. In fact, Jason made them look silly at times. Jason always advocated my best interests, not his own. Jason is not only an exceptional attorney who helped my family to achieve a favorable outcome, but he is a friend. I’ve worked with major law firms throughout my career and when it comes to SOX and employment law matters, there is not a finer, more talented attorney than Jason Zuckerman.”
- “Jason is everything you could possibly ask for an an attorney: highly intelligent, thoughtful, and extraordinarily knowledgeable in his specialty of the law. In a very short period of time Jason was able to assimilate a laundry list of details and offer a compelling strategy on how to effectively proceed. Moreover, he is extremely responsive.”
- “Jason did an exceptional job in quickly understanding the intricacies of my case, grasping not only his field of expertise of employment law, but also the violations of law and SEC Regulations that were central to my dispute. The overall strategy he utilized insured that opposing counsel was challenged and made clear that this case would simply not proceed based on a timetable convenient to them. Jason is thorough, accurate and seemingly working at all hours based on phone calls and correspondence. Fortunately Jason has a very down to earth personality, understands issues readily and can convey in understandable language current “legal” circumstances and probable outcomes. I would easily and thoroughly recommend Jason for issues related to a Sarbanes-Oxley or employment related dispute.”
- “I selected Jason to handle my case after consulting with three other lawyers because of his extensive SOX experience and negotiation skills. My decision paid off as he easily surpassed all of my expectations. He quickly analyzed the merits of my case and aggressively engaged my former employer to reach a favorable settlement, avoiding years of potential litigation. He was responsive, professional, ethical and a great advocate on my behalf. I truly believe that I could not have found a better lawyer to represent my interests. He would be the first person I would recommend if a colleague or friend were to ever need similar services. Put simply, Jason is a top notch lawyer who works tirelessly to achieve a positive outcome for his clients. It’s easy to see why he is regarded as an expert in the field.”
- “Jason Zuckerman is the most focused, thoughtful and aggressive attorneys I have ever known, let alone had the pleasure to have on my side in a highly complex legal case. He brought well-honed legal insights and a rapid pace to our legal preparations. He forcefully brought those preparations to the opposing side, which gave them little choice but to engage with us until a positive settlement was reached. In addition, we found Jason to be extremely responsive at every step, even if it required working past midnight. His character is beyond reproach and his dedication through the entire process was unwavering. If I ever need someone in my legal court again, I won’t hesitate for even a second, before I seek Jason’s support.”