Image of What are some types of proof to show that a disclosure is objectively reasonable?

What are some types of proof to show that a disclosure is objectively reasonable?

Proving that a Disclosure is Objectively Reasonable

Some of the options to prove that a disclosure was objectively reasonable include 1) showing that the SEC took enforcement action to penalize similar conduct; 2) offering testimony from co-workers to prove that other employees shared similar concerns about the unlawful conduct; and 3) offering expert witness testimony.

A 2016 unpublished Fourth Circuit decision in Deltek, Inc. v. Dep’t of Labor underscores the importance of coworker testimony in proving the objective reasonableness of a disclosure.[i] In this case, soon after starting a new job in the IT department of Deltek Inc., Ms. Gunther noticed a lack of clear procedure and documentation for Deltek’s billing disputes with Verizon Business. Ms. Gunther suspected that Deltek employees were subjecting Verizon to unfounded billing disputes in order to conceal a shortfall in Deltek’s telecommunications budget.

Ms. Gunther’s coworker, who was responsible for managing the billing relationship between Deltek and Verizon, agreed with her concerns, after which Ms. Gunther then reported to her immediate supervisor. Soon thereafter, Ms. Gunther began to experience hostility at work. She then escalated her concerns of ongoing fraud in a letter to Deltek’s general counsel, which she copied to the SEC. Deltek’s general counsel met with Ms. Gunther and asked her to gather information about her concerns. The general counsel then investigated Ms. Gunther’s report and found that no improper activity had occurred. Despite this, Ms. Gunther witnessed her coworkers shredding documents.

Eventually, Ms. Gunther was fired for being “confrontational and disruptive.” Deltek argued that Ms. Gunther’s belief that Deltek was violating securities laws was not objectively reasonable because she lacked the education and experience necessary to recognize securities fraud; she, in fact, did not have a college degree. The Fourth Circuit rejected this argument, stating that a determination of the reasonableness of Ms. Gunther’s belief warranted consideration of the “factual circumstances,” including information that Ms. Gunther learned from coworkers. The court agreed with the administrative law judge’s (ALJ’s) determination that “in forming her belief Gunther reasonably relied on her close dealings with [her coworker], who did have extensive experience in Verizon invoicing . . . [and] who was himself a ‘credible, convincing witness at the hearing.’” Therefore, the Fourth Circuit held Ms. Gunther’s belief that Deltek was violating securities laws as reasonable.

[i] See Deltek, Inc. v. Dep’t of Labor, Admin. Review Bd., No. 14-2415, 2016 WL 2946570 (4th Cir. May 20, 2016).

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