Sarbanes Oxley - The Reach?

Posted 8:48 AM by Michael Fox

Earlier this year we learned that Sarbanes Oxley stops at the country's edge, SOX - Strictly Domestic According to 1st Circuit, but there remain lots of unanswered questions. The AP story, Lawsuit tests whistleblowers' protection, highlights one of them - what sort of complaints are protected? A North Carolina federal court is considering whether Donald Livingston's complaints that Wyeth's training and oversight procedures of its manufacturing process were faulty is protected activity under Sarbanes Oxley. The rub is that Sarbanes Oxley only protects employees who:

provide information ... regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.

What does that statutory gobbledy-gook mean? The answer provided by Law Professor Robert Vaughn of American University as quoted in the article, "The basic principle is this: Is the information something that investors and shareholders should know about?". If Professor Vaughn is right and his standard is interpreted expansively, it could bring any complaint about any practice of material size within the protective fold of Sarbanes Oxley.

OSHA, the agency charged with the enforcement of the whistleblowing provisions of Sarbanes Oxley, thought Livingston's complaints were not protected. But the District Court for the Middle District of North Carolina gets to make its own determination and has scheduled a hearing next Monday on Wyeth's motion for summary judgment. If you are keenly interested and would like to see the Motion and Response, you are out of luck since they were filed under seal. In my experience, a move almost certain to engender more interest and attention than anything you could possibly do.

Bet that as it may, once the Court issues its hopefully not sealed ruling on the Motion, we will have taken another small step along the way of finding out just how big Sarbanes Oxley will be.

Comments:

You'v got to be kidding. Congress, in its infinite wisdom, has assigned administration of SOX, which, by its terms, covers only whistle-blowing to protect shareholders, i.e., mail, wire, secrities fraud issues, and NOT included reports of violations of laws directed at protection of workers or consumers, and then assigned its administration and enforcement to OSHA, which presumably knows about those things but zip about securities regulation, mail and wire fraud, etc.?

Actually, no, you're probably not kidding. As my law school dean and prof John W. Wade used to say, quoting Will Rogers, "Every time Congress tells a joke, it's a law, and every time they pass a law, it's a joke!"

Who else could write and pass a law that protected employees whose tips protect wealthy investors and campaign contributors from losing money at the casino we call a stock market, but not infants from possibly dangerous vaccines due to bad management, and then assign its enforcement to an agency with expertise in real goods but not accounting and fraud?

Of course, a withdrawal and big class action lawsuit on behalf of babies given vaccine produced under the conditions described might impact the price of the maker's stock, but why would the law require that step in proof before a whistele-blower trying to protect infannts from personal injury, rather than gambler-investors from losses, or the courts, have to go through that sticky wicket to find out if they are protected?

This positively reeks of payoffs, bribery, and corruption.

peterschamberlain@earthlink.net

# posted by

Anonymous : 8:49 AM