Whistleblowers who leak to media, not protected by law says appeals court

Paula Duffy's picture

Boeing Co. auditors who exposed the company's unlawful financial reporting practices to media sources, were wrong to do so said the U.S. Federal Ct. of Appeals for the Ninth Circuit.

A unanimous decision by a three-judge panel of the Ninth Circuit court upheld a dismissal of the case at the trial level, and spelled out in great detail how the auditors overstepped the bounds of protection for whistleblowing.

Under the federal accounting law of 2002, the Sarbanes-Oxley Act (SOX) employees of publicly traded companies are afforded protection when they disclose what they believe to be fraudulent or negligent reporting to the SEC and other federal agencies, The Ninth Circuit decision spells out the difference between alerting the proper regulatory or law enforcement agencies supplying information to media sources.

The two Boeing internal auditors, Michael Neumann and Nicholas Tides, were in the process of reviewing the company's required public filings in light of the stricter standards set forth in SOX. They were fired in 2007 when proprietary information belonging to Boeing found its way into a Seattle, Washington newspaper.

The two were caught after an internal investigation revealed that they used company computers to transmit data by way of email to the Seattle Post-Intelligencer. The men filed suit for wrongful termination and claimed protection under current federal law. There is another statute named the Whistleblowers Protection Act that covers only federal employees when they disclose information to any source and are fired as a direct result of their actions.

The federal appellate court ruled that SOX is meant to protect those who work in "a culture supported by law, that discouraged employees from reporting fraudulent behavior not only to the proper authorities such as the FIT and the SEC, but even internally." The three-judge panel's decision went further as it pertained to the actions of the two Boeing employees.

The transmission of the information believed to be in violation of reporting requirements can be made under the law "only to individuals and entities with the capacity of authority to act effectively on the information provided."

Neumann and Tides were rightfully terminated by Boeing the court ruled, for violating the company's employee guidelines that prohibited disclosures that weren't authorized by responsible managers. The men claimed protection under SOX because the information published in media would get into the hands of the proper government enforcement agencies, albeit in an indirect manner.

The panel of judges did not seem troubled that the ruling would have a chilling effect on others similarly situated, because the tenets of SOX are sufficient to protect legitimate whistleblowing activity. It is unknown at the present time if the case will be taken up by the full Ninth Circuit bench. In the case of a unanimous ruling that affirmed a lower court dismissal, it is unlikely but not out of the question that attorneys for the two men will make an attempt to do so.

Image credit: Wikimedia Commons

Comments

Submitted by Peter Remmel (not verified) on
Wow, how is this in the public interest? Sites like officeleaks.com are going to become so important. Being anonymous is the only way to say what needs to be said.

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