Articles Posted in Banking Regulations

While we won’t say we told you so, the government has announced a slew of Sarbanes-Oxley violations since we wrote about board of director duties on our Massachusetts Employment Lawyer Blog.

The Sarbanes-Oxley Act of 2002 requires companies and boards of directors to obey financial regulations meant to avoid corporate collapses such as Enron and WorldCom. One thing we didn’t mention was whistleblower protections — which is where the government landed with both feet this month on a number of companies. 182576_whistle.jpg

  • The U.S. Department of Labor found Bond Laboratories Inc. and its former CEO in violation of whistleblower protection provisions. The company has been ordered to rehire the employee and pay about $500,000 in back wages, interest and other damages. The company was accused of firing the officer after he objected to sales figures that misrepresented the company’s value to potential investors.

The company has 30 days to appeal the decision which was issued Sept. 15 by the Occupations Safety and Health Administration.

OSHA enforces the whistleblower portion of the Sarbanes-Oxley Act as well as 20 other laws protecting employees who report violations of laws regulating airlines, consumer products, financial reforms, health care reforms, nuclear energy, commercial motor carriers, environmental, railroad and maritime laws.

Employees who report corporate wrongdoing — whether it’s fleecing the government or unfair labor practices — are generally protected from employer retaliation. Though it can often take a Massachusetts employment law attorney to assert your rights. In many cases, back wages and other damages are available to employees who prove they were wrongly terminated.

  • On Sept. 14, the government ordered Bank of America to pay $930,000 in back wages, damages and interest to an employee fired for reporting suspected Sarbanes-Oxley violations. The employee had worked for Countrywide Financial Corp., which was purchased by B of A. The employee headed internal reviews that found widespread mail and bank fraud by Countrywide employees. The employee said those trying to report the fraud to the company’s employee relations department were frequently retaliated against. Ultimately, the employee was fired shortly after the merger. “It’s essential that American’s workers do not have to fear retaliation when reporting wrongdoing,” said OSHA’s Dr. David Michaels.

For those serving as a corporate board member, these cases illustrate the need to ensure compliance with the law. Sarbanes-Oxley also allows for the personal liability of board members in some situations. The whistleblower statute makes it that much more likely that the government will ultimately find out.

As an employee, you need to understand your rights. In many cases, you are protected from retaliation when reporting a dangerous or illegal condition. However, consulting an experienced Boston employment lawyer is your best bet when it comes to ensuring that those rights are protected.
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CNN is reporting that the Securities and Exchange Commission is without the funding necessary to carry out mandates issued as part of the 2010 Wall Street reform act passed by Congress.

Our Boston bank attorneys continue to monitor issues arising from the so-called “reforms” passed by Congress. In this case, Congress promised a huge funding boost but has failed to pass a budget, which has left the SEC scrambling. In the wake of the Bernie Madoff scandal and the economic meltdown, regulatory agencies are under more pressure than ever.
Yet the lack of funding means banks and industry professionals may face scrutiny by an agency without the proper resources to ensure fairness and accuracy. In still other cases, consumers may be left without the protection promised in the wake of reform.
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The Dodd-Frank Act set up a whistleblower office at the SEC, which cannot hire or even fill vacancies. For now, the agency is staffing it by borrowing resources from the enforcement division, which could lead to inadequate investigative resources. And the personnel being imported are not necessarily the best for the job. CNN reports that Stephen Kohn, the director of the National Whistleblower Center, likened it to filling a baseball team with hockey and football players.

And it’s not as if the SEC was on top of its game before the crisis: It had been warned about Madoff numerous times over a period of 16 years and failed to stop him from perpetrating the biggest financial fraud scheme in U.S. history.

Democrats accuse Republicans of gutting the budget to take the teeth out of new financial regulations; Republicans counter that more money is not the answer. “Unfortunately, over the last decade the SEC’s budget has nearly tripled, yet it has repeatedly failed to stop the most egregious cases of fraud,” said Republican Ed Royce.
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