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Does a SOX whistleblower need to prove that the employer’s reason for the adverse action is untrue?

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Where are SOX whistleblower cases litigated?

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Law Firm Representing Virginia, Maryland and Washington DC Employees in Non-Compete Litigation

When an employer sues a former employee for an alleged breach of a non-compete or non-solicitation agreement, the stakes are high.  The employer suing to enforce the agreement can potentially obtain an injunction enforcing the agreement and other damages, including attorney fees.  These cases can move at warp speed and an injunction can drastically alter the rights of the parties.

The non-compete attorneys at Zuckerman Law litigate non-compete disputes and advise clients in a wide range of industries on the enforceability of non-compete agreements.  The firm takes a practical approach aimed at enabling our clients to pursue their careers while mitigating risk, but also relishes the opportunity to combat heavy-handed attempts to block lawful competition.  Recently Wired magazine quoted Jason Zuckerman about a high-profile trade secrets lawsuit.U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area in the 2018 edition “Best Law Firms.” Click here to read reviews and testimonials from former clients.

To schedule a confidential consultation, click here or call us at (571) 288-1309.

 

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Virginia Law Disfavors Restrictive Covenants

Covenants that restrain trade are disfavored by Virginia courts.  Modern Env’ts, Inc. v. Stinnett, 263 Va. 491, 493 (2002).  Virginia courts employ a three-part test to determine whether the agreement is enforceable. The employer must show that the restraint

  1. is no greater than necessary to protect a legitimate business interest,
  2. is not unduly harsh or oppressive in curtailing an employee’s ability to earn a livelihood, and
  3. is reasonable in light of sound public policy.

Modern Env’ts, Inc. v. Stinnett, 263 Va. 491, 493 (2002).  Some of the issues courts will consider include:

  • Did the employee have access to confidential information that the employee can use to compete against the former employer? Access to “confidential information makes [a] covenant not to compete more reasonable.” Comprehensive Techs. Int’l, Inc. v. Software Artisans, Inc., 3 F.3d 730, 738-39 (4th Cir. 1993).
  • Does the non-compete prohibit a former employee from owning or working for any business similar to the type of business conducted by the former employer? “When a former employer seeks to prohibit its former employees from working for its competitors in any capacity, it must prove a legitimate business interest for doing so.”  Home Paramount Pest Control Companies, Inc. v. Shaffer, 282 Va. 412, 416 (2011).
  • Is the geographic scope reasonable? Where the geographic scope is indefinite or overbroad, the non-compete may be deemed invalid.

Strategies for Defending Against Non-Compete Litigation

For a summary of strategies for defending against non-compete litigation, click here.  Such strategies include:

  • File a Declaratory Judgment;
  • Challenge the validity of the agreement;
  • Assert the “Unclean Hands” Defense; and
  • Bring a Counterclaim of Tortious Interference with a Business or Contractual Relationship.

Virginia Employment Lawyers Representing Employees in Non-Solicitation Litigation

To determine whether a non-solicitation clause is valid and enforceable, a court will evaluate whether the “former employee had direct customer contact or substantial knowledge of the employer’s confidential information or methods of operation.” Lasership, Inc. v. Watson, 79 Va. Cir. 205, 210 (Fairfax 2009).  An overbroad non-solicitation agreement may be unenforceable.  For example, a court declined to enforce a non-solicitation agreement that prohibited a former employee from contacting any of the employer’s customers that had been invoiced in the year before the employee left for a period of two years because it “impose[d] an unreasonable burden on the employee to know all the customers invoiced.”  Lasership, 79 Va. Cir. at 210.

But where the restriction in a non-solicitation provision is limited “only to those clients who were contacted, solicited, or served by [the employee] while he was employed by [the employer],” the provision is likely enforceable.  Brainware, Inc. v. Mahan, 808 F. Supp. 2d 820, 828 (E.D. Va. 2011)

Representing Virginia Employees in Trade Secret Litigation

We represent employees in trade secret litigation, including cases where a former employer misuses trade secret litigation to block competition.  To prevail under the Virginia Uniform Trade Secret Act, the plaintiff must establish that (1) the information alleged constitutes a trade secret, and (2) that the Defendant misappropriated it. Microstrategy v. Bus. Objects. S.A., 331 F.Supp.2d 396, 416 (E.D.Va.2004).  A trade secret

  1. must maintain some independent economic value;
  2. not be known or readily ascertainable by proper means; and
  3. be subject to reasonable efforts to maintain secrecy.

Trident Products and Services, LLC v. Canadian Soiless Wholesale Ltd., 859 F.Supp.2d 771, 778 (E.D.Va.2012).

Is my non-competition agreement with my former employer enforceable?

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SEC Targets Disclosure Fraud

The SEC is consistently taking enforcement actions against companies whose public filings or communications have misled or deprived investors of material information. Investors need full, fair, and accurate disclosures to make informed decisions about investments.

Under the SEC Whistleblower Program, whistleblowers can obtain a reward for reporting original information to the SEC about violations of federal securities laws, including misleading or inadequate disclosures. We have successfully represented SEC whistleblowers that provided information to the SEC about disclosure fraud. 

The SEC has awarded nearly $1.3 billion in awards to whistleblowers. The largest SEC whistleblower award to date, $114 million, was issued to a whistleblower who provided the SEC with key information that led to a successful enforcement action.

If you have information that may qualify for an SEC whistleblower award or have suffered whistleblower retaliation, contact the Director of our SEC whistleblower practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959.

All inquiries are confidential. In conjunction with our courageous clients, we have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies and return funds to defrauded investors. Our SEC whistleblower lawyers have obtained multi-million dollar SEC whistleblower awards for our clients.  Read our tips for SEC whistleblowers.

On September 22, 2022, the SEC charged The Boeing Company and its former CEO with making materially misleading public statements following crashes of Boeing airplanes. According to the SEC’s orders, after the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was “as safe as any airplane that has ever flown the skies.” Later, following the second crash, Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of contrary information. Boeing and the former CEO entered into cease-and-desist orders that included penalties of $200 million and $1 million, respectively.

Gurbir S. Grewal, Director of the SEC’s Enforcement Division stated: “[P]ublic companies and their executives must provide accurate and complete information when they make disclosures to investors, no matter the circumstances. When they don’t, we will hold them accountable, as we did here.”

“Original Information” Based on Independent Analysis  

SEC whistleblower bounties and rewardsWhistleblowers must submit “original information” to be eligible for an award. This information may be derived from the whistleblower’s independent knowledge or independent analysis. Inadequate disclosure violations present an opportunity for individuals with in-depth market knowledge and experience to provide the SEC with information that may provide the springboard for an investigation.

For example, Regulation G and Item 10(e) of Regulation S-K govern the presentation of companies’ non-GAAP financial measures. These regulations require, among other things, that companies using a non-GAAP measure in their filings include:

  • A presentation of the most directly comparable GAAP financial measure, with that presentation having equal or greater prominence than the disclosed non-GAAP measure; and
  • A reconciliation showing the differences between the non-GAAP measure and the most directly comparable financial measure calculated in accordance with GAAP.

Accordingly, if an investor notices that either requirement is amiss from a company’s filings, he or she may submit a tip to the SEC and be eligible for an award. In early 2016, the SEC issued a $700,000 award to a whistleblower for his or her detailed analysis that led to a successful SEC enforcement action.

SEC Enforcement Actions Based on Deficient Internal Controls

There are many examples of SEC enforcement actions based on inadequate disclosures. These include actions for

As Warren Buffett has warned, companies are using non-GAAP numbers to artificially boost earnings. We expect to see an increase in SEC enforcement in this area of inadequate disclosures and have brought whistleblower tips to the SEC disclosing the use of deceptive non-GAAP financial measures.

For example, in December 2015, two JP Morgan wealth management subsidiaries agreed to pay $267 million to settle charges that they failed to disclose conflicts of interest to clients.  According to the SEC order, the investment advisory business and the bank invested clients in the firm’s own proprietary investment products without properly disclosing this preference. Morgan Stanley was fined $50 million for similar inadequate disclosures in 2003.

On February 14, 2017, the SEC fined groups of investors that failed to properly disclose ownership information during a series of campaigns to influence or exert control over microcap companies. In each of these campaigns, the groups collectively owned more than five percent of the companies’ outstanding common stock, yet the required ownership filings to disclose that information to the investing public were either incomplete, untimely, or altogether absent. The investors agreed to penalties ranging from $30,000 to $180,000.

On May 11, 2017, the SEC announced that the former CEO of MDC Partners, Miles S. Nadal, has agreed to pay $5.5 million to settle charges that his perks were not properly disclosed to shareholders. In public companies, all perks, benefits, and other forms of compensation paid to CEOs and highly compensated executive officers must be disclosed. According to the SEC’s order, Nadal obtained nearly $11 million in perks beyond his disclosed benefits and $500,000 annual allowance. This included Nadal’s personal use of private airplanes, charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks. Earlier in 2017, MDC Partners agreed to settle this disclosure failure for $1.5 million.

SEC Whistleblower Rewards and Bounties 

SEC Whistleblower TipsUnder the SEC Whistleblower Program, whistleblowers may be eligible for monetary awards when they voluntarily provide the SEC with original information about violations that leads the SEC to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.  Whistleblowers are eligible to receive between 10 percent and 30 percent of the monetary sanctions collected.

SEC Whistleblower Lawyers

The SEC Whistleblower Program also protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity. Furthermore, the Dodd-Frank Act protects whistleblowers from retaliation by their employers for reporting violations of securities laws.

Recently the Association of Certified Fraud Examiners published a profile of Matt Stock’s success working with whistleblowers to fight fraud:

SEC whistleblower lawyers

U.S. News and Best Lawyers® have named Zuckerman Law a Tier 1 firm in Litigation – Labor and Employment in the Washington DC metropolitan area in the 2022 edition “Best Law Firms.”

 

SEC Whistleblower Process to Obtain an SEC Whistleblower Award

Protections for SEC Whistleblowers

Drawing on substantial experience representing corporate whistleblowers in SOX whistleblower cases, our SOX whistleblower lawyers have published a free guide to SOX titled Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers:

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Securities Fraud Whistleblowers RewardIf you have original information about fraud that may qualify for an SEC whistleblower award, contact the Director of our SEC whistleblower practice at [email protected] or call our leading SEC whistleblower lawyers at (202) 930-5901 or (202) 262-8959. All inquiries are confidential.  This page has FAQs and other resources for prospective SEC whistleblowers.

sec whistleblower bountiesOur experienced and effective SEC whistleblower attorneys will provide SEC whistleblowers with the highest-quality representation. In conjunction with our courageous clients, we have helped the SEC halt multi-million dollar investment schemes, expose violations at large publicly traded companies, and return funds to defrauded investors.

In contrast to most SEC whistleblower law firms, our team includes a Certified Public Accountant and Certified Fraud Examiner with substantial experience auditing public companies and investigating complex fraud schemes.

 

Attorneys Representing SEC Whistleblowers

Tips for SEC Whistleblowers

SEC Whistleblower Process to Obtain an SEC Whistleblower Award

Protections for SEC Whistleblowers

Overview of the SEC Whistleblower Program

Whistleblowers Eligible for an Award

Reporting to the SEC and Maximizing Award Percentage

After Reporting to the SEC

To learn more about the SEC Whistleblower Program, download Zuckerman Law’s eBook: SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award:

SEC Whistleblower Program Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award

SEC Whistleblower Protection Lawyers

The SEC whistleblower protection lawyers at Zuckerman Law have represented CEOs, CFOs, in-house counsel, partners at audit firms and other senior professionals in high-stakes whistleblower matters.  Click here to read reviews and testimonials from whistleblower clients.

Drawing on our substantial experience representing corporate whistleblowers, we have published a free guide to SOX titled Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers:

Click here to learn more about anti-retaliation protections for SEC whistleblowers under the Dodd-Frank Act and Sarbanes-Oxley Act.

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