Vannoy v. Celanese Corp.: Administrative Review Board Interprets Less Stringent Requirements for Sarbanes-Oxley Whistleblower Protections
In Vannoy v. Celanese Corp., ARB Case No. 09-118, the Administrative Review Board (“ARB”) reversed an Administrative Law Judge’s (“ALJ”) decision that Matthew Vannoy (“Vannoy”) had not alleged shareholder fraud and therefore could not rely on the whistleblower protections contained in § 806 of Sarbanes-Oxley (“SOX”). The ARB found that a claimant need only have a reasonable belief, alleged with sufficient facts, that the company was violating SOX. The ARB also dismissed the limitations that the ALJ read into the term “federal regulatory agency” in § 1514A of SOX and relaxed certain elements of a whistleblower action in order to more align them with Congressional intent.
According to the decision, Vannoy began working for Celanese Corporation in 2004 and became the program administrator of the company’s expense reimbursement program in early 2005. After finding what he viewed as misuse of company credit cards, Vannoy filed an internal complaint for violations of the business conduct policy on February 15, 2007. Shortly after, Vannoy received a performance bonus for a good review but was informed that his entire department was being outsourced.
In March, he filed an IRS complaint through its whistleblower rewards program. Vannoy secured Celanese Corporation proprietary and confidential documents in order to aid in the investigation. In October, Vannoy was suspended with pay for allegedly disregarding direction from his boss by confronting an employee about expense reimbursements. A subsequent examination of his company laptop revealed that Vannoy had emailed documents containing personal information, including social security numbers, of 1,600 Celanese employees to his personal email address, a violation of company policy. On November 5, 2007, Vannoy was suspended without pay. Vannoy filed a complaint with OSHA alleging a violation of the whistleblower provision of SOX.
To seek protection as a whistleblower under SOX, the plaintiff must establish that he or she "(1) engaged in activity or conduct that § 1514A protects; (2) the respondent took an unfavorable personnel action against him; and (3) the protected activity was a contributing factor in the adverse personnel action.” Vannoy v. Celanese Corp., ARB Case No. 09-118, at 9 (Sep. 28, 2011).
The ALJ dismissed the complaint, finding that Vannoy failed to allege either a “specific and definitive” violation of law by Celanese or conduct by Celanese that “amounted to actual fraud on shareholders.” In addition, The ALJ found that the IRS is not a “federal regulatory or law enforcement agency” as contemplated by §1514A and that Vannoy did not “suffer an unfavorable personnel action due to protected activity.”
The ARB reversed this determination. The ARB found Vannoy’s reasonable belief that the accounting discrepancies he uncovered were in “noncompliance with federal securities laws and fraud generally” was adequate. The ARB also reversed the ALJ’s determination that the IRS was not a “federal regulatory agency” under SOX finding no such limitation in the statutory language. It was enough that Vannoy reported the allegations to individuals who had the authority to investigate the misconduct.
The ARB found that Vannoy suffered an adverse employment action. In defining this element, the ARB stated “an adverse action… is simply an unfavorable employment action, not necessarily retaliatory or illegal.” This broad definition can include being put on paid administrative leave as well as non-tangible activity such as harassment or threats. The case was remanded to determine whether Vannoy suffered an adverse personnel action due to his engaging in protected activity.
The ARB noted that a temporal connection between the protected activity and the adverse action would be adequate. Further evidentiary hearings were also necessary to determine whether Vannoy’s sending of sensitive documents to his personal email was protected activity under SOX and whether the information was “the kind of ‘original information’ that Congress intended to be protected under either the IRS or SEC whistleblower programs.”
The primary materials for this case may be found on the DU Corporate Governance website.