An amicus brief filed this week in the Supreme Court case, Digital Realty Trust Inc. v. Paul Somers, argues that the whistleblower protections outlined in the Dodd-Frank Act should apply to all whistleblowers, regardless of whether they report their concerns to the Securities and Exchange Commission or only internally to their employer.
The amicus brief was submitted by the Taxpayers Against Fraud Education Fund (TAFEF), a nonprofit dedicated to protecting and advancing whistleblower enforcement efforts by federal and state authorities. The Supreme Court has scheduled oral arguments in Digital Realty Trust v. Paul Somers for Nov. 28.
Somers, a former executive at Digital Realty, was fired after he reported to his company that his supervisor had removed internal controls and hid certain expenditures on a project in Hong Kong. He then sued Digital Realty, saying he was protected from retaliation by Dodd-Frank’s whistleblower rules.
Digital Realty argues that the law defines a whistleblower as someone who reports fraud to the SEC, which Somers did not do, and therefore he is not protected.
The District Court of Northern California sided with Somers, as did the Ninth Circuit Court of Appeals. The Supreme Court agreed to hear the case in part because the Ninth Circuit’s ruling added to a split among courts of appeals on the issue. While the Second Circuit in a separate case ruled similarly to the Ninth Circuit, the Fifth Circuit ruled in another whistleblower retaliation case that whistleblowers are only protected when they report to the SEC.
TAFEF’s amicus brief argues that the statute reflects Congress’s intent to encourage whistleblowers to to step forward and provide information to protect investors and the markets by providing whistleblowers both rewards and protections from retaliation and blacklisting. Digital Realty’s argument would deprive whistleblowers of the full set of protections Congress provided, including the right to remain anonymous when reporting to the SEC and would undermine Congress’s purpose.
When the SEC wrote the rules for its whistleblower programs, corporations strongly pushed the agency to require whistleblowers to report internally before going to the SEC. “Ironically, industry’s main argument that the Commission should require internal reporting was that whistleblowers would otherwise bypass internal compliance and go straight to the Commission to obtain an award,” the amicus brief reads.
“. . . Exactly this result, however, would follow from Petitioner’s reading of the statute — that employees must report to the Commission to benefit from the anti-retaliation protections of Dodd-Frank,” the brief concludes.