Federal Court in District of Columbia Dismisses Whistleblower Claims of Former Fannie Mae Employee

On August 25, 2014, the District Court for the District of Columbia dismissed a claim brought by a former employee of Fannie Mae alleging violations of the anti-retaliation provisions of the Sarbanes-Oxley Act and the Dodd-Frank Act.

The former employee claimed he was terminated because he raised concerns that his supervisor was reporting fraudulent data to federal regulators. In granting Fannie Mae’s motion for summary judgment, the district court rejected the former employee’s claims.

The district court sided with previous rulings by the Administrative Review Board (ARB) that a potential whistleblower need not “definitively and specifically” relate his complaint to one of six enumerated categories in the Sarbanes-Oxley Act to qualify as a whistleblower. Rather, the district court adopted the ARB’s “reasonable belief” standard.

The former employee, however, failed to meet this standard for two reasons. First, he did not report the allegedly fraudulent activity at the time it occurred. The employer offered multiple avenues for reporting and the former employee was aware of them. The former employee did not claim the activity was fraudulent under after he was terminated. Second, the court found that the alleged fraudulent activity amounted to a computational error and was corrected as soon as it was discovered.

The decision shows the benefits for employers of (1) offering employees a variety of means to report suspected wrongdoing and (2) correcting errors quickly once they are identified. The decision also shows the continuing tension in the courts about the “definitively and specifically” standard.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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