Two partners from a self-described law firm that specializes in the representation of whistleblowers have sent a letter to the SEC Commissioners complaining about the use of severance agreements to prevent employees from participating in the SEC whistleblower program. The letter complains about contractual clauses inserted in severance agreements with departing employees such as:
Employee agrees that he will not use or disclose any Company information at any time subsequent to the execution of the Agreement, except as required by law. Company information does not include information or knowledge which Employee is required to disclose by order of a governmental agency or court after timely notice of the order has been provided to the Company.
Employee represents that he has not filed any lawsuit, claim, charge, or complaint regarding the Company with any local, state, or federal agency, self-regulatory organization, or court.
Employee hereby irrevocably assigns to the federal government, or relevant state or local government, any right Employee may have to any proceeds, bounties or awards in connection with any claims filed by or on behalf of the government under any laws, including but not limited to, the False Claims Act and/or the Dodd-Frank Act (and/or any state or local counterparts of these federal statutes or any other federal, state or local qui tam or “bounty” statute) against the Company. Employee also represents and promises that Employee will deliver any such proceeds, bounties or awards to the United States government (or other appropriate governmental unit).
Employee will inform the Company within ten (10) days of receipt of a subpoena or inquiry requesting information relating to the Company and will cooperate with the Company in any investigation, regulatory matter, arbitration and/or any third-party lawsuit in which the Company is a subject or party.
The letter requests the SEC issue a regulation or an opinion clarifying the breadth of actions that the SEC views as likely to “impede” communication with the SEC under the whistleblower program. The law firm believes this would stem the growth of what they believe is an apparent effort to discourage whistleblowers from providing information to the SEC.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.