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Law Offices of Elizabeth “Booka” Smith, LLC Blog

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July 31, 2017: SOX's 15 Year Anniversary Marks Success for Wells Fargo Whistleblowers

July 31, 2017 marked the fifteen (15) year anniversary of the enactment of the Sarbanes-Oxley Act of 2002 (SOX). In the wake of the Enron and WorldCom financial fraud scandals, SOX introduced strict reforms to improve corporate financial disclosures and prevent accounting fraud. SOX includes an anti-retaliation provision, Section 806 (18 U.S.C. § 1514A), which prohibits publicly traded companies, their subsidiaries and their employees from retaliating against any employee who engages in “protected activity.” “Protected activity” under Section 806 includes, but is not limited to, providing information, causing information to be provided, or otherwise blowing the whistle on bank fraud. The US Department of Justice (DOJ), the US Securities and Exchange Commission (SEC), and private attorneys are successfully utilizing SOX to prosecute Wells Fargo in connection with a “phantom account” scandal which rivals the Enron/WorldCom scandals SOX was enacted to prevent. Wells Fargo’s “phantom account scandal” (which was revealed to the public in November, 2016) was predicated on large numbers of Wells Fargo employees opening accounts on retail customers’ behalf without their knowledge or permission. This practice (which Wells Fargo internally labeled a “best practice”) was the result of a highly pressurized sales culture at Wells Fargo that tacitly encouraged bank employees to make undisclosed and unauthorized sales of secondary accounts to customers in order to achieve sales goals. To date, the SEC has identified as many as two million (2,000,000) unauthorized (“phantom”) accounts. It is widely anticipated that Wells Fargo is on the verge of self-reporting that there are hundreds of thousands of additional “phantom accounts” beyond the 2M already discovered by the SEC. SOX Section 806 has been successfully utilized by private attorneys to secure reinstatement and monetary damages for Wells Fargo employees who spoke out against or otherwise blew-the-whistle on the widespread bank fraud. On July 29, 2017, the Occupational Health and Safety Administration (OSHA)(the federal agency where SOX Section 806 claims must initially be filed) awarded a former Wells Fargo Bank Manager $5.4M pursuant to SOX Section 806. The Bank Manager was terminated almost immediately after he called the Wells Fargo “hotline” and reported several instances of his direct reports committing bank fraud. The damages awarded to the former Wells Fargo Bank Manager by OSHA included substantial back pay (due to the employee being blackballed in the banking industry), compensatory damages, and attorney fees. The OSHA further ordered Wells Fargo to reinstate the Bank Manager to his former position and clear the employee’s personnel file of all references to alleged wrongdoing. This case is just one of many examples of private attorneys using SOX Section 806 to redress some of the wrongs created by the Wells Fargo “phantom account scandal.” The Law Offices of Elizabeth “Booka” Smith, LLC has significant experience representing executive employees in whistleblower retaliation cases, including cases arising under SOX Section 806. Booka Smith has successfully fought and is aggressively fighting prominent US corporations (including Wells Fargo) in whistleblower retaliation cases. If you are a current or former employee of a publicly traded company and are either contemplating blowing the whistle on your company for what you reasonably believe are SOX violations, or if you have and have been retaliated against because of your whistleblowing activities, CONTACT US to schedule an appointment for advice on your best course of action.

 

 

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