Criminal Exposure of Sarbanes-Oxley

Section 1107 provides that:

“whoever knowingly, with the intent to retaliate, takes any action harmful to any person including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense.”

This section of SOX is not limited to publicly traded employers. It appears to apply broadly to both individuals and corporations. The Section prohibits retaliation against persons who provide to a law enforcement officer “any truthful information” relating to the commission or possible commission of “any Federal offense.” Thus the information is not limited to matters involving corporate fraud or accounting abuses but can involve “any Federal crime“.

Section 1107 could create “land mines” for employers. For example, a report to a law enforcement official that a co-worker or supervisor engaged in any of the following activities would appear to be protected under this Section: (1) willfully creating dangerous working conditions in violation of OSHA laws; (2) violating one of the multitude of environmental laws; (3) copying or using software with out permission; (4) storing and/or transmitting indecent material via a company computer; or (5) the destruction of documents in response to notice of a governmental investigation.

Another concern for employers should be the risk of defending both a civil proceeding and a criminal proceeding under the Act, with a potential early communication to OSHA being the employer’s first required statement on the matter. The substantial resources required to defend against both proceedings simultaneously could result be a drain on the employer’s assets.

The final concern resulting from Section 1107 is the location of its codification at 18 U.S.C. § 1513(e). This section is specifically listed within the definition “racketeering activity” under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). The result of this is that Section 1107 will likely be a basis for asserting civil RICO claims in a whistleblower case.