A federal appeals court has ruled that anti-retaliation provision found in the corporate governance law known as the Sarbanes-Oxley Act ("SOX") does not protect employees who disclose potential legal violations to the media. In the case of Tides v. Boeing Company, two Boeing internal auditors were fired after admitting that they provided internal company information to a newspaper reporter. They later sued, claiming that their termination was illegal.

SOX is a federal law that requires companies to annually assess the effectiveness of their internal controls and procedures for financial reporting. SOX contains a whistleblower provision that protects employees who report company conduct that they reasonably believe constitutes a securities law violation or wire, bank or securities fraud to specified government officials.

Nicholas Tides and Matthew Neumann worked as auditors in Boeing's Information Technology SOX Audit group, which is responsible for ensuring the integrity of Boeing's IT controls for financial reporting. According to the court opinion, Tides and Neumann began separately to complain to management that supervisors were pressuring auditors to rate Boeing's IT controls as "effective." They also reported their belief that certain auditing practices were in violation of SOX. For example, they claimed that Boeing's software system allowed unauthorized users to alter its IT SOX audit results

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Richard S. Rosenberg

Partner

BRG&S, LLP

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Click Here to Read the Published Opinion - PDF

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