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Atlanta-based Company Paying Penalty for Violating Important SEC Whistleblower Protection Rule

Atlanta-based building products distributor BlueLinx Inc. is settling charges that it violated an important whistleblower protection rule by using severance agreements that required departing employees to waive their rights to monetary recovery should they file a charge or complaint with the Securities and Exchange Commission (the “SEC”) or other federal agencies.

BlueLinx has agreed to pay a $265,000 penalty per the SEC’s order.

According to the SEC’s order, BlueLinx’s restrictive provisions were an attempt to bar employees from filing charges against the company and to keep their mouths shut if the company ever committed any securities law violations.  The restrictive language in the agreements essentially forced employees leaving the company to waive possible whistleblower awards or risk losing their severance payments and other post-employment benefits.

In 2011, the SEC adopted Rule 21F-17, which prohibits any action that will impede someone from communicating with the SEC about possible securities law violations.  Its intention was to stop companies from contractually clogging whistleblowers’ whistles.  According to the SEC order, BlueLinx added the restriction at issue to all of its severance agreements in mid-2013, well after the adoption of Rule 21F-17.  Companies cannot implement strategies penalize whistleblowing and undercut key principles of the whistleblower program.

The Dodd-Frank Act established the whistleblower program in 2012, shoring up and establishing new rules like Rule 21F-17. The whistleblower program entices “whistleblowers” to come forth and help the SEC identify possible fraud and other violations much earlier than might have been possible, consequently reducing harm to investors, preserving the integrity of U.S. capital markets, and swiftly holding perpetrators of unlawful conduct accountable, according to the SEC Office of the Whistleblower website.

Additionally, the Act offers confidentiality, protection from retaliation, and rewards fraud tipsters for reporting wrongdoing that leads to an SEC enforcement action in which over $1 million in sanctions is ordered.  The award can range anywhere from 10 to 30 percent of the sanctions, according to the website.

Scott L. Silver, managing partner of the Silver Law Group, was an early proponent of the legislation and authored a primer on the SEC Whistleblower Program.  Our legal team includes former defense attorneys and government prosecutors now working to protect whistleblowers.

Silver Law Group and The Law firm of David R. Chase, P.A. are committed to the protection of whistleblowers through the whistleblower claim process and can prosecute your whistleblower claims.  If you have questions about your legal rights as a whistleblower, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.

 

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