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The Securities and Exchange Commission has gotten involved in a whistleblower lawsuit against Siemens by a former employee. The lawsuit is being brought under the anti-retaliation provision of the Dodd-Frank Act.

Corporations have increasingly argued that employees who wish to make claims have to go to the SEC and cannot have only reported fraud or misconduct internally. In fact, the Fifth Circuit Court of Appeals ruled in favor of General Electric in a recent whistleblower retaliation lawsuit and accepted this corporate interpretation of the law.

The SEC’s filed brief makes it clear that internal disclosures or reports to a company’s general counsel “regarding evidence of a material violation of the securities laws” are covered. Any internal reports to an “audit committee” that concern “questionable accounting or auditing matters” are covered. Any internal reports to a “supervisor or compliance official” that concern “possible securities fraud, wire fraud, bank fraud or mail fraud” are covered. (All of these disclosures are protected under the Sarbanes-Oxley law, which Dodd-Frank reaffirmed.)

When the SEC was developing the whistleblower protection provisions in Dodd-Frank, the agency sought to ensure that employees were not incentivized to go outside the agency and report wrongdoing to the SEC before they tried to address the corruption internally. They made sure the monetary award for whistleblowers was not inflated to an extent where employees could be cast as opportunistic individuals informing on corporations for cash.

When Dodd-Frank whistleblower protection provisions were being debated, corporations argued individuals should report internally and not go to a government agency.

Susan Hackett, a vice president and general counsel for the Association of Corporate Counsel (ACC), argued, “Basically, regulators have moved from an interest in protecting whistleblowers and facilitating their reports toward a system that establishes huge potential rewards for bounty hunters who don’t have interest or investment in making sure their company is doing the right thing, but rather are rewarded only when the company can be shown to do the wrong thing.”

ACC had 260 in-house legal executives sign a letter that condemned the SEC for encouraging employees “to find a way to profit from corporate wrongdoing” and “to focus on timing their report so as to maximize the bounty they’ll receive, potentially allowing misconduct to fester.” The ACC suggested what the SEC was proposing was an “end-run” to internal investigations.

“From our perspective and based on the traditional understanding of the term, an individual who merely learns of a problem and heads for Door Number 1 to recover a large award is not a whistleblower,” the ACC plainly stated. And the story that corporations told the SEC was that these whistleblower protections would undermine internal reporting mechanisms.

Most whistleblowers report fraud or misconduct internally and do not go outside the corporation. The Ethics Resource Center did a study in 2011 that found “only 18% of whistleblowers reported externally and 84% of those did so after trying to report internally first.” The study found “only 2% of employees solely went outside the company and never reported the wrongdoing they observed to their employers.”

This study additionally found that employees were afraid to become “government sources” and go to an agency like the SEC with evidence of fraud. Those who reported to the government did so if they were “financially secure” and could risk losing their job.

Corporations are well aware of this reality. What they would like to do is convince courts that the SEC did not want to protect more than 80% of whistleblowers. They are parsing language and maintaining the SEC only wanted to protect people who reported evidence of crimes to them.

The SEC knows corporations are engaged in a calculated effort to gut the provisions they worked on with representatives of some of these same corporations. The agency is responding with clear opposition in this lawsuit because corporations are now making arguments that are the opposite of what they argued when the law was written.

This effort to neutralize whistleblower protections in Dodd-Frank is cunning and blatantly opportunistic, but, for what it’s worth, the SEC at least has the decency to stick up for whistleblowers as corporations wage this battle.