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A whistleblowing ex-stockbroker at Bank of America Corp. in Sarasota, Fla., may provide clues to the breadth of the 2002 Sarbanes-Oxley Act’s anti-retaliation protections. And it may be the harbinger of wider use of the law’s shelter. The case also could give lawyers on both sides a chance to see how well the Department of Labor’s Occupational Safety and Health Administration (OSHA) handles complex financial whistleblower retaliation claims. Congress assigned the new whistleblower investigation responsibilities to OSHA with passage of Sarbanes-Oxley (SOX). OSHA is generally responsible for enforcing whistleblower statutes affecting industries involved in such things as toxic waste, clean water, landfills and pipeline safety. Securities law and shareholder fraud are not its traditional turf. “My observation has been there is a great deal of confusion still over what kinds of claims really are protected in SOX whistleblower claims,” said Laurence Stuart, a labor law specialist who represents employers at Houston’s Legge, Farrow, Kimmitt, McGrath & Brown. “That confusion is within the agency on the ground level. If you talk to multiple investigators at multiple offices you might not find uniform answers to what is protected activity,” said Stuart, who also teaches law at Rice University. OSHA’s Florida office did not return a call for comment. A dilemma Under SOX, Congress protected employees against retaliation for internal or external reports when the employee suspects “mail or wire fraud, bank fraud, securities fraud or violating [Securities and Exchange Commission] rules or regulations or federal laws relating to fraud against shareholders,” according to an OSHA fact sheet on SOX. The statute, 18 U.S.C. 1514A, refers to violation of SEC rules or “any provision of federal law relating to fraud against shareholders.” The case of Sarasota broker David Willms poses a dilemma: Does SOX protect whistleblowers who report suspicions of general fraud, rather than fraud directly affecting shareholders? Willms, a 12-year veteran with Bank of America Investment Services Inc., gave up his management duties in frustration in 2004 after his compliance decisions were overruled by office managers. In one case he complained that a broker sold an 87-year-old woman $725,000 in corporate bonds, pocketed $15,600 in commissions and moved the money to an account that would cost the woman 1.5% in annual fees. The case is currently under investigation by OSHA based on Willms’ complaint. The agency has 60 days to respond, and from there it can be appealed by either side to an administrative law judge. “To me the statute seems clear: Anyone who, in good faith, calls attention to superiors of acts that violate securities law is covered,” said James Keeney, Willms’ Sarasota attorney. “We’re going to see a lot more of these cases in the future,” he said. What’s significant about the SOX whistleblower provisions is a more forgiving standard of proof. Typically an employee bears the burden of showing the adverse job action was discriminatory, he said. Under Sarbanes-Oxley, to be protected the employee only has to show that he or she believed company conduct was illegal and that reporting it contributed to his or her firing or demotion, said Keeney. “The whistleblower has a better chance of prevailing,” he said. With Sarbanes-Oxley still in its legal infancy, courts have provided little guidance. “One can imagine a company engaged in conduct that includes technical violation of securities rules and an employee complains about it and is fired,” said Stuart. “On the face of the statute that would appear to be a whistleblower claim,” but added, “It is hard to imagine mere professional negligence would give rise to a whistleblower claim.” The SOX whistleblower provision, “is going to have to go through a period of court review over its meaning before people understand its scope,” Stuart said. Bank of America said of Willms’ claims, “We take these allegations seriously. We did investigate and found that his claims lacked merit and factual foundation,” said Shirley Norton, spokeswoman for the Charlotte, N.C.-based bank. Norton declined to comment on the pending OSHA investigation.

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