On August 19, 2016, Eric Ben-Artzi, a former Deutsche Bank risk officer, stated he would not accept his portion of a $16.5 million whistleblower award from the SEC because the executives he contends were responsible for overvaluing certain portfolios at the bank were not being personally held accountable in the bank’s settlement with the SEC. Ben-Artzi had provided information to the SEC, which led to a $55 million fine and settlement in 2015.
Ben-Artzi’s main criticism of the settlement and whistleblower award is that Deutsche Bank shareholders and rank-and-file employees bear the cost of paying such penalties. He also accused the SEC of having too many connections to the bank through the “revolving door” between government and the industry. Ben-Artzi noted that his ex-wife and attorneys may have claims on portions of the award. He also stated that he would accept his portion if he was sure it came out of the pockets of the executives who he claims caused violations of the securities laws.
Employers conducting internal investigations often have employees sign agreements requiring them to acknowledge the confidential nature of employee interviews. Less common are agreements that prohibit employees from discussing the interview with anyone outside the company on the pain of possible termination for such disclosure. On April 1, 2015, the SEC found such an agreement, required by a global engineering firm, to violate SEC Rule 21F-17. That Rule, adopted pursuant to Dodd-Frank, prohibits companies from taking, “any action to impede an individual from communicating directly with the [SEC] about a possible securities violation, including … threatening to enforce a confidentiality agreement.”
The firm, KBR Inc., had required witnesses in internal investigations to sign confidentiality statements with language warning that they could face discipline or be fired if they discussed the matters with persons outside KBR. Although there was no evidence that KBR had actually sought to enforce the confidentiality statement, KBR nonetheless agreed to pay a $130,000 penalty and amend its confidentiality statement to make clear that employees may report potential securities violations to the SEC and other federal agencies without fear of retribution.
Bottom line: Companies conducting internal investigations that want to have witnesses acknowledge the confidential nature of interviews should amend their agreements and statements to reflect that employees may report potential violations to the Government without fear of any adverse employment action. In fact, companies seeking to avoid this problem may want to consult the amended language adopted by KBR in the SEC Order – http://www.sec.gov/litigation/admin/2015/34-74619.pdf.