An oil-and-gas company that allegedly retaliated against an internal whistleblower and used illegal separation agreements agreed to pay the SEC a $1.4 million penalty.
Oklahoma-based SandRidge Energy Inc. fired an employee who raised concerns inside the company about how it calculated its publicly reported oil-and-gas reserves.
SandRidge then put language in the employee’s separation agreement that prohibited participating in any government investigation or disclosing information potentially harmful or embarrassing to the company.
It was the same language SandRidge regularly used with departing employees, the SEC said.
SandRidge continued using the restrictive language even after “multiple reviews of its separation agreements after a new whistleblower protection rule became effective in August 2011,” the SEC said.
The SEC settled the case with an internal adiministrative order (pdf) and didn’t go to court.
SandRidge fired the whistleblower after senior management concluded he or she was disruptive and could be replaced with someone “who could do the work without creating all the internal strife.”
The firing was just a few months after SandRidge had offered the employee a promotion, which was turned down.
The SEC said,
The company had conducted no substantial investigation of the whistleblower’s concerns and only initiated an internal audit that was never completed. The employee’s separation agreement also contained the company’s prohibitive language that violated the whistleblower protection rule.
SandRidge settled the enforcement action without admitting or denying the SEC’s findings.
It agreed to pay a penalty of $1.4 million but could pay far less. The firm recently emerged from bankruptcy so the penalty is subject to its bankruptcy plan.
Under the plan, the SEC penalty is considered an unsecured claim. That could result in a penalty payment as low as $100,000, the company told the Wall Street Journal.
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In another action last week, the SEC fined a Virginia-based tech firm NeuStar Inc. $180,000 for using severance agreements that impeded former employees from communicating information to the SEC.
SEC Rule 21F-17 makes it unlawful to take “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.”
The rule was enacted as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to encourage and protect whistleblowers.
Neustar used the severance agreements with at least 246 departing employees from August 2011 to May 2015, the SEC said.
In September, Anheuser-Busch InBev paid the SEC $6 million to settle charges that it violated the Foreign Corrupt Practices Act and impeded a whistleblower who reported the misconduct.
The company’s India minority-owned joint venture used third-party sales promoters to make improper payments to government officials in India to increase sales and production, the SEC said.
Anheuser-Busch InBev used a separation agreement that stopped an employee from continuing to voluntarily communicate with the SEC about potential FCPA violations. The agreement could have imposed a $250,000 penalty if the employee violated strict non-disclosure terms.
In August, insurance provider Health Net Inc. paid a $340,000 penalty to the SEC for illegally using severance agreements that required outgoing employees to waive their ability to obtain monetary awards from the SEC’s whistleblower program.
Also in August, the SEC fined building-products wholesaler Blue Linx Holdings $265,000 for requiring departing employees to waive their rights to recover money from any whistleblower claims they filed with the SEC or other federal agencies.
Richard L. Cassin is the publisher and editor of the FCPA Blog.