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Author: Jordan Thomas
A troubling practice that is frequently seen on the part of companies is the use of confidentiality agreements that purport to prevent employees or former employees from sharing any information – including information about potential violations of law – with any outside parties, including the SEC and other law enforcement agencies.
In a recent development for current and potential whistle blowers, reports suggest that the SEC and courts are getting tough on companies that seek to use such agreements to dissuade employees from reporting securities violations or other illegal conduct to the appropriate regulatory agencies. According to the Washington Post, the SEC has opened an investigation into Kellogg Brown & Root (“KBR”), a former subsidiary of Halliburton, to determine whether KBR broke SEC rules by requiring employees involved in an internal investigation into an alleged military-contract fraud to sign “confidentiality statements.” These confidentiality statements gave KBR the right to fire employees who revealed information about the alleged fraud, including to government authorities.
The SEC has neither confirmed nor denied the existence of the investigation due to the fact that all pending SEC investigations are confidential and non-public. However, the report is a sign that the SEC is deeply concerned about this issue and is willing to take a stand against companies who seek to thwart potential whistleblowers.
What are your thoughts on whistle blowing and the SEC’s focus on confidentiality agreements?