Carl Genberg’s suspicions surrounding pharmaceutical corporation Ceragenix began when the company failed to hold scheduled shareholder meetings. Unsettled by this, Genberg consulted a friend who agreed to send a letter written by Genberg under his name. The letter was sent to external attorney Marc Redlich, who as a result conducted the internal investigation that ultimately ended up exposing Ceragenix’s unlawful conduct. During the investigation, Redlich learned that Genberg was responsible for writing the initial letter. Genberg was promptly and unlawfully fired following a vote by the Ceragenix Board of Directors, who claimed Genberg was attempting a hostile takeover of the company. This showcases the blatant retaliation against whistleblowers that often occurs, and thus created a claim under the Sarbanes-Oxley Act (“SOX”).
The question in this case is whether whistleblower protections should be allocated based on a “definitive and specific” standard or based on a “reasonably believes” standard.
On January 6th 2017, the National Whistleblower Center (“NWC”) filed an amicus brief in support of Genberg’s legal case. In its brief, the NWC points out that whistleblower cases should be judged based on the “reasonably believes” standard outlined in the SOX, as opposed to the “definitive and specific” standard as outlined by the Chamber of Commerce and used by the District Court in its ruling. The brief further addresses how the Circuit Court have neglected the legislative history of the SOX and in doing so, has severely endangered whistleblowers by revoking their access to protections to which they should be legally entitled to.
The Tenth Circuit Court ruled in favor of whistleblowers by determining that the statement of the burden proposed by the District Court was incorrect. The decision can be accessed here. By reaffirming the basic rules of law governing the SOX, the court rightfully elected to protect whistleblowers.
Whistleblower protection is paramount in terms of safeguarding the government because whistleblowers provide an irreplaceable service by exposing fraud from the inside. Stephen M. Kohn, former NWC Executive Director, declares, “corporations must stop retaliating and start listening to their whistleblowers…. These rules were drafted to help whistleblowers report wrongdoing, not to help the corporation’s cover-up fraud. The culture of shooting the messenger must end.”
