A federal judge in Massachusetts has ruled that whistleblowers who report fraud and other wrongdoing within their company are protected under the 2010 Dodd-Frank Act, adding to a growing list of U.S. District Court judges who have made similar rulings. The pro-whistleblower rulings contradict the interpretation of a circuit court ruling earlier this year.
According to the Wall Street Journal, the Massachusetts District Court judge issued an opinion Wednesday that “rejected the argument that Richard Ellington, a former employee of New England Investment and Retirement Group Inc., was ineligible for protection from retaliation under Dodd-Frank because he did not report suspected securities-law violations to the Securities and Exchange Commission (SEC) until after he was fired.”
Among the alleged wrongdoing Mr. Ellington reported internally was New England Investment and Retirement’s distribution of misleading investment reports, an allegation that was later settled with the SEC.
The Wall Street Journal reports that at least five District Court judges have “ruled along the same lines,” in contradiction of the Fifth U.S. Circuit Court of Appeals, which said that whistleblowers weren’t protected from retaliation by Dodd-Frank’s provisions unless they reported the alleged wrongdoing to the SEC. The Fifth Circuit Court made that ruling after hearing a case brought by a former General Electric employee alleging the company retaliated against him after he reported fraud internally.
“At the heart of the legal dispute is a quirk in the language that set up the new whistleblower provisions,” the Wall Street Journal reported. “In one place, it specifically defines a whistleblower as someone who reports information to the SEC, but in another place it says that whistleblowers are protected from retaliation if they report information in a variety of ways.”
In its ruling, the Massachusetts federal court said that it “respectfully disagrees” with the Fifth Circuit’s ruling and also rejected the argument that Dodd-Frank wasn’t applicable to Mr. Ellington’s case because he reported the alleged wrongdoing before the law went into effect.
The SEC established its Office of the Whistleblower in 2011 under the Dodd-Frank Act, a series of sweeping reforms signed into law in 2010 to address financial-industry fraud and avert a crisis like the one that spawned a deep recession in the late 2000s.