On February 27, 2009, the United States Department of Labor’s Administrative Review Board (“ARB”) affirmed the Administrative Law Judge’s (“ALJ”) decision in Kalkunte v. DVI Fin. Servs., Inc., which extends whistleblower liability under the Sarbanes-Oxley Act (“SOX”) to private entities that engage in business with publicly traded companies. In particular, the ARB concluded that the ALJ was correct in finding that a privately-held company acting as a contractor, subcontractor, or agent of a publicly traded company can be held liable for violation of the whistleblower provisions of SOX. The decision is significant because it defines the scope of liability under SOX and marks the first time that the ARB has affirmed an ALJ’s decision in favor of a SOX plaintiff.
In Kalkunte, Sheila Kalkunte, a former Associate General Counsel of DVI Financial Services, Inc. (“DVI”), filed a whistleblower complaint against DVI and AP Services, LLC (“AP”), alleging that both companies retaliated against her for disclosing information about senior management’s alleged misrepresentation of statistical data in violation of securities laws. In its defense, AP argued that privately-held companies are not required to adhere to SOX.
In affirming the ALJ’s decision, the ARB held that a company cannot escape liability for violating the whistleblower provisions of SOX merely because it is not registered under the Securities and Exchange Act or required to file reports under the same act.
The ARB awarded Kalkunte lost wages and compensatory damages after finding that there was substantial evidence supporting the ALJ’s ruling that both DVI and AP retaliated against Kalkunte because of her whistleblowing activity.
R. Scott Oswald and Nicholas Woodfield, Principals at The Employment Law Group® law firm, represented Ms. Kalkunte.