In 2005, Halliburton hired Anthony Menendez to be the Director of Technical Accounting Research and Training in the Finance and Accounting department. Menendez trained field accountants and monitored accounting issues. A few months after he was hired, he reported to his boss, the Chief Accounting Officer (CAO), that some of Halliburton's accounting practices deviated from Generally Accepted Accounting Principles (GAAP).
I'm Going Up the Ladder
Over the next few months, he brought these concerns to the CAO's attention but was told he wasn't being a "team player." Eventually, the CAO stopped meeting with him. So what did Menendez do? He went to the SEC.
Menendez sent to Halliburton's General Counsel the same complaint he sent to the SEC. Once the GC received the SEC's complaint, he figured out that Menendez contacted the SEC. Eventually, the SEC investigation ended with the Commission concluding no enforcement action was necessary. Menendez resigned, claiming he couldn't continue working in that environment.
He filed a Department of Labor complaint alleging retaliation under the Sarbanes-Oxley Act. After bouncing between an administrative law judge and a review board, the review board held Halliburton liable for retaliation.
Don't Unmask the Whistleblower
So what's the issue? Halliburton appealed the claim that the GC's disclosure of Menendez's identity was an "adverse action" and that protected conduct was a "contributing factor" in that disclosure. The Fifth Circuit., however, upheld the review board's determination. "It is inevitable that such a disclosure would result in ostracism, and, unsurprisingly, that is exactly what happened to Menendez following the disclosure," said the court. It also pointed out that when it's the boss disclosing the identity of the whistleblower to other employees, "the boss could be read as sending a warning, granting his implied imprimatur on differential treatment of the employee, or otherwise expressing a sort of discontent from on high."
On the second issue, the court found that the whistleblowing was a contributing factor to the disclosure. Even though Halliburton claimed the connection between the whistleblowing and the adverse action had to be "wrongfully motivated," the Fifth Circuit disagreed.
What is there to learn from the Fifth Circuit's opinion?
What's at stake? More than just back pay. The Fifth Circuit upheld a damage award for "noneconomic compensatory damages, including emotional distress and reputational harm" under Sarbanes-Oxley.