Media Sources Can’t Use Whistle-Blower Shield

(CN) - Boeing Co. had grounds to fire two employees who leaked company information to a Seattle newspaper, the 9th Circuit affirmed Tuesday, finding that a whistle-blower provision meant to protect workers who reveal internal auditing problems in publically traded companies does not cover media interviews.

Former Boeing auditors Matthew Neumann and Nicholas Tides discovered problems with the aerospace giant's internal information-technology controls while working for its Sarbanes-Oxley Audit group in 2007.

The Sarbanes-Oxley Act, or SOX, requires all publically traded companies to assess the state of their internal controls and financial-reporting procedures.

During the course of the yearly audit, both Tides and Neumann complained to management about several perceived problems, including the company's practice of relegating authority over Boeing employees to outside contractors, whom Boeing also used to design and audit the company's internal controls.

They also questioned the "integrity of data stored in the software system Boeing used to record its IT SOX audit results," believing it was left open to unauthorized use.

Rebuffed by management, Tides and Neumann eventually responded to requests for information from a reporter for the Seattle Post-Intelligencer, which published an article in the summer of 2007 bearing the headline, "Computer security faults put Boeing at risk."

After an internal investigation found several months later that Tides and Neumann had leaked information and company documents to the reporter, Boeing fired both men.

They filed separate actions in Washington District Court claiming that their terminations violated the Sarbanes-Oxley Act's protection provision for whistle-blowers. After consolidating the complaints, U.S. District Judge John Coughenour granted Boeing summary judgment.

On appeal, a three-judge panel of the 9th Circuit in Seattle upheld the ruling, finding that Sarbanes-Oxley's whistle-blower provision covers only employees who reveal information to federal-regulatory and law-enforcement agencies, Congress and employee supervisors.

Tides and Neumann argued that the provision extended to media leaks because information passed to reporters would eventually end up with Congress or federal law enforcement and regulatory agencies. But the panel found this to be a "boundless interpretation of the statute" that would render it meaningless.

"If, as the plaintiffs contend, the disclosure of information to the media is protected on the ground that it may ultimately fall into the hands of a member of Congress or a federal regulator, then virtually any disclosure to any person or entity would qualify as protected whistleblower activity, provided the information pertains to one of the statutorily defined categories of unlawful conduct set forth in [the provision]," Judge Barry Silverman wrote for the court (emphasis in original). "We decline to afford such an expansive meaning to the statutory language."

Finding that both the plain meaning of the statute and Congressional intent support Boeing's termination of Tides and Neumann, the panel upheld the District Court's ruling.

"We therefore hold that [the provision] does not protect employees of publicly held companies from retaliation when they disclose information regarding designated types of fraud or securities violations to members of the media," the ruling states. "Though unnecessary to this result, the legislative history gives no reason to doubt that Congress said what it meant to say."

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