Sarbanes Oxley Act

• Author: International Law Group
• Pages: 16-18

Page 16

Ruben Carnero (plaintiff), an Argentine citizen residing in Brazil, sued Boston Scientific Corporation (BSC or defendant), a Delaware corporation with its headquarters in Massachusetts in the federal court in that state. BSC manufactures medical equipment.

In 1997, the Argentine subsidiary, Boston Scientific Argentina S.A. (BSA) hired plaintiff, and later on he also served as the Country Manager for a Brazilian subsidiary of BSC.

Page 17

Plaintiff had informed BSC that its Latin American subsidiaries had created false invoices and had inflated sales figures. The complaint alleged that the defendant had fired him in retaliation for his "whistleblowing."

The district court dismissed plaintiff's federal and state law claims, holding that the whistleblower protection under Title VIII, Section 806, of the Sarbanes-Oxley Act of 2002, 18 U.S.C. ß 1514A (2005), does not apply extraterritorially. As for his state law claims, the court found that plaintiff had no contact at all with defendant in Massachusetts. Plaintiff appealed but the U.S. Court of Appeals for the First Circuit affirms.

The Court first points out that no court has yet addressed the extraterritorial application of a whistleblower claim under 18 U.S.C. ß 1514A. As a threshold matter, the Court determines that plaintiff's claim would otherwise fit within the whistleblower protection of the statute. Section 1514A applies to employees of publicly traded companies who lawfully "provide information... or otherwise assist in an investigation regarding any conduct which the employee believes constitutes a violation" of the federal mail, wire, bank, or securities laws and regulations.

"The whistleblower statute ... makes clear that the misconduct it protects against is not only that of the publicly traded company itself, but also that of 'any officer, employee, contractor, subcontractor, or agent of such company,' who retaliates or otherwise discriminates against the whistleblowing employee. See 18 U.S.C. ß 1514A(a). Thus, the statute can be read to embrace an agent-subsidiary's retaliation against a protected employee. As Carnero may be an 'employee' of BSC, ... his alleged retaliatory discharge by its subsidiaries for reasons forbidden in the Act could (putting aside any question of extraterritorial application) violate the terms of the whistleblower protection provision of the Sarbanes-Oxley Act." [Slip op. 7]

The Court concludes, however, that the relevant provisions of The...