The Securities and Exchange Commission (SEC) filed charges against KBR, a global technology and engineering firm for violating whistleblower protection rule 21F-17 under the Dodd-Franck Act.

KBR

KBR whistleblower protection rule violations

According to the SEC, KBR used improperly restrictive language in confidentiality agreements, which could potentially suppress the whistleblowing process.

The Commission found that the company required witnesses in certain internal investigation interviews to sign confidentiality statements. KBR include a language warning witnesses that they could face disciplinary actions including termination of their employment if they discuss the issues with outside parties without the approval of its legal department.

The SEC emphasized that KBR’s internal investigations included accusations of possible violations of securities laws. The Commission emphasized that the Rule 21F-17 prohibits companies from implementing measures that hinders whistleblowers from reporting potential securities violations.

Andrew J, Ceresney, director, Division of Enforcement at SEC said KBR potentially discouraged employees from reporting securities violations to authorities by requiring them sign confidentiality agreements imposing pre-notification requirements.

Ceresney emphasized, “SEC rules prohibit employers from taking measures through confidentiality, employment, severance, or other type of agreements that may silence potential whistleblowers before they can reach out to the SEC.  We will vigorously enforce this provision.”

KBR agreed to pay a penalty to settle the SEC charges

According to the SEC, KBR agreed to pay a penalty of $130,000 to settle the charges.

The company also amended its confidentiality agreement voluntarily by adding a language clarifying that employees are free to report possible securities violations without fear of retaliation and seeking approval from KBR.

KBR also agreed to cease and desist from committing or causing any future violations of Rule 21F-17 without admitting or denying the charges against it.

Sean McKessy, chief, Office of Whistleblower at SEC commented, “KBR changed its agreements to make clear that its current and former employees will not have to fear termination or retribution or seek approval from company lawyers before contacting us.”

McKessy added that other employers should also review and change their existing and historical agreements that prevent their employees from reporting possible violations to the SEC.