The Securities and Exchange Commission (SEC) announced it has reached a settlement agreement with Monolith Resources LLC (Monolith) to resolve claims that it violated the SEC’s whistleblower protection rules in employee separation agreements. Monolith, headquartered in Lincoln, Nebraska, is a privately held technology company at the center of the SEC’s latest order.
From February 2020 to March 2023, Monolith used separation agreements that required a number of employees to waive their rights to monetary compensation for filing whistleblower claims or participating in investigations by government agencies upon their exit from the company. The SEC found that Monolith’s separation agreements served to deter former employees from participating in the SEC’s whistleblower program by having them waive access to financial incentives that are intended to encourage people to come forward to the SEC about possible securities law violations.
The SEC order finds that Monolith violated the Securities Exchange Act of 1934. After the order’s release, the regional director of the SEC’s Denver Office said, “Both private and public companies must understand that they cannot take actions or use separation agreements that in any way disincentivize employees from communicating with SEC staff about potential violations of the federal securities laws … Any attempt to stifle or discourage this type of communication undermines our regulatory oversight and will be dealt with appropriately.”
Monolith consented to cease and desist from violating the SEC’s whistleblower protection rules. According to the order, Monolith voluntarily altered its separation agreement to fix the faulty clauses and make clear that in addition to not restricting a departing employee’s right to communicate with government agencies like the SEC, the agreement also did not in any way limit their ability to obtain incentives for such communication to governmental agencies. The agreement now reads: “nothing in this Agreement shall bar or impede in any way your ability to seek or receive any monetary award or bounty from any governmental agency or regulatory or law enforcement authority in connection with protected ‘whistleblower’ activity.” Monolith also agreed to pay a civil penalty of $225,000 and notify all impacted former employees that the agreements do not in any way limit their ability to obtain financial incentives for providing information to government agencies, such as the SEC.
The SEC Office of the Whistleblower manages securities fraud settlements, investigations, and whistleblower payouts. They oversee SEC whistleblower rewards if information reported leads to a successful recovery of funds by the government. SEC whistleblower cases can involve payouts of millions of dollars, as whistleblowers are eligible to receive 10 to 30 percent of recovered funds if their information is useful, unique, and delivered of their own free will. Most importantly, they want to hear from you!
If you would like to report securities, commodities, or banking fraud, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at www.fraudfighters.net.