Seventh Circuit Permits Whistleblower’s RICO Claims Based on Sox Violation to go Forward

RICO

In an opinion that provides new ammunition for whistleblowers, the U.S. Court of Appeals for the Seventh Circuit permitted Michael DeGuelle’s claim for retaliation under the Racketeer Influenced and Corrupt Organizations Act (RICO) to continue. According to his Complaint, Mr. DeGuelle had previously blown the whistle internally on tax law violations by his employer S.C. Johnson & Son, Inc., before he filed a claim under the Sarbanes-Oxley Act (SOX) with the Department of Labor.

Subsequent to this filing, Mr. DeGuelle was terminated in apparent retaliation for his SOX filing and whistleblowing activities. Mr. DeGuelle filed a lawsuit alleging various state and federal claims. Two of Mr. DeGuelle’s claims alleged that his former employer violated the federal RICO statutes. This is based upon a pattern of racketeering activity, which includes violation of § 1513 of SOX.

SOX

Under this section of SOX, it is a crime to “knowingly, with intent to retaliate, take[] any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense[.]” 18 U.S.C. 1513(e). The Seventh Circuit stated that “[t]he language of § 1513(e) and logic imply that retaliatory actions always occur after a whistleblower reports others’ wrongdoing,” and consequently the retaliation for such whistleblowing could be considered part of a scheme to prevent disclosure, and thus a proper basis for a RICO claim.

This ruling permits whistleblowers who file a complaint under SOX and are retaliated against to take advantage of the increased damages provisions and attorney fees provisions of the federal RICO statutes. Are you a current or former employee who has blown the whistle against your employer? Are you contemplating blowing the whistle? You should contact Ogborn Mihm LLP immediately to discuss your options.