In the Matter of Anheuser-Busch InBev SA/NV

On September 28, 2016, the SEC announced a settled administrative proceeding that included findings that the respondent, Anheuser-Busch InBev, improperly impeded a whistleblower’s communications with the SEC through severance agreement language. The violation of the whistleblower rules were related to the SEC’s additional findings that Anheuser-Busch InBev had violated the FCPA when it used third-party sales promoters to make improper payments to government officials in India. In 2010 and 2011, an employee raised concerns about the possible use of these third parties to make the improper payments. The employee was terminated in 2012, and the respondent’s Indian subsidiary engaged in mediation regarding the employee’s potential employment law claims. At the time, the employee was communicating with the SEC about his concerns regarding potential FCPA violations. The mediation resulted in a Confidential Agreement and General Release that included strict confidentiality provisions and a liquidated damages provision of $250,000 in the event of a breach of such confidentiality provisions. After signing the agreement, the former employee stopped communicating with the SEC because he feared triggering the agreement’s liquidated damages provision.

In addition to FCPA violations, the SEC found a violation of Rule 21F-17, noting that the language of the separation agreement had impeded the employee from communicating with the SEC staff. The SEC’s order also noted that the respondent had remediated the violation by including in its separation agreements the following language, “I understand and acknowledge that notwithstanding any other provision in this Agreement, I am not prohibited or in any way restricted from reporting possible violations of law to a governmental agency or entity, and I am not required to inform the Company if I make such reports.”

In the Matter of BlueLinx Holdings, Inc.

On August 10, 2016, the SEC announced a settled administrative proceeding with BlueLinx Holdings, Inc., for violation of Rule 21F-17, which provides in part that no person may “impede” an individual from communication with the SEC. The SEC found that BlueLinx entered into agreements with employees who were leaving the company and who received severance or other post-employment consideration that:

1. Prohibited the employees from sharing with anyone confidential information that the employee had learned while employed with the company, unless compelled to do so by law or legal process; and

2. Required employees to either provide written notice to the company or obtain written consent from the company’s legal department prior to providing such confidential information.

Further, in mid-2013, two years after Rule 21F-17 was adopted, BlueLinx made changes to some of its severance agreements but continued to require notice of any required disclosure to the company’s legal department. Other changes made at the same time recognized an employee’s ability to file a “charge” with the SEC, but provided that the employee understood that he or she was “waiving the right to any monetary recovery in connection with any such charge … ”

The SEC found that these provisions violated Rule 21F-17. Without admitting or denying the SEC’s findings, BlueLinx agreed to pay a civil money penalty of $265,000 and cease and desist from further violations. In addition, BlueLinx agreed to include in its severance agreements language specifically noting an employee’s right to file a charge or complaint with the SEC and to provide documents without first providing notice to BlueLinx. Finally, the language confirmed that the agreement does not limit an employee’s right to receive an award from the SEC or another government agency. As part of its undertaking, BlueLinx undertook to contact employees who had received the severance agreements with the prohibited language.

In the Matter of Health Net, Inc.

Days after the BlueLinx proceeding, the SEC settled another Rule 21F-17 case, this time with Health Net, Inc. The SEC alleged that from 2011 to 2015 Health Net had used a variety of severance agreements containing a Waiver and Release of Claims that required an employee to waive “the right to file an application for an award for information submitted pursuant to Section 21F of the Securities Exchange Act of 1934.” Another provision of the agreements required employees to waive their rights to any monetary recovery relating to any federal agency investigation. In 2013, while amending the severance agreements to provide that nothing in the agreements prohibited the employee from cooperating with a regulator, the revised Waiver and Release of Claims continued to provide that the employee waived any right to an individual monetary recovery. Even without evidence that these provisions ever prevented an employee from reporting to the SEC or that Health Net took action to enforce the provisions, the SEC found violations of Rule 21F-17 because the provisions were intended to remove the financial incentives that are designed to encourage people to communicate with the SEC.

Without admitting or denying the SEC’s findings, Health Net agreed to pay a civil money penalty of $340,000. In addition, Health Net agreed to make reasonable efforts to contact former Health Net employees who had signed the Waiver and Release of Claims forms during the period and provide them with the SEC’s order and a statement that Health Net, in fact, does not prohibit former employees from seeking and obtaining a whistleblower award pursuant to Section 21F of the Securities Exchange Act.