© 2016 The Texas Lawbook.
By Mark Curriden
(Dec. 20) – Oklahoma City-based SandRidge Energy Inc. has agreed to pay a $1.4 million fine after the U.S. Securities and Exchange Commission accused the bankrupt oil and gas company of firing an internal whistleblower who questioned how company officials calculated its publicly reported oil-and-gas reserves.
SEC officials in the Fort Worth Regional Office announced Tuesday that SandRidge officials ignored 2011 federal whistleblower protection laws by regularly using restrictive language in their employee separation agreements that prohibited outgoing workers from participating in any government investigation or disclosing information potentially harmful or embarrassing to the company.
SEC Regional Director Shamoil T. Shipchandler said Tuesday that SandRidge officials fired an internal whistleblower who repeatedly raised concerns about the process the company used to determine its oil-and-gas reserves, which were then publicly announced and relied upon by investors.
The whistleblowing employee, according to the SEC, was initially offered a promotion by SandRidge. When the employee rejected the offer, SandRidge senior managers later concluded the worker was disruptive and could be replaced with someone “who could do the work without creating all the internal strife.”
Shipchandler said that the company conducted no substantial investigation of the whistleblower’s concerns.
“Ignoring a rule that protects communications between outgoing employees and the SEC, SandRidge flatly prohibited such contact in their separation agreements and at the same time retaliated against an employee who raised concerns about the company to its management,” Shipchandler said in a written statement.
Despite agreeing to pay the $1.4 million penalty, SandRidge did not admit or deny the SEC’s charges. The agreement must still be approved by a federal bankruptcy judge who is handling SandRidge’s reorganization.
The SEC lawyers who led the investigation into SandRidge were Tamara F. McCreary, Timothy L. Evans, David R. King and supervisor Jonathan P. Scott.
Covington & Burling partner David Kornblau represents SandRidge.
“Whistleblowers who step forward and raise concerns internally to their companies about potential securities law violations should be protected from retaliation regardless of whether they have filed a complaint with the SEC,” said Jane Norberg, who is chief of the SEC’s Office of the Whistleblower. “This is the first time a company is being charged for retaliating against an internal whistleblower, and the second enforcement action this week against a company for impeding employees from communicating with the SEC.”
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