Company Settles Charges in Whistleblower Retaliation Case

The Securities and Exchange Commission today announced that an oil-and-gas company has agreed to settle charges that it used illegal separation agreements and retaliated against a whistleblower who expressed concerns internally about how its reserves were being calculated.

The SEC’s order finds that Oklahoma City-based SandRidge Energy Inc. conducted multiple reviews of its separation agreements after a new whistleblower protection rule became effective in August 2011, yet continued to regularly use restrictive language that prohibited outgoing employees from participating in any government investigation or disclosing information potentially harmful or embarrassing to the company.

The SEC’s order further finds that SandRidge fired an internal whistleblower who kept raising concerns about the process used by SandRidge to calculate its publicly reported oil-and-gas reserves.  The employee had been offered a promotion, which was turned down.  Just months later, senior management concluded the employee was disruptive and could be replaced with someone “who could do the work without creating all the internal strife.” The company had conducted no substantial investigation of the whistleblower’s concerns and only initiated an internal audit that was never completed. The employee’s separation agreement also contained the company’s prohibitive language that violated the whistleblower protection rule.

“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,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. 

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, added, “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.  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.”

Without admitting or denying the SEC’s findings, SandRidge agreed to pay a penalty of $1.4 million, subject to the company’s bankruptcy plan.

The SEC’s investigation was conducted by Tamara F. McCreary, Timothy L. Evans, and David R. King and supervised by Jonathan P. Scott and David L. Peavler of the Fort Worth office.