Whistleblowers Not Protected for Media Leaks, Federal Court Rules

May 5, 2011

Whistleblower protections in a federal accounting law do not cover leaks to the media, a U.S. appeals court has ruled, dealing a blow to two former Boeing auditors who had sued the company.

Nicholas Tides and Matthew Neumann were fired from a group that was testing information technology controls at Boeing. They sued the company, charging they were terminated for reporting violations under the 2002 Sarbanes-Oxley Act.

Tensions in the group were high in 2007 because management feared that external auditor Deloitte & Touche might declare a material weakness in Boeing’s internal controls, according to the ruling from the 9th U.S. Circuit Court of Appeals.

The two auditors expressed concerns to Boeing management about the integrity of data in the software system, but they also disclosed information when approached by a reporter from the Seattle Post-Intelligencer newspaper.

After the newspaper ran a story about computer security at Boeing, Tides and Neumann admitted in a company investigation that they had shared documents with the reporter.

The 9th Circuit Tuesday upheld a lower court ruling and found that the auditors could not proceed with the lawsuit.

Sarbanes-Oxley protects whistleblower disclosures to federal regulators, law enforcement, Congress and employee supervisors — but not the media, the appeals court ruled.

“Boeing was within its rights” in firing Tides and Neumann, Judge Barry Silverman wrote for a unanimous three-judge panel.

Attorney John Tollefsen, representing the plaintiffs, called the decision “shocking.”

“Any lawyer is going to have to advise their client that they can’t talk to the press,” he said, adding that he would advise his clients to seek rehearing before a larger 9th Circuit panel.

Boeing spokesman John Dern said the company was “obviously pleased.”

“There are processes in place for employees to report their concerns, and the court ruling reinforced that those should be followed,” Dern said.

The case in the 9th Circuit is Nicholas Tides and Matthew Neumann v. The Boeing Company, 10-35238.

(Reporting by Dan Levine; Editing by Tim Dobbyn and Ted Kerr)

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