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International Gaming Technology Agrees to Pay $500,000 to Settle Charges of Unlawfully Retaliating Against One of Its Executives

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  • Posted on: Sep 30 2016

On September 29, 2016, the Securities and Exchange Commission (the “SEC” or the “Commission”) announced that International Gaming Technology (“IGT”), a casino-gaming company, agreed to pay $500,000 to settle charges of retaliating against one of its executives with several years of positive performance reviews because he reported to senior management and the SEC concerns about the accuracy of IGT’s financial statements.

According to the SEC’s order, within weeks of raising concerns that the company’s cost accounting was arbitrarily inflated, senior managers retaliated against the whistleblower by removing him “from two opportunities he considered significant to performing his job successfully.”  IGT terminated the whistleblower approximately three months later, following the conclusion of an internal investigation into the whistleblower’s allegations.  As noted by the SEC, “[t]he internal investigation found that the cost accounting model IGT used … was appropriate and did not cause its reported financial statements to be distorted.”

The case marks the first time that the SEC has brought an enforcement action under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or the “Act”) against a company without an underlying securities law violation. Section 21F(h) of the Act protects whistleblowers who provide information to the SEC about violations of the securities laws, or violations of any protected activity under the Sarbanes-Oxley Act of 2002, from retaliation. Under SEC rules, the Commission may, as it had done with IGT, prosecute violations of the anti-retaliation provisions of the Dodd-Frank Act through an enforcement action.

“Bringing retaliation cases, including this first stand-alone retaliation case, illustrates the high priority we place on ensuring a safe environment for whistleblowers,” said Jane A. Norberg, Chief of the SEC’s Office of the Whistleblower.  “We will continue to exercise our anti-retaliation authority when companies take reprisals for whistleblowing efforts.”

Without admitting or denying the SEC’s findings, IGT agreed to pay the $500,000 penalty and cease and desist from committing or causing any further violations of Section 21F(h) of the Securities Exchange Act of 1934.

Takeaway:

As this Blog wrote last month, the SEC has been making good on its promise to crack down on employers that retaliate (or attempt to retaliate) against employees who report securities fraud to the SEC.  The IGT penalty and cease and desist order is another example of the success of these efforts.

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