Insurer to Pay $340K Over Bid to Deter Whistle-Blowers

Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...

By Antoinette Gartrell

Aug. 16 — Health Net Inc. agreed to pay $340,000 to resolve Securities and Exchange Commission allegations over its use of a severance agreement that barred former employees from seeking an award under the agency's whistle-blower program ( In re Health Net, Inc., SEC, Admin. Proc. File No. 3-17396, 8/16/16 ).

The California-based health insurance provider also agreed to notify former employees that they are free to accept an award for blowing the whistle on a suspected securities law violation.

Health Net neither admitted nor denied wrongdoing.

Under the SEC's bounty program, whistle-blowers whose tips lead to a successful enforcement action may be awarded up to 30 percent of the funds collected.

Faulty Severance Agreements

In May 2011, the SEC adopted a rule prohibiting the use of confidentiality agreements designed to deter an employee from telling the commission about a possible securities violation. Allegedly, after the rule was adopted, Health Net started using a severance agreement that required departing employees to waive their right to apply for a whistle-blower award.

Although the company later removed the SEC-specific language from its severance agreements, it didn't remove other restrictive language prohibiting financial incentives for blowing the whistle until last year, the agency said.

The agency has been cracking down on conduct that stifles whistle-blowers from coming forward. On Aug. 10, Atlanta-based building products distributor BlueLinx Holdings Inc. agreed to pay $265,000 to settle claims its severance agreements violated whistle-blower protection rules (155 CARE, 8/11/16).

To contact the reporter on this story: Antoinette Gartrell in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

For More Information

The SEC's complaint is available at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.