SandRidge Energy to Pay $1.4M Over Whistle-Blower Violations

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By Antoinette Gartrell

Oklahoma City-based SandRidge Energy Inc. agreed to pay $1.4 million to resolve Securities and Exchange Commission allegations it used unlawful separation agreements and retaliated against an internal whistle-blower who questioned its accounting practices ( In re SandRidge Energy, Inc. , S.E.C., No. Admin. Proc. File No. 3-17739, 12/20/16 ).

The move marks the first time the agency has sued a company for retaliating against an internal whistle-blower who complained about possible misconduct. It’s also the second time in as many days the commission has sued a company for allegedly using severance agreements that violated whistle-blower protection rules. Virginia-based technology company NeuStar Inc., which agreed to pay $180,000, voluntarily revised its agreements immediately after the SEC began its investigation.

Continuing Effort

“This is part of a continuing effort by the SEC to police what seems to be rampant, i.e., companies using severance agreements to muzzle departing employees,” Washington lawyer Daniel J. Hurson of Law Offices of Daniel J. Hurson told Bloomberg BNA. “This case is significant because the company is alleged to have actually retaliated against the employee. This was more serious than the others, and so the fine was the largest assessed for this kind of conduct. Hopefully, all companies who still are using such language will wake up and remove it,” he said.

Virginia lawyer Dallas Hammer of Zuckerman Law agreed that the case is noteworthy. “It is the first time the SEC has implemented its broad view of protected conduct under the Dodd-Frank Act,” he told Bloomberg BNA in an e-mail. “This view has not been accepted by all courts, but today’s announcement shows the SEC will prosecute companies based on its own interpretation of the law, despite the conflicting court opinions.” The SEC also is sending the message that it will “actively and aggressively inspect companies’ confidentiality provisions and that prior decisions are not merely symbolic,” he said.

Restrictive Language

1934 Securities Exchange Act Rule 21F-17, enacted in August 2011, specifically prohibits confidentiality agreements designed to prevent an individual from communicating with the commission about potential securities violations.

According to the SEC, SandRidge’s severance agreements included restrictive language that prohibited departing employees from communicating with the SEC and other regulators regarding company misconduct. The company also fired an internal whistle-blower who complained about the process it used to calculate publicly reported oil-and-gas reserves.

SandRidge was represented by David Kornblau of Covington & Burling LLP, New York.

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

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

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