On September 29th, 2016 the Securities and Exchange Commission (“SEC”) announced that International Game Technology (“IGT”), a casino-gaming company, would pay a penalty of $500,000 for dismissing an employee (the “Whistleblower”) who raised questions about its cost accounting model. The SEC alleges this termination occurred as retaliation for the Whistleblower investigating company accounting practices (the “Complaint”). This case is the first stand-alone whistleblower retaliation case without charges of other misconduct. On further investigation it was revealed that IGT did conform to Generally Accepted Accounting Practices (“GAAP”) and was not engaging in any illegal activities. However, IGT is being fined for violating whistleblower retaliation provisions in Section 21F(h) of the Securities Exchange Act of 1934 (the “Exchange Act”). This fine was submitted pursuant to an Offer of Settlement (the “Offer”), without admitting or denying the findings contained within the Complaint.
The SEC protects whistleblowers from retaliation by their employers. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), which became effective in July 2010, contains new whistleblower provisions that provide substantial incentives and protections for individuals who voluntarily provide information to the SEC concerning securities law violations. Securities violations that can be reported by whistleblowers to the SEC include the following: unregistered offer or sale of securities; insider trading; market manipulation; theft or misappropriation of funds or securities; bribery of foreign officials; filing false or misleading SEC reports or financial statements; Ponzi schemes; abusive naked short selling; fraudulent conduct associated with municipal securities transactions or public pension plans; and other fraudulent conduct.
IGT is a Nevada based corporation that is a subsidiary of IGT PLC, which is a public limited company that trades on the New York Stock Exchange (“NYSE”) as a foreign private issuer. The Whistleblower joined IGT in 2008, and prior to his termination on October 30, 2014, had been promoted to the position of Director, overseeing a budget exceeding $700 million. The Whistleblower was given only positive performance reviews during that time period, and his bonuses were in the highest range allowed for someone of his seniority. According to the Complaint, the Whistleblower’s supervisors had put him at the top of their “talent planning matrix,” with the potential to be promoted to a vice-president role.