Investing.com -- The U.S. Securities and Exchange Commission announced on Tuesday that a California-based health insurance provider agreed to pay a $340,000 fine to settle charges that it illegally persuaded outgoing employees to relinquish their ability to seek a monetary reward through a federal whistleblower program upon their departure from the company.
According to the SEC's order, Health Net, Inc. violated federal securities law by preventing departing employees which sought severance packages and other post-employment benefits from filing for awards offered by amended whistleblower laws. In 2011, the Dodd-Frank Wall Street Reform and Consumer Protection Act provided the SEC with the requisite authority to pay financial rewards to whistleblowers which provided timely information regarding potential violations of federal securities law.
At a minimum, the amended law required the applicant to provide information leading to successful enforcement action of at least $1 million in order to receive a monetary incentive, the SEC said at the time. Weeks later, Health Net allegedly added a provision to the company's severance policies, removing the SEC-specific language, while retaining restrictive language that prevented employees from qualifying for the monetary incentives, according to the SEC.
"Financial incentives in the form of whistleblower awards, as Congress recognized, are integral to promoting whistleblowing to the Commission," said Antonia Chion, Associate Director of the SEC Enforcement Division. "Health Net used its severance agreements with departing employees to strip away those financial incentives, directly targeting the Commission’s whistleblower program."
The settlement comes roughly one week after BlueLinx Holdings, an Atlanta-based building products maker, paid $265,000 to settle similar whistleblower charges with the SEC. In agreeing to settle the charges, neither company admitted to any wrongdoing in the respective cases.
Health Net agreed to make "reasonable efforts" to alert ex-employees who completed the severance agreements from a period of August, 2011 to October, 2015 from retroactively seeking the monetary incentives under Section 21F of the Securities Exchange Act.