KKC Worked to Ban the Use of Non-Disclosure Agreements and Hush Money Settlements
Kohn, Kohn & Colapinto led the effort to ban “hush money” payments in federal cases involving environmental and nuclear violations and the use of NDAs to silence whistleblowers.
Securities and Exchange Commission's Rule 21F-17 was adopted in response to the whistleblower reward provisions found in the Dodd-Frank Act. Rule 21F-17 forbids a covered employer from taking “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation.”
An SEC investigation was triggered by a complaint filed by Kohn Kohn & Colapinto on behalf of a former KBR employee, Mr. Harry Barko. Read a copy of the KKC’s February 19, 2014 complaint. While litigating against KBR the firm documented an entrenched practice at KBR that forced all its employees with knowledge of fraud to sign non-disclosure agreements that threaten them with termination if they chose to reveal fraud allegations to anyone outside of KBR’s legal department. The SEC took enforcement action on that complaint on April 1, 2015 and issued the first penalty against any company for attempting to silence a whistleblower. KBR was forced to pay a $130,000 penalty and agreed to cease this practice. The KBR enforcement action was widely applauded and served as the springboard for the series of related enforcement actions that followed.
Well before KKC’s efforts to get the SEC to police the use of restrictive non-disclosure agreements, KKC successfully led the efforts to outlaw a similar practice that was occurring in the nuclear industry.
KKC represented Joe Macktal, a journeyman electrician who worked for Halliburton Brown & Root building the Comanche Peak nuclear plant. After exposing serious safety defects at the plant, lawyers for Halliburton Brown & Root coerced Mr. Macktal into signing a settlement agreement that prohibited him from telling the Nuclear Regulatory Commission about his safety concerns. Macktal complained of the restrictions, but was warned that the powerful corporation would: “follow him to the ends of the earth,” and ruin him financially.
In 1988, Joe Macktal rocked the corporate world when he blew the whistle on these hush money agreements and testified at a Senate Environmental and Public Affairs Committee hearing with oversight of the Nuclear Regulatory Committee, which was forced to void these restrictive settlement agreements. Mr. Macktal’s case rendered such agreements illegal under federal whistleblower law and set national precedent for whistleblowers.
Mr. Macktal was a guest on the Phil Donahue show in 1996 during an early discussion of the importance of whistleblowers in our society that helped bring whistleblowers to the attention of the American public.
KKC successfully litigated the first whistleblower hush money cases, which resulted in a nationwide ban on restrictive settlements in nuclear and environmental cases, requiring government approval to ensure the right of employees to blow the whistle on safety issues was not compromised during the settlement process. The firm successfully litigated these hush money cases in the Fourth, Fifth and Ninth Circuits.
The Whistleblower’s Handbook: A Step-by-Step Guide to Doing What’s Right and Protecting Yourself details these protections in “RULE 20: Don’t Take Hush Money.”
If you have knowledge of Hush Money being paid to prevent reports of fraud or misconduct and would like to know how Kohn, Kohn & Colapinto can help you with your case, please complete our Contact Form to speak with one of our whistleblower attorneys.