Oklahoma City oil and gas company to pay $1.4 million after firing whistleblower

An Oklahoma City oil and gas company has agreed to pay $1.4 million to settle charges it used illegal separation agreements and fired a whistleblower who raised concerns internally about how it was calculating its reserves, according to U.S. Securities and Exchange Commission.

SandRidge Energy Inc. agreed to pay the penalty without admitting or denying the SEC’s findings that it violated a whistleblower protection rule, which went into effect in August 2011. The company often had prohibited outgoing employees from taking part in government investigations or releasing information that would be “potentially harmful or embarrassing to the company,” according to the SEC.

The employee who was fired had internally reported concerns about how the company was calculating its publicly reported oil and gas reserves. In fall 2012, the employee was hired to oversee reservoir engineers responsible for a portion of the company’s drilling program. Within months of being hired and over the next two and a half years, the whistleblower raised concerns to senior management about how the company calculated its oil and gas reserves, information periodically reported to the SEC.

In early December 2014, the employee was one of three employees offered promotions to vice president if they would assure that they “would support management and were committed to the company,” but the whistleblower declined the offer because of the “whistleblower’s ongoing concerns about the reserves process.” On March 31, 2015, senior management decided to fire the whistleblower after noting the whistleblower “was disruptive, and that the company could replace the whistleblower with someone ‘who could do the work without creating all of the internal strife.’” At the time, the company had yet to investigate the whistleblower’s concerns, except for an incomplete internal audit that had been started in spring 2014.

The employee was fired April 1, 2015. “The employee’s separation agreement also contained the company’s prohibitive language that violated the whistleblower protection rule,” according to the SEC.

Jane Norberg, chief of the SEC’s Office of the Whistleblower explained that whistleblowers “should be protected from retaliation regardless of whether they have filed a complaint with the SEC. This is the first time a company is being charged for retaliating against an internal whistleblower, and the second enforcement action this week against a company for impeding employees from communicating with the SEC.”

On Monday (Dec. 19), Virginia-based NeuStar Inc. agreed to pay $180,000 to settle a charge that its severance agreements impeded at least one former employee from reporting information to the SEC.

SandRidge (NYSE: SD) shares closed at $23.80, down 14 cents or 0.58%. In the past 52 weeks, the stock has traded between $26.85 and $15.75.