Facebook Whistleblower And SEC Protections

Facebook Whistleblower And SEC Protections

Have you ever thought to yourself: “I wonder how Facebook, whistleblowers, and the SEC intersect?” If so, today is your lucky day!

By now, most of you have heard about the bombshells former Facebook data scientist turned Facebook whistleblower Frances Haugen recently dropped. If you somehow missed this developing story, here is a summary of what has happened so far.

The Facebook Files Exposé Is Released

Before Frances Haugen revealed her identity, the Wall Street Journal released a stomach-churning exposé called “The Facebook Files” based, in large part, on documents Frances Haugen had shared with them (as an anonymous Facebook whistleblower). The “Facebook Files” opened with:

Facebook Inc. knows, in acute detail, that its platforms are riddled with flaws that cause harm, often in ways only the company fully understands…Time and again, the documents show, Facebook’s researchers have identified the platform’s ill effects. Time and again, despite congressional hearings, its own pledges and numerous media exposés, the company didn’t fix them. The documents offer perhaps the clearest picture thus far of how broadly Facebook’s problems are known inside the company, up to the chief executive himself. 

The “Facebook Files” then included a detailed, four-part review of Facebook’s behavior with revealing titles of: 

1. Facebook Says Its Rules Apply to All. Company Documents Reveal a Secret Elite That’s Exempt.
2. Facebook Knows Instagram Is Toxic for Many Teen Girls, Company Documents Show.
3. Facebook Tried to Make Its Platform a Healthier Place. It Got Angrier Instead.
4. Facebook Employees Flag Drug Cartels and Human Traffickers. The Company’s Response Is Weak, Documents Show.

Shortly after the Wall Street Journal published this report, the Facebook whistleblower behind it revealed herself to be Frances Haugen and gave a riveting interview on 60 minutes. Two days later, at a Senate subcommittee hearing, Frances Haugen again laid out her intimate knowledge of Facebook’s habit of “putting profits before people.” Since the substance of Ms. Haugen’s testimony was well known by this time, the Senate hearing’s real revelation was how it united a normally divided Senate around the concept that Facebook’s algorithms may actually be harmful to its users.  

Facebook and the SEC: Strange Bedfellows

How does the SEC fit into all of this? The answer is that Frances Haugen, through her lawyers, filed eight whistleblower complaints with the SEC based on her voluminous documentary evidence of Facebook’s conduct. The complaints state: 

Our anonymous client is disclosing original evidence showing that Facebook, Inc. (NASDAQ: FB) has, for years past and ongoing, violated U.S. securities laws by making material misrepresentations and omissions in statements to investors and prospective investors, including, inter alia, through filings with the SEC, testimony to Congress, online statements and media stories.

Frances Haugen’s SEC whistleblower complaints alleged that Facebook misled investors and the public about:

1. its role perpetuating misinformation and violent extremism relating to the 2020 election and January 6th insurrection;
2.  “transparency” reports boasting proactive removal of over 90% of identified hate speech when internal records show that “as little as 3-5% of hate” speech is actually removed;
3. the negative impact of Instagram and Facebook on teenagers’ mental and physical health;
4. its promotion of human trafficking/slavery/servitude;
5. the negative consequences of its algorithms, which claim to prioritize “meaningful social interactions” or “MSI” (e.g. reshares of friends’ posts) but which actually promote virality of polarizing misinformation and hate speech; 
6. equal enforcement of its terms given that high-profile users are “whitelisted” under its “XCheck” program;
7. bringing “the world closer together” where it relegates international users and promotes global division and ethnic violence
8. shrinking user base in important demographics, declining content production, and the true number and recipients of “Reach & Frequency” advertising. 

If you’ve read our blog on how SEC Whistleblower cases typically work and are wondering: “How is all of this public? I thought you got to remain anonymous forever if you were a SEC whistleblower?” then you would be right! 

Normally, the identity of an SEC whistleblower stays protected, even after the case is closed but Ms. Haugen took the extraordinarily brave step of making her allegations public for all to see. Her decision to do so helped reveal to the public what other Facebook employees with similar stories had mostly broadcast in private settings, such as Facebook’s internal “Workplace” message board.

Documents, Documents, Documents!

In real estate, the saying goes: “Location, location, location!” In whistleblower cases, it’s “Documents, documents, documents!” What makes Frances Haugen’s Facebook whistleblower case so powerful is that she based it on a treasure trove of documentary evidence. Although whistleblowers can (and do) bring cases to the government without documentary evidence, it’s no secret that the strongest cases have documents to back up the whistleblower’s allegations. 

This is especially important when a whistleblower is bringing a case against a giant company with powerful lawyers, like Facebook, who will do whatever they can to discredit the whistleblower. After all, it’s a lot harder for company executives to deny that they are doing something when they are presented in documents that say otherwise. 

Another layer of the document gathering inquiry in the Haugen case is what protections do whistleblowers have? In a normal case, providing documents to the SEC as part of a confidential filing would protect whistleblowers against retaliation. The Haugen case, however, presents the thornier question of “What happens if a whistleblower provides documents to the public?”  As of the time of this writing, Facebook executive Antigone Davis said Facebook will not retaliate against Ms. Haugen “for addressing Congress,” thus leaving open the possibility of other legal action (such as breach of contract).

At the end of the day, we applaud Ms. Haugen for her courage, diligence, and willingness to share her story with the public.  As we wait to see what happens with her case, please contact the Atlanta whistleblower attorneys at Bracker & Marcus LLC if you have a whistleblower case of your own.