The ARB reasoned that even if Cardinal erroneously reported the $195,000 as income instead of recording it in the loan reserve account, the erroneous entries still showed that "Cardinal had in fact recovered $195,000 that it previously did not have," and that therefore Welch could not have had an objectively reasonable belief that the loan entries might mislead investors.
The ARB suggested that the misclassification of items in a financial statement can never "present[ ] potential investors with a misleading picture of [a company's] financial condition," so long as the misclassification does not affect the "bottom line." We disagree. As
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the SEC has explained in its amicus brief, "‘[t]he individual items, subtotals, or other parts of a financial statement may often be more useful than the aggregate to those who make investment, credit, and similar decisions.'" Statement of the SEC, Amicus Curiae, in Support of Neither Side at 3 (quoting the Financial Accounting Standards Board, Statement of Financial Accounting Concepts No. 5, Recognition and Measurement of Financial Statements of Business Enterprises 15-16, ¶ 22 (Dec. 1984)) (emphasis omitted). Thus, as the Department of Labor now concedes, communications about misclassifications in financial statements may, in some circumstances, form the basis for a Sarbanes-Oxley whistleblower action, and the ARB erred to the extent that it held to the contrary. Were this the only rationale for the ARB's holding, we would have to remand to allow the ARB to determine whether Welch could have reasonably believed that this misclassification violated relevant law.
B.
The ARB offered a second rationale for its dismissal of Welch's complaint, however. The ARB held that even if Welch's charges proved correct — that Cardinal reported the $195,000 as income in violation of GAAP, that Cardinal improperly restricted Welch's access to Larrowe & Co., and that Moore permitted individuals without expertise to make ledger entries — Welch had nonetheless failed to explain to the ARB how he could have had an objectively reasonable belief that these actions violated any of the laws listed in § 1514A.
After the ALJ ruled in favor of Welch, Cardinal filed a petition for review with the ARB, taking exception to the ALJ's findings of fact and conclusions of law, pursuant to 29 C.F.R. § 1980.110 (2007). Cardinal specifically took issue with the ALJ's rulings that Welch had an objectively reasonable belief that his communications identified violations of federal securities laws. See Resp't's Pet. for Review at ¶¶ 2, 4, 5 (Feb. 25, 2005). Cardinal argued that:
The ALJ erred in finding protected activity because Welch's complaints . . . did not allege conduct that constituted a violation of, or even a reasonably perceived violation of, federal securities laws. Conspicuously absent from the ALJ's
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analysis is any explanation of how the conduct Welch complained about constituted a violation of federal securities laws.
Br. of Resp't at 11, Welch v. Cardinal Bankshares Corp., ARB Case No. 05-064 (ARB May 31, 2007). Cardinal stressed that the ALJ had cited "no authority" to support the proposition that the identified conduct violated federal securities laws. Id. at 18; see also id. at 16 (asserting that Welch's communications "did not allege a violation of federal securities law" and that "[t]he ALJ fails to point to a single statute, regulation, or case" in support of his holding).
In his response before the ARB, Welch defended the ALJ's holding, but, like the ALJ, he utterly failed to explain how Cardinal's alleged conduct could reasonably be regarded as violating any of the laws listed in § 1514A. Although Welch advanced several arguments before the ARB, he supported these arguments only with irrelevant and inapposite authority or conclusory, general statements.5 The ARB therefore held that Welch had failed to establish that he engaged in protected activity. We find no error in this ruling. See, e.g., Hall v. U.S. Dep't of Labor, Admin. Review Bd., 476 F.3d 847, 861 n.8 (10th Cir. 2007) (explaining that the ARB is not required to "sua sponte raise legal theories referenced only obliquely by a party but not clearly articulated in its briefs"); cf. Fed. R. App. P. 28(b), (a)(9)(A) (requiring the appellee's brief to contain an argument, which must, in
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turn, include "citations to the authorities and parts of the record on which [that party] relies").
To the extent that Welch now explains his position and cites to relevant authority in his filings before this court, he attempts to raise new arguments relying on newly identified authorities. Welch has forfeited these new arguments by failing to raise them before the ARB. See, e.g., Taylor v. U.S. Dep't of Labor, 440 F.3d 1, 8-9 (1st Cir. 2005).
Of course, we do not suggest that a whistleblower must identify specific statutory provisions or regulations when complaining of conduct to an employer, nor do we address the burden upon the parties in the proceedings before the ALJ. See 29 C.F.R. §§ 1980.103-109 (2007). We simply hold that Welch completely failed to raise any relevant arguments before the ARB and may not now raise new arguments before this court.
V.
For the reasons set forth above, the judgment of the Administrative Review Board is