The SEC has a history of taking aggressive positions on what an NDA can say (if your NDA does not explicitly have a carveout for ‘you can still say anything you want to the SEC’, they will argue that you’re trying to stop whistleblowers from talking to the SEC) and a reliable tendency to extract large fines and give a chunk of them to the whistleblowers.
This news might be better modeled as ‘OpenAI thought it was a Silicon Valley company, and tried to implement a Silicon Valley NDA, without consulting the kind of lawyers a finance company would have used for the past few years.’
(To be clear, this news might also be OpenAI having been doing something sinister. I have no evidence against that, and certainly they’ve done shady stuff before. But I don’t think this news is strong evidence of shadiness on its own).
Hmm. Part of the news is “Non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC”; this is minor. Part of the news is “threatened employees with criminal prosecutions if they reported violations of law to federal authorities”; this seems major and sinister.
Not a lawyer, but I think those are the same thing.
The SEC’s legal theory is that “non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC” and “threats of prosecution if you report violations of law to federal authorities” are the same thing, and on reading the letter I can’t find any wrongdoing alleged or any investigation requested outside of issues with “OpenAI’s employment, severance, non-disparagement and non-disclosure agreements”.
I’m confused by the word “prosecution” here. I’d assume violating your OpenAI contract is a civil thing, not a criminal thing.
Edit: like I think the word “prosecution” should be “suit” in your sentence about the SEC’s theory. And this makes the whistleblowers’ assertion weirder.
Yeah, I have no idea. It would be much clearer if the contracts themselves were available. Obviously the incentive of the plaintiffs is to make this sound as serious as possible, and obviously the incentive of OpenAI is to make it sound as innocuous as possible. I don’t feel highly confident without more information, my gut is leaning towards ‘opportunistic plaintiffs hoping for a cut of one of the standard SEC settlements’ but I could easily be wrong.
EDITED TO ADD: On re-reading the letter, I’m not clear where the word ‘criminal’ even came from. The WaPo article claims
These agreements threatened employees with criminal prosecutions if they reported violations of law to federal authorities under trade secret laws, Kohn said.
but the letter does not contain the word ‘criminal’, its allegations are:
Non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC;
Requiring prior consent from the company to disclose confidential information to federal authorities;
Confidentiality requirements with respect to agreements, that themselves contain securities violations;
Requiring employees to waive compensation that was intended by Congress to incentivize reporting and provide financial relief to whistleblowers.
Matt Levine is worth reading on this subject (also on many others).
https://www.bloomberg.com/opinion/articles/2024-07-15/openai-might-have-lucrative-ndas?srnd=undefined
The SEC has a history of taking aggressive positions on what an NDA can say (if your NDA does not explicitly have a carveout for ‘you can still say anything you want to the SEC’, they will argue that you’re trying to stop whistleblowers from talking to the SEC) and a reliable tendency to extract large fines and give a chunk of them to the whistleblowers.
This news might be better modeled as ‘OpenAI thought it was a Silicon Valley company, and tried to implement a Silicon Valley NDA, without consulting the kind of lawyers a finance company would have used for the past few years.’
(To be clear, this news might also be OpenAI having been doing something sinister. I have no evidence against that, and certainly they’ve done shady stuff before. But I don’t think this news is strong evidence of shadiness on its own).
Hmm. Part of the news is “Non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC”; this is minor. Part of the news is “threatened employees with criminal prosecutions if they reported violations of law to federal authorities”; this seems major and sinister.
Not a lawyer, but I think those are the same thing.
The SEC’s legal theory is that “non-disparagement clauses that failed to exempt disclosures of securities violations to the SEC” and “threats of prosecution if you report violations of law to federal authorities” are the same thing, and on reading the letter I can’t find any wrongdoing alleged or any investigation requested outside of issues with “OpenAI’s employment, severance, non-disparagement and non-disclosure agreements”.
I’m confused by the word “prosecution” here. I’d assume violating your OpenAI contract is a civil thing, not a criminal thing.
Edit: like I think the word “prosecution” should be “suit” in your sentence about the SEC’s theory. And this makes the whistleblowers’ assertion weirder.
Yeah, I have no idea. It would be much clearer if the contracts themselves were available. Obviously the incentive of the plaintiffs is to make this sound as serious as possible, and obviously the incentive of OpenAI is to make it sound as innocuous as possible. I don’t feel highly confident without more information, my gut is leaning towards ‘opportunistic plaintiffs hoping for a cut of one of the standard SEC settlements’ but I could easily be wrong.
EDITED TO ADD: On re-reading the letter, I’m not clear where the word ‘criminal’ even came from. The WaPo article claims
but the letter does not contain the word ‘criminal’, its allegations are: