Thursday, August 21, 2014

Is the Dodd-Frank Whistleblower Law Working?

Two news articles about the Dodd-Frank whistleblower law caught my eye this week. The first was an Op-Ed in the New York Times, in which Joe Nocera profiled a Mass Mutual whistleblower, who received a $400,000 reward—the upper level of the 10-30% of financial recoveries to which Dodd-Frank whistleblowers are entitled.

Regular readers of this blog may know that I met with the SEC, regulators and testified before Congress before the law went into effect about what I thought might be unintended effects on compliance programs. I have blogged about my thoughts on the law here and here

The Mass Mutual whistleblower, Bill Lloyd, complained internally and repeatedly to no avail. Like most whistleblowers, he went external because he felt that no one at his company took his reports seriously. He didn’t go to the SEC for the money. As I testified, people like him who try to do the right thing and try resolve issues within the company (if possible) deserve a reward if their claims have merit.

The second story had a different ending. The Wall Street Journal reported on the Second Circuit opinion supporting Siemens’ claim that Dodd-Frank’s anti-retaliation protection did not extend to its foreign whistleblowing employees. In that case, everything-- the alleged wrongful conduct, the internal reporting, and the termination--happened abroad. The employee did disclose to the SEC, but only after he was terminated, and therefore his retaliation claim relates to his internal reports. The court's reasoning  about the lack of extraterritorial jurisdiction was sound, but this ruling may be a victory for multinationals that may unintentionally undermine the efforts to bring certain claims to internal compliance officers. 

I proudly serve as a “management representative” on the Department of Labor’s Whistleblower Protection Advisory Committee with union members, outside counsel, corporate representatives, and academics. Although Dodd-Frank is not in our purview, two dozen other laws, including Sarbanes-Oxley are, and we regularly hear from other agencies including the SEC. I will be thinking of these two news articles at our next meeting in September.

I will also explore these issues and others as the moderator of the ABA 8th Annual Section of Labor and Employment Law Conference, which will be held in Los Angeles, November 5-8, 2014. Panelists include Sean McKessey, Chief of the SEC’s Office of the Whistleblower, Mike Delikat of Orrick, Herrington & Sutcliffe LLP, and Jordan A. Thomas of Labaton Sucharow LLP.

The program is as follows: 

 Program Title: Whistleblower Rewards:  Trends and Emerging Issues in Qui Tam Actions and IRS, SEC & CFTC Whistleblower Rewards Claims

Description:     This session will explore the types of claims that qualify for rewards under the False Claims Act and the rewards programs administered by the Securities & Exchange Commission, Commodity Futures Trading Commission, and Internal Revenue Service, the quantity and quality of evidence needed by the DOJ, IRS, SEC, and CFTC to investigate a case successfully, and current trends in the investigation and prosecution of whistleblower disclosures. The panel also will address, from the viewpoint of in-house counsel, the interplay between these reward claims and corporate compliance and reporting obligations.

If you can think of questions or issues I should raise at either the DOL meeting in DC next month or with our panelists in November, please email me at mnarine@stu.edu or leave your comments below.

http://lawprofessors.typepad.com/business_law/2014/08/is-the-dodd-frank-whistleblower-law-working.html

Business Associations, Corporate Governance, Corporations, Current Affairs, Ethics, Financial Markets, Marcia Narine, Securities Regulation | Permalink

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