Last week CNN reported that the Food and Drug Administration (FDA) took control of three of Johnson & Johnson’s Tylenol plants located at:
Las Piedras, Puerto Rico
Fort Washington, Pa
Lancaster, Pa
>Additionally, the FDA and the U.S. Department of Justice are pursuing criminal charges against two executives for failing to comply with federally-mandated manufacturing practices.
Johnson & Johnson’s reputation has been marred over the past couple years by a history of drug recalls and FDA violations at its manufacturing plants. The Wall Street Journal provided a detailed list of the recalls in its Health Blog:
In January J&J said it would pull 43 million bottles of certain Tylenol, Benadryl, Sinutab and Sudafed products because they were made at the company’s Ft. Washington, Pa., plant at a time when equipment may not have been properly cleaned.
In December the company said it was recalling all lots of Rolaids Extra Strength Softchews, Rolaids Extra Strength Plus Gas Softchews and Rolaids Multi-Symptom Plus Anti-Gas Softchews following consumer reports of foreign-particle contamination.
In October, there was a recall of 127,000 bottles of Tylenol 8-Hour caplets due to a musty odor.
In August, J&J’s DePuy Orthopedics unit pulled two hip implants off the market because of an unusually high rate of replacement surgeries.
In late 2009 there were recalls of Tylenol Arthritis Pain Caplets due to that musty odor issue.
The public places its trust in drug companies to provide safe and affordable drugs. It’s unacceptable for drug companies to betray the public’s trust by delaying a recall when the company has reason to know drugs were not properly manufactured. The drug company plant worker, quality assurance manager, and executive each have a duty to report unsafe drugs immediately and before those drugs reach the medicine cabinets of the public.
Whistleblowers are the key to detecting unsafe drugs early and forcing the management of drug companies to recall those drugs. We wrote a post in January about a classic example where the law worked: whistleblower Cheryl Eckard was awarded $96 million under the False Claims Act after reporting that her former employer, GlaxoSmithKline, failed to immediately recall drugs that were contaminated. It’s impossible to know how many lives may have been affected positively by her prompt reporting.
Eckard was awarded millions, because Congress designed the False Claims Act to reward whistleblowers for the risks they take when reporting companies committing fraud against the federal government. Since many prescription drugs and some over-the-counter drugs are purchased using government health care programs such as Medicare and Medicaid, drug companies defraud the federal government every time they knowingly sell unsafe drugs to the public. The whistleblower is in the unique position to detect unsafe drugs early and prevent disaster.
In Feldman v. Law Enforcement Associates Corp., Judge W. Earl Britt of the U.S. District Court for the Eastern District of North Carolina ruled that plaintiffs Paul Feldman and Martin Perry successfully stated a Sarbanes-Oxley whistleblower claim and could proceed to trial; defendants Law Enforcement Associates Corp. (LEA), John Carrington, et al., had failed to quash all of plaintiffs’ claims with their motion to dismiss. The court held that the Sarbanes-Oxley Act (SOX) does not require that the fraudulent conduct or violation of federal securities law be committed directly by the employer that takes the retaliatory action.
LEA is a manufacturer of security and surveillance equipment used by local, state, federal and international law enforcement agencies and by public and private companies. John Carrington is LEA’s founder and former majority shareholder. Feldman was LEA’s President for almost twenty years, and Perry was LEA’s Director of Sales – both were also directors of the corporation. Feldman and Perry discovered at LEA what they believed to be business transactions that violated U.S. export controls:
In 2005, Carrington was convicted of felonies relating to the illegal export of evidence collection products to China. The federal government fined Carrington, placed him on probation for one year, and prohibited him from making exports for five years. . . . Carrington resigned from LEA’s Board and also ended his management and majority ownership role at LEA. After Carrington’s departure, LEA entered into multiple contracts with a company called SAFE Source to export receivers and video equipment to police in the Dominican Republic. In September 2007, Feldman and Perry discovered that Carrington had an ownership interest in SAFE Source.
Because Carrington had been banned from making exports for five years and because he had an ownership interest in SAFE Source, plaintiffs maintain that it was illegal for SAFE Source to engage in the export business. Feldman and Perry notified LEA’s Board and then federal authorities:
In January 2008, LEA’s counsel, James Jorgensen (“Jorgensen”), and plaintiffs met with federal authorities at the [Department of Commerce] (DOC) to report Carrington’s illegal and undisclosed ownership of SAFE Source and the illegal export business that SAFE Source conducted with LEA. Approximately one week after plaintiffs reported these activities to the DOC, federal agents raided the headquarters of SAFE Source . . . and began a criminal investigation.
LEA then fired both plaintiffs. On September, 30 2009, plaintiffs sent an email and a letter to the SEC to report their concerns about the false 8k filing regarding their firings. Feldman sent a letter to the United States Department of Labor, Occupational Health and Safety Administration (OSHA) regarding LEA’s failure to report information to the SEC, including plaintiffs’ cooperation with investigations by the DOC into export violations by Carrington. Feldman and Perry also filed complaints with OSHA alleging LEA had violated federal whistleblower protections. On December 3, 2009, LEA removed plaintiffs from the Board of Directors.
Whistleblower claims under the Sarbanes-Oxley Act of 2002.
In order to make a prima facie showing of a SOX violation, an employee’s complaint must allege that:
the employee engaged in activity protected by SOX;
the employer knew, actually or constructively, of the protected activity;
the employee suffered an unfavorable personnel action; and
the circumstances raise an inference that the protected activity was a contributing factor in the personnel action.
For purpose of the motion to dismiss the court only addressed the first element: whether the plaintiffs have sufficiently pled that they engaged in protected activity under SOX. They must show that they complained to a “Federal regulatory or law enforcement agency . . . or a person with supervisory authority” over them, and their complaint “definitively and specifically” related to:
mail fraud,
wire fraud,
bank fraud,
securities fraud,
any rule or regulation of the SEC or
any provision of federal law related to fraud against shareholders.
In addition, plaintiffs must show that they had both “a subjective belief and an objectively reasonable belief” that the conduct they complained constituted a violation of federal law.
Adopting a broad scope of SOX protected conduct, the court held that SOX does not require that the fraudulent conduct or violation of federal securities law be committed by the employer that takes the retaliatory action. Plaintiffs maintain they reasonably believed that LEA’s involvement with SAFE Source caused LEA to engage in illegal exports and jeopardized LEA’s numerous contacts with federal customers that required compliance with export laws and regulations. Therefore, reporting a third party’s fraudulent behavior to an employer constitutes protected conduct under the whistleblower provisions of SOX.
In Brown v. Lockheed Martin Corp., the Administrative Review Board (ARB) affirmed the decision of the Administrative Law Judge (ALJ) who ordered Andrea Brown reinstated to her previous position at DOD contractor Lockheed Martin, awarded her $75,000 in damages, and requested she submit an application for attorney fees and costs. Beginning in June 2000, Brown worked as Communications Director for Lockheed Martin in Houston, Texas and reported to the Vice President of Communications, Wendy Owen. The ARB described how Brown first uncovered fraudulent activity at Lockheed Martin:
In approximately May 2006, Brown had difficulty getting responses on work-related matters from Owen. Brown discussed this difficulty with Tina Colditz, a communicator who reported directly to Owen, who also ran a Pen Pal program between Lockheed employees and U.S. soldiers in Iraq. Colditz told Brown that Owen had developed sexual relationships with several soldiers in the Pen Pal program, purchased a laptop computer for one soldier, sent inappropriate e-mails and items to soldiers in Iraq, and had traveled to welcome-home ceremonies to visit soldiers on the pretext of business when she actually took soldiers in limousines to expensive hotels for intimate relations rather than working. Colditz told Brown that she was concerned that Owen was expending company funds for these activities. Brown understood that most expenses employees incurred were passed on to the customer, presumably the government in this case. Brown knew that Lockheed’s standard business practice was to bill its costs to its customers. Colditz told Brown that she had personally witnessed these activities or that Owen had told her about them.
Brown was concerned that Owen’s actions were fraudulent and illegal, and reported Owen to the Ethics Director. Within a few days of Brown’s anonymous complaint, the Pen Pal program was discontinued, and Owen later changed positions but remained a vice president.
In March 2007, Lockheed Martin reorganized its Communications Department and in September 2007, Lockheed hired a new Communications Director. Management then denied Brown an office, responsibilities, and any leadership position. As a result, Brown had an emotional breakdown and sank into a very deep depression. The ALJ ruled these acts violated the whistleblower provisions of the Sarbanes-Oxley Act:
The ALJ found causation between the protected activity [of reporting fraud] and adverse action because he found that Owen clearly poisoned [supervisors’] opinions regarding Brown’s qualifications and quality of work. [Supervisors] relied on Owen in making evaluations of Brown. The ALJ found that Brown told [management] that Owen knew about Brown’s involvement in the ethics complaint and also that Owen was involved in the process of filling her job position, but Lockheed failed to remove Owen from the process. The ALJ found that Lockheed should have taken steps to see that Owen could not retaliate against Brown and, therefore, Lockheed managers were complicit in allowing the retaliation.
To learn more about the special protections afforded employees who report fraud under the Sarbanes-Oxley Act, click here.
In Winder v. Erste, Judge John D. Bates of the United States District Court for the District of Columbia ruled in favor of whistleblower Alfred Winder, holding that the 2009 amendment to the D.C. Whistleblower Protection Act should be applied retroactively to pending cases before the courts. The amendment altered the governing statute of limitations period and specified that D.C. Code Section 12-309, which contains the notice requirement, no longer applied to any “civil action brought under this section.”
In 1999, Winder was hired as General Manager of the DCPS Division of Transportation where he oversaw the operation of transportation services for special education students in the District. He was specifically brought in to assist the District in complying with several court orders. Winder alleges he was fired while on medical leave, because of disagreements regarding compliance with those court orders.
Winder’s original complaint was dismissed for failing to meet this notice requirement. Quoting Montgomery v. Dist. Of Columbia, this court wrote, “unless a contrary legislative intent appears, changes in statutory law which pertain only to procedure are generally held to apply to pending cases.” As a result, Winder is allowed to pursue his original complaint alleging that the D.C. Public Schools violated his rights as a whistleblower under the D.C. Whistleblower Protection Act.
“After the Bernard Madoff scandal broke the SEC had a lot of egg on its face,” says Jason Zuckerman, principal of [T]he Employment Law Group, a Washington, D.C.-based firm that represents whistle-blowers.
“It’s clear that they need to do more to be responsive to the allegations they get and to encourage employees to report corporate fraud,” says Zuckerman, who co-chairs the Whistleblower Subcommittee of the American Bar Association’s Labor and Employment Section’s Employee Rights and Responsibilities Committee.
The Dodd-Frank Act (DFA) was passed in July of 2010 to deter securities violations by corporations. The law includes whistleblower reward and protection provisions that require the SEC to provide a monetary reward up to 30% for whistleblowers who report violations to the SEC. Corporations often characterize whistleblowers as troublemakers and have consistently lobbied the SEC to weaken the DFA’s whistleblower provisions by adopting regulations requiring all whistleblowers to report violations internally to the corporation, rather than to the SEC. Zuckerman responded as follows:
…[W]histle-blower advocates like [T]he Employment Law Group’s Zuckerman maintain that the backlash against the SEC’s proposed rules is unfounded.
“I don’t think individuals are ever eager to blow the whistle,” says Zuckerman. He co-authored a comment letter to the SEC on Dec. 17 as a member of the whistle-blower advocacy group, Voices for Corporate Responsibility, along with Change to Win, the National Employment Lawyers Association and the Government Accountability Project. “What they want to do is keep their jobs, especially when we have such high unemployment.”
He says whistle-blower programs with robust monetary rewards have proven successful, citing the False Claims Act, whose provisions were strengthened in 1986. The act authorizes whistle-blowers to prosecute contractors for fraud on behalf of the U.S. government. Those claims have resulted in the recovery of more than $24 billion, Zuckerman says.
“There is tremendous empirical evidence that it works,” he says, citing large settlements against companies such as Pfizer and Eli Lilly. “If companies are so concerned about employees blowing the whistle directly to the SEC, then they should enhance their compliance programs to address employee concerns more effectively.”
The groups co-authoring the letter with Zuckerman also worry that the proposed SEC rules don’t address coordination of investigations by overlapping federal agencies, a need they say is “particularly critical where the SEC has limited resources and must respond to claims originating from a universe of approximately 6,700 publicly traded companies and related advisors and entities.”
A federal jury awarded Sarbanes-Oxley whistleblowers Shawn and Lena Van Asdale $2.2 million in a lawsuit they filed against their former employer International Game Technology (“IGT”). IGT is a publicly-traded company specializing in computerized gaming and slot machines. IGT’s management hired the Van Asdales in 2001 as in-house intellectual property attorneys, quickly promoting Shawn to the Director of Strategic Development and Lena to the Director of IP Procurement.
In 2003, Shawn reported to his supervisors that he believed Anchor Gaming, which merged with IGT in 2001, misled IGT regarding the validity of the patent for one of Anchor’s popular slot machine designs. If the patent is invalid, then the benefits of IGT’s merger with Anchor Gaming was likely overvalued and IGT’s shareholders may have been defrauded.
Following the merger, many from Anchor’s management accepted positions in IGT’s management, including Anchor’s General Counsel, David Johnson, who became IGT’s General Counsel. Johnson decided to fire Shawn seventeen days after Shawn received a positive performance review and three days after Shawn reported the potential shareholder fraud to Johnson in a meeting. Johnson then fired Lena after learning that she had requested access to allegedly sensitive information that Johnson believed she planned to use to assist her husband.
The Van Asdales brought their lawsuit in federal court alleging IGT violated the whistleblower protection provisions of the Sarbanes-Oxley Act (SOX), which prohibits publicly traded companies from retaliating against employees who report what they reasonably believe to be shareholder fraud. Whistleblowers do not have to prove any actual fraud took place – only that they reported potential fraud to their employer and that their employer retaliated against them. Initially, IGT prevailed against the Van Asdales when a federal judge granted their motion for summary judgment. However, Judge Bybee of the United States Court of Appeals for the Ninth Circuit reversed the federal court’s decision and allowed the lawsuit to proceed to trial where a federal jury awarded the Van Asdales $2.2 million in compensation for being illegally fired by IGT.
Does Attorney-Client Privilege Strip Company Lawyers of Whistleblower Protections?
According to Judge Bybee, attorney-client privilege alone does not warrant dismissal of a lawyer’s claim of whistleblower retaliation by an employer, stating:
There is no reason why the district court cannot limit any testimony to [allegations of shareholder fraud], while avoiding testimony regarding any litigation-related discussions that also took place. To the extent this suit might nonetheless implicate confidentially-related concerns, we agree… that the appropriate remedy is for the district court to use the many equitable measures at its disposal to minimize the possibility of harmful disclosures, not to dismiss the suit altogether. (citations omitted).
Furthermore, the court noted that the Sarbanes-Oxley Act expressly authorizes any “person” alleging unlawful retaliation to file a complaint with the Secretary of Labor and, thereafter, to bring suit in an appropriate district court.
The Sham Affidavit Rule Narrowly Applied
Under the sham affidavit rule, a party cannot create an issue of fact (and thus survive the opposition’s motion for summary judgment) by merely submitting an affidavit that contradicts the party’s prior deposition testimony. The rule is intended to strike at stalling tactics used by lawyers to keep their lawsuit alive through pretrial motions. The court briefly identified the facts that triggered the application of the sham affidavit rule in this case:
Johnson executed a sworn declaration stating that neither Shawn nor Lena made any suggestion to him regarding a potential fraud on the shareholders; however, this declaration directly contradicted Shawn’s affidavit. Typically, of course, such a stark factual dispute must be decided by a fact finder and cannot be resolved on summary judgment. In this case, however, the district court disregarded the portion of Shawn’s [affidavit] in which he said that he raised concerns of shareholder fraud with Johnson, because the district court viewed this portion of the [affidavit] as contradicting Shawn’s [prior] deposition testimony.
Judge Bybee explained why the sham affidavit rule must be applied narrowly and with caution:
… [I]t must be recognized that the sham affidavit rule is in tension with the principle that a court’s role in deciding a summary judgment motion is not to make credibility determinations or weigh conflicting evidence. Aggressive invocation of the rule [] threatens to ensnare parties who may have simply been confused during their deposition testimony and may encourage gamesmanship by opposing attorneys. We have thus recognized that the sham affidavit rule should be applied with caution.
…
First, we have made clear that the rule does not automatically dispose of every case in which a contradictory affidavit is introduced to explain portions of earlier deposition testimony, rather, the district court must make a factual determination that the contradiction was actually a ‘sham.’ Second, our cases have emphasized that the inconsistency between a party’s deposition testimony and subsequent affidavit must be clear and unambiguous to justify striking the affidavit. Thus, the nonmoving party is not precluded from elaborating upon, explaining or clarifying prior testimony elicited by opposing counsel on deposition [and] minor inconsistencies that result from an honest discrepancy, a mistake, or newly discovered evidence afford no basis for excluding an opposition affidavit. (Citations omitted).
Since nothing in Shawn’s affidavit flatly contradicted his earlier deposition testimony, and his affidavit was a legitimate attempt to explain or clarify prior deposition testimony, the district court incorrectly applied the sham affidavit rule when it struck portions of Shawn’s affidavit.
The Whistleblower Reasonable Belief Standard
To trigger the whistleblower protections of the Sarbanes-Oxley Act, the employee must have a subjective belief that the conduct being reported violated a securities law, and this belief must be objectively reasonable. Judge Bybee applied this standard to the Van Asdales, ruling:
It is not critical to the Van Asdales claim that they prove that Anchor officials actually engaged in fraud in connection with the merger; rather, the Van Asdales only need show that they reasonably believed that there might have been fraud and were fired for even suggesting further inquiry. To encourage disclosure, Congress chose statutory language which ensures that an employee’s reasonable but mistaken belief that an employer engaged in conduct that constitutes a violation… is protected. We think that the Van Asdales have met this minimal threshold requirement. (Citations omitted).
…
Requiring an employee to essentially prove the existence of fraud before suggesting the need for an investigation would hardly be consistent with Congress’s goal of encouraging disclosure.
For more information about the whistleblower protections of the Sarbanes-Oxley Act, click here.
Webinar: Using New Developments In Whistleblower Laws To Your Client’s Advantage March 10, 2011
11:00 a.m. Pacific/2:00p.m. ET/1:00p.m. CT/ 12:00 MT
Congress recently enacted several new robust whistleblower reward and protection laws, and strengthened existing whistleblower laws. This webinar will address new developments in whistleblower law, including recent decisions strengthening the rights of federal employee whistleblowers. Topics include:
The whistleblower reward provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act and the proposed regulations implementing those provisions.
Dodd-Frank Act amendments strengthening the anti-retaliation provisions of the Sarbanes-Oxley Act and the False Claims Act.
Three new whistleblower retaliation causes of action in the Dodd-Frank Act.
Recent case developments under Section 806 of the Sarbanes-Oxley Act, including the Fourth Circuit’s decision in Stone v. Instrumentation Lab. Co., 591 F.3d 239 (4th Cir. 2009) clarifying the right to de novo review in federal court.
New legislation protecting whistleblowing on food safety.
Recent developments under the False Claims Act, including legislation closing loopholes.
Recent case developments in federal employee whistleblower protection, including the MPSB’s recent decision in Conyers v. Dep’t Defense, 2010 MSPB 2047, December 22, 2010).
An overview of recently enacted federal whistleblower protection laws protecting workers in the transportation and health care industries.
NELA’s expert faculty will address these new whistleblower protection laws and offer practical tips for representing whistleblowers.
Presenters: Tom Devine
Tom Devine is Legal Director of the Government Accountability Project (GAP) where he has worked since January 1979. GAP is a nonprofit, nonpartisan public interest organization that champions the rights of whistleblowers—those employees who exercise freedom of speech to challenge abuses of power that betray the public trust. During his 29 years at GAP he has represented or informally helped over 4,000 whistleblowers to make a difference, such as stopping nuclear power plants that were accidents waiting to happen, deregulation of meat inspection and the next generation of Star Wars. He has been a leader in the campaigns to pass or defend nearly all major national or international whistleblower laws, from the Whistleblower Protection Act of 1989 for federal employees, and breakthrough laws creating the right to jury trials for corporate whistleblowers for corporate employees, to new U.N. and African Development Bank policies legalizing public freedom of expression for their own whistleblowers, the first time any Intergovernmental Organizations have adopted this cornerstone for global accountability. He has been an “Ambassador of Whistleblowing” for the State Department in over a dozen nations on speaking tours to advocate whistleblower rights as a cornerstone transparency reform for globalization. Mr. Devine has authored or co-authored numerous books, including Courage Without Martyrdom: The Whistleblower’s Survival Guide, law review articles, and newspaper op-ed articles.
Reuben A. Guttman Reuben A. Guttman is a director at Grant & Eisenhofer where he heads the Federal False Claims Act and whistleblower practice. Mr. Guttman earned his law degree at Emory University Law School in 1985 and his Bachelor’s Degree from the University of Rochester in 1981. He is a Senior Fellow and Adjunct Professor at the Emory University School of Law Center for Advocacy and Dispute Resolution. As part of a U.S. State Department program in conjunction with the Center for Advocacy and Dispute Resolution, he has been one of five visiting professors at Universidad Panamericana in Mexico City training Mexican judges and practitioners on oral advocacy and trial practice. Mr. Guttman is also faculty member of the National Institute of Trial Advocacy. He has been a guest lecturer at a number of universities including Jao Tong University in Shanghai, as well as Peking University and Renmin University in Beijing.
Stephen M. Kohn
Stephen M. Kohn is a founding member of the Washington, D.C. law firm of Kohn, Kohn & Colapinto, LLP and currently serves as the Executive Director of the National Whistleblower Center. In 1985 he wrote the first-ever legal treatise on whistleblower law, Protecting Environmental and Nuclear Whistleblowers: A Litigation Manual, and since then has written seven other books and numerous law journal articles on whistleblower law and civil liberties. Mr. Kohn started representing whistleblowers in 1984 as the Clinical Director and Director of Corporate Litigation for the Government Accountability Project. His clients have blown the whistle on billion dollar tax frauds, illegal “no-bid” contracts given to insiders for the “Reconstruction of Iraq,” and high level corporate and government misconduct. Mr. Kohn consulted with staff from the Senate Banking Committee during the drafting phase of the Dodd-Frank Act, and contributed suggestions to Section 21F of the Securities Exc hange Act that were ultimately incorporated into the law. He graduated magna cum laude from Boston University, earned a Master’s Degree in political science from Brown University and his law degree from Northeastern University.
Jason Mark Zuckerman Jason Zuckerman, a Principal at The Employment Law Group, P.C., has been recognized twice by Washingtonian magazine as a “Top Whistleblower Lawyer” and has substantial experience litigating whistleblower retaliation, qui tam, and wrongful discharge cases, including a qui tam action under the False Claims Act that settled for $57 million. Mr. Zuckerman serves as Co-Chair of the Whistleblower Subcommittee of the ABA Labor and Employment Section’s Employee Rights and Responsibilities Committee, Co-Chair of the Sarbanes-Oxley Subcommittee of the Fair Labor Standards Legislation Committee of the American Bar Association’s Labor and Employment Law Section, Co-Chair of the Whistleblower Committee of the District of Columbia Bar’s Labor and Employment Section, and has served as Co-Chair of the National Employment Lawyers Association’s Whistleblower Committee. In addition, Mr. Zuckerman serves on the Government Accountability Project’s Advisory Committee and has worked with public interest groups to enact new whistleblower protection laws and strengthen existing laws. Mr. Zuckerman co-authored a chapter on litigating whistleblower cases for Whistleblowing: The Law of Retaliatory Discharge (BNA Books), drafted a chapter on the D.C. Whistleblower Protection Act for the D.C. Practice Manual and is co-editor of the Whistleblower Law Blog. He graduated magna cum laude from Georgetown University and received his law degree from the University of Virginia.
How To Attend
Register for the webinar at this website. Join the live program from your office, home, or hotel room using a computer for the web portion and telephone for the audio portion. You may ask questions, participate in surveys, and post comments from your computer during the program. You may also invite colleagues to watch the program from a shared computer or projection screen and speakerphone. Please note that credit (if available) is only provided to registered attendees participating at their own computer and phone. Simple instructions with a link to the program will be sent when you register.
Credit If applicable, you may obtain credit in multiple jurisdictions simultaneously for this program (see pending/approved list below). Registrants in jurisdictions not listed below will receive a Certificate of Attendance/Completion that may or may not meet credit requirements in other jurisdictions. Where applicable, credit will be only awarded to a paid registrant attending the live program at their own computer and phone.
This program has been approved for or is pending credit for:
CA, CO, IL, VA
The U.S. Department of Labor (DOL) should be commended for requesting an additional $6 million in funding for its whistleblower programs, which would allow them to hire an additional 45 full-time employees. The DOL enforces 21 federal statutes enacted by Congress to protect employees who report illegal or unsafe activity from being retaliated against by their employer. Deficiencies in the program were recently highlighted in a Government Accountability Office report and the DOL’s own internal investigations. Attorneys at the The Employment Law Group® and other law firms were invited by the DOL to provide feedback on how the whistleblower programs could be improved. The recommendations included, among other ones, the following:
OSHA should update the training of OSHA investigators so that their interpretation of the law is consistent agency-wide.
OSHA should further develop its relationships with other law enforcement agencies so that OSHA can leverage their expertise.
OSHA should issue a plain English procedural guide for complainants who are not represented by counsel.
The DOL’s request for additional funding underscores the seriousness with which the DOL intends to combat whistleblower retaliation. To learn more about the federal statutes that prohibit whistleblower retaliation, click here.
The Employment Law Group® attorney Jason Zuckerman is quoted in an article titled Whistle-blower Debate Heats Up on CFO.com regarding the Securities and Exchange Commission’s proposed regulations for implementing the whistleblower provisions of the Dodd-Frank Act. The Act requires the SEC to provide a monetary reward to whistle-blowers who voluntarily report original information leading to the recovery of more than $1 million from the accused companies. Zuckerman compares the new whistleblower program to the highly successful qui tam provisions of the False Claims Act where a financial incentive helped the government recover over 28 billion dollars:
“The evidence is clear that providing a financial incentive for people to report corporate fraud has worked very well,” says Jason Zuckerman, a principal of The Employment Law Group®, which represents whistle-blowers.
Regarding a projected increase in tips, Zuckerman states:
. . . if you were to talk to people who lost their life savings to corporate fraud, “you would find it hard to argue that, if the SEC has to take some time to separate the wheat from the chaff, then this program is not worthwhile.”
Those opposed to the rules also see an issue with the Dodd-Frank Act allowing whistle-blowers to report allegations of fraud directly to the SEC.
To be eligible for protection under the whistleblower provisions in the Sarbanes-Oxley Act, [whistleblowers previously] have had to first inform their employers through internal compliance programs.
Zuckerman responds:
If a CEO is behind an illegal scheme to stimulate short-term profits, the company’s compliance program is unlikely to be effective, Zuckerman points out, and an internal “investigation” could include tampering with evidence or witnesses.
Most whistleblowers do not want to change careers and would readily report fraud through their employer’s compliance program if they believed their employer would not retaliate against them. The whistleblower, not the employer, is in the best position to decide whether to report illegal activity directly to the SEC or through the employer’s compliance program. Click here to learn more about the Dodd-frank Act.
Senator McCaskill (with Senator Jim Webb co-sponsoring) re-introduced to the Senate a bill titled the Non-Federal Employee Whistleblower Protection Act of 2011 which would extend whistleblower protections to employees of federal government contractors and employees of institutions receiving federal grants, including state and local governments. Whistleblowers who report fraud, waste, and abuse would be protected from retaliation by their employer. For more information on federal whistleblower laws, click here.
The Employment Law Group® law firm produces this blog to provide general news and information about the field of whistleblower law. The blog does not contain any legal advice upon which you should rely or act. Please read our disclaimer.
