Whistleblower

SEC, CFTC and OSHA Officials Offer Candid Insights into Whistleblower Programs’ Results, Priorities, and Future Directions

On June 28, 2017, three prominent whistleblower law regulators spoke at PLI’s Corporate Whistleblowing in 2017, which was co-chaired by Orrick partners Mike Delikat and Renee Phillips. With the standard disclaimer that their comments and opinions were their own and not the official comments of their respective agencies, each spoke candidly about their agencies’ whistleblower program’s progress, challenges, and priorities.

SEC’s Office of the Whistleblower

The Chief of the SEC’s Office of the Whistleblower (“OWB”), Jane Norberg, kicked off the panel with her views on the current status and priorities of the OWB in the new administration: “From my point of view, the SEC’s whistleblower program is open for business and we are moving forward as we have in the past.”  She elaborated on the program’s results to date, noting that the Commission has received over 18,000 tips and awarded over $154 million to 44 tipsters, reflecting over $1 billion recovered through the SEC’s enforcement actions and related actions arising from whistleblower tips.  Norberg explained, “the real value of the program comes from individuals who help prevent ongoing fraud at a company while also giving victims a chance to recover some of what they lost.” READ MORE

Will the Whistle Be Silenced? Dismantling Dodd-Frank

Silver school PE sports whistle on white background Will the Whistle be Silenced? Dismantling Dodd-Frank

When Donald Trump was elected President of the United States in November, he vowed to “dismantle” the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). In its place, Trump promised to replace the law “with new policies to encourage economic growth and job creation.”  Now a bill known as the Financial CHOICE Act may initiate the process to do just that. But at least with respect to Dodd-Frank’s whistleblower provisions, the Financial CHOICE Act would leave largely intact the current bounty programs that have already awarded tipsters over $150 million in the U.S. and abroad.

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Rules of the Road: New CFTC Regulations Expand Whistleblower Bounty Program

The Commodity Futures Trading Commission (CFTC), published updated regulations Monday to bring its whistleblower bounty efforts more in line with the SEC’s.  The rules were proposed last August and generally provide more robust protections to would-be whistleblowers.  According to an agency press release, “In addition to strengthening anti-retaliation protections, the new amendments will add efficiency and transparency to the process of deciding whistleblower award claims and will, in many respects, harmonize the CFTC’s rules with those of the U.S. Securities and Exchange Commission’s whistleblower program.”  READ MORE

Whistleblower’s Ability to Breach Confidentiality Agreement – Do the Ends Justify the Means?

It is common for employers to require employees whose job duties require access to confidential, sensitive, and/or proprietary information to sign confidentiality and/or non-disclosure agreements as a condition of employment. However, at least in limited circumstances involving whistleblowers, employers are finding that they may not be permitted to enforce such agreements under all circumstances.  READ MORE

Circuit Split on Whistleblower Protections Widens: Ninth Circuit Follows Second Circuit and Splits with Fifth Circuit in Holding That Internal Whistleblowers Are Protected by Dodd-Frank

On March 8, 2017, a divided panel of the Ninth Circuit issued an opinion in Somers v. Digital Realty Trust Inc. that further widened a circuit split on the issue of whether the anti-retaliation provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act apply to whistleblowers who claim retaliation after reporting internally or instead only to those who report information to the SEC.  Following the Second Circuit’s 2015 decision in Berman v. [email protected] LLC, the Ninth Circuit panel held that Dodd-Frank protections apply to internal whistleblowers.  By contrast, the Fifth Circuit considered this issue in its 2013 decision in Asadi v. G.E. Energy (USA), LLC and found that the Dodd-Frank anti-retaliation provisions unambiguously protect only those whistleblowers who report directly to the SEC. READ MORE

Whistle While You Work?: First Court To Rule On DTSA’s Whistleblower Immunity Provision Treats It As An Affirmative Defense

The Defend Trade Secret Act (“DTSA”) contains a whistleblower immunity provision which could have a significant impact on employers. Until last month, however, no court had interpreted this provision which provides that no one “shall be held criminally or civilly liable under Federal or State trade secret law for the disclosure of a trade secret” made in confidence to a government official or an attorney and “solely for the purpose of reporting or investigating a suspected violation of law.” 18 U.S.C. § 1833(b).  Now, the U.S. District Court for the District of Massachusetts has.  In rejecting that assertion of the provision in a motion to dismiss, the court concluded that the party seeking the protections of the provision has the burden of at least asserting facts justifying its application. See Unum Group v. Loftus, No. 16-cv-40154-TSH, 2016 WL 7115967 (D. Mass. December 6, 2016). READ MORE

Germany’s Financial Regulator Implements New Electronic System Guaranteeing Whistleblowers Absolute Anonymity and Non-traceability

As we reported last summer, Germany’s Financial Supervisory Authority (BaFin) set up a centralized platform for receiving whistleblower complaints of alleged violations of supervisory provisions within the financial sector.

Beginning this year, the BaFin implemented a new electronic system, allowing whistleblowers to submit their reports. The system guarantees the informants absolute anonymity, while on the other hand enabling the BaFin to make contact regarding possible inquiries. Thereby, although taking place on anonymous basis, the newly installed communication channel is expected to give BaFin the opportunity to verify the truth value of the submitted information by posing further questions, e.g. regarding the background of the complaint. READ MORE

Whistle While You Work: SEC Whistleblower Office Releases Its 2016 Annual Report

The SEC released its Fiscal Year 2016 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 15, 2016. The Report analyzes the tips received over the last twelve months by the SEC’s Office of the Whistleblower (“OWB”), provides additional information about the whistleblower awards to date, discusses the OWB’s efforts to combat agreements that chill whistleblowers, and describes the OWB’s recent activity in the anti-retaliation arena.

Breakdown of Tips Received in FY 2016

The OWB reported a modest increase in the number of whistleblower tips and complaints that it received in 2016–4,218 tips in 2016 compared to 3,923 tips in 2015. Overall, the 2016 whistleblower tips were similar in number and type of whistleblower tips reported in 2015. As in 2015, the most common types of allegations in 2016 were Corporate Disclosure and Financials (22%), Offering Fraud (15%), and Manipulation (11%). Most whistleblowers, however, selected “Other” when asked to describe their allegations.

The OWB received whistleblower tips and complaints from all 50 states, the District of Columbia, and Puerto Rico. Domestically, the largest number of whistleblower complaints and tips were from California (547), New York (296), Florida (239), and Ohio (230). Additionally, the OWB received whistleblower tips from individuals located in 67 foreign countries. Of these, the countries from which the largest number of tips originated were Canada (68), the United Kingdom (63), Australia (53), the People’s Republic of China (35), Mexico (29), and India (20), with Germany, Ireland, and Taiwan being other countries from which the SEC received more than 10 tips.

Cybersecurity Whistleblowing Is Murkier Than You May Think

Employment Partner & Co-chair of Orrick’s Whistleblowing Task Force Renee Phillips, and Cybersecurity & Data Privacy Associate Shea Leitch, recently authored an article in Corporate Counsel magazine titled “Cybersecurity Whistleblowing Is Murkier Than You May Think.”

The article covers the emerging issue of cybersecurity whistleblowing and discusses scenarios in which cybersecurity whistleblowers can step forward. In addition, the authors touch on best practices for companies when addressing internal complaints and how to mitigate potential scrutiny from regulatory agencies. To read the full article, please click here.

Bounty-ful Pay Day and Former SEC Whistleblower Chief’s Move To Plaintiff’s Firm May Lead to Whistleblower Claim Increase

Two recent events may spur a rise in the number of high quality whistleblower tips filed with the SEC.  First, on August 30, 2016, the SEC announced that it had awarded a $22.4 million bounty to a former Monsanto financial executive, whose report of alleged accounting fraud led to the company’s $80 million settlement with the SEC in February.  This recent award brings the total amount paid out to whistleblowers by the SEC since the inception of the bounty program in 2011 up to $107 million, more than half of which has been paid out in 2016 alone.  This most recent award follows a string of seven and eight-figure awards in 2016, most notably topping a $17 million bounty in June 2016, and is second in size only to a September 2014 award of $30 million.  The $22.4 million award represents approximately 28% of Monsanto’s $80 million payment, just shy of the 30% award cap established for recoveries exceeding $1 million.

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