Posts by: Michael Disotell

CEO’s Whistleblower Claims “Rest On Feet Of Clay”: Seventh Circuit Affirms Dismissal Of SOX and Dodd-Frank Case

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Earlier this month, the Seventh Circuit affirmed dismissal of a CEO’s whistleblower retaliation claims in a decision that should provide corporate defendants ammunition to fight SOX and Dodd-Frank whistleblower cases going forward.

In Verfuerth v. Orion Energy Systems, Inc., No. 16-3502 (7th Cir. Jan. 11, 2017), the plaintiff, founder and former CEO of Orion, claimed that Orion’s Board of Directors terminated him for cause in retaliation for making whistleblower complaints about perceived fraud on SEC reports and other managerial decisions.  Orion asserted that it terminated Verfuerth for numerous legitimate reasons, including falling stock prices, Verfuerth’s intimidating leadership style, high rates of senior management turnover, and other business disagreements such as reimbursement for Verfuerth’s costly divorce. READ MORE →

The Whistle Keeps Blowing: SEC Whistleblower Office Releases Its 2017 Annual Report

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The SEC released its Fiscal Year 2017 Annual Report (the “Report”) to Congress on the Dodd-Frank Whistleblower Program on November 16, 2017. 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, and discusses the OWB’s efforts to combat retaliation and other actions that muzzle whistleblowers. READ MORE →

Laying Down the Law(son): Jury Returns Defense Verdict in First SOX Whistleblower Case to Reach the U.S. Supreme Court

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An individual who convinced a divided U.S. Supreme Court in 2014 that Sarbanes-Oxley’s (“SOX”) whistleblower protections extend to the employees of a public company’s contractors and subcontractors has ultimately lost her case before a federal jury in Massachusetts, thus ending her ten-year legal saga.

Lawson claimed that in 2005 she spotted what she believed were accounting irregularities at Fidelity that allowed the company to charge millions of dollars in excessive fees to mutual fund shareholders.  She never called Fidelity’s information hotline to report the inaccuracies, but instead filed a whistleblower tip a year later with the SEC regarding the alleged fraud.  While the SEC did not pursue an enforcement action against the company, Lawson claimed that Fidelity managers and employees harassed her and retaliated against her for the reporting by giving her lower performance ratings and bonuses.  Lawson resigned in 2007 and sought whistleblower protections under SOX. READ MORE →

Joint Responsibility: Companies Should Keep an Eye on the Shifting Legal Landscape of Joint Employment

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As Congress considers a bill to change the definition of joint employment under two federal statutes, the Supreme Court is poised to decide whether to take up the issue under the Fair Labor Standards Act, the U.S. Department of Labor has withdrawn administrative guidance issued by the prior administration, and several states have enacted or considered joint employment legislation.  In this rapidly evolving legal landscape, companies may want to keep a close eye on a doctrine that can lead to unexpected legal exposure. READ MORE →

Looking the Other Way: European Court of Human Rights Grand Chamber Determines Employer Monitoring of Electronic Communications May Violate Employees’ Privacy

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In a case highlighting the European Continent’s approach to worker privacy, the Grand Chamber of the European Court of Human Rights ruled that employers may violate employees’ rights when monitoring their electronic correspondence in the workplace.  In Barbulescu v. Romania, the Grand Chamber reversed a prior decision from a smaller panel of the European Court of Human Rights (“ECtHR”) which had determined companies have far-reaching authority to monitor employees’ electronic communications—a similar standard to that which exists in the United States. READ MORE →

President Trump’s DOJ Takes Website Accessibility Regulations off the Table

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As those interested in website accessibility regulations under Title III of the Americans with Disabilities Act (“ADA”) know, the Department of Justice announced in May 2016 that it would issue a rule governing website accessibility standards for places of public accommodation to take effect in 2018. It now appears that we can expect an even longer indefinite delay. Last month, the Trump Administration launched its Unified Regulatory Agenda, which “provides an updated report on the actions administrative agencies plan to issue in the near and long term.” The Agenda is meant to effectuate Executive Orders 13771 and 13777, which require agencies to reduce unnecessary regulatory burden. According to the Office of Information and Regulatory Affairs, the Agenda “represents the beginning of fundamental regulatory reform and a reorientation toward reducing unnecessary regulatory burden on the American people. By amending and eliminating regulations that are ineffective, duplicative, and obsolete, the Administration can promote economic growth and innovation and protect individual liberty.” READ MORE →

Show Me The Money: SEC Awards $2.5 Million To Government Agency Whistlleblower

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

The SEC has awarded $2.5 million to a government agency employee who reported misconduct by a company to the SEC and caused the SEC to open an investigation. While the SEC order granting the award acknowledged that government employees may be prohibited from receiving whistleblower awards in some circumstances, such as when the employee works for a “law enforcement organization,” the SEC nevertheless determined that although “certain components of Claimant’s governmental employer have law enforcement responsibilities, [ ] those responsibilities are housed in a separate, different component of the agency at which Claimant works.” The SEC further explained that “the record is clear that this is not a situation where a claimant sought to circumvent the potential responsibilities that his or her government agency might have to investigate or otherwise take action for the misconduct.  We express no view on how an award determination might differ under that alternative circumstance.”  Ultimately, because the individual provided the Commission with “credible information . . . significant ongoing assistance, and relevant testimony that accelerated the pace of the investigation,” the SEC found the $2.5 million bounty justified.

In a press release announcing the award, the SEC noted it has now awarded approximately $156 million to 45 whistleblowers since the program’s inception.

Landing a New Gig: Lessons for the “On Demand” Economy

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In the past few years, the American workforce has shifted dramatically. By some estimates, as many as 53 million Americans are now self-employed. Many of them work in the “gig” or “on demand” economy, which has emerged as the new norm for doing business. In general, the gig economy offers traditional services, such as transportation, food delivery, and housing, in a more efficient way by connecting consumers directly to service providers. But, as with many innovations, gig economy companies face challenges from multiple fronts due to mounting legal pressures. Employment laws written in the 1930s haven’t kept up with the pace of innovation, and trying to apply them to the way services are delivered today is like trying to fit a square peg into a round hole. READ MORE →

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

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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

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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.

READ MORE →