In the Supreme Court’s first decision interpreting Dodd-Frank’s whistleblower retaliation provisions, the Court unanimously held that internal whistleblowing is not protected under Dodd-Frank. The highly anticipated ruling resolves a circuit split between the Second and Ninth Circuits, which held that such reporting was protected, and the Fifth Circuit, which held that it was not. The Court sided with the Fifth Circuit’s textual reading and held that no Chevron deference to the SEC’s interpretation of the statute was warranted because the statutory definition of “whistleblower” was clear. READ MORE
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 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
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
We have previously written about how Dodd-Frank retaliation cases are a mixed bag for employers and about the Supreme Court’s expansion of Sarbanes-Oxley (“SOX”) Whistleblower protections. A new decision from the Wisconsin District Court is another mixed win for employers who want to enforce arbitration agreements in Dodd-Frank and SOX retaliation cases. In a case of first impression in the Seventh Circuit, Wussow v. Bruker Corporation., No. 16-cv-444-wmc, 2017 WL 2805016 (W.D. Wis. June 25, 2017), the district court held that while arbitration of SOX whistleblower retaliation claims cannot be compelled, a similar cause of action for whistleblower retaliation under Dodd-Frank can be. READ MORE
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.
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
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.
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
