The holiday season is past and many of us have returned
to work. However, if you are a Chief Compliance Officer (CCO) there is a gift
that you may wish to give yourself, it is "The
Whistleblower's Handbook - A Step-by-Step Guide to Doing What's Right and
Protecting Yourself" authored by Stephen
Martin Kohn, Executive Director of the National Whistleblowers Center.
I do not suggest that CCO's purchase this volume for their own protection,
although the former Chief Executive Officer (CEO) of Olympus might have been
able to use it before he was fired by the Olympus Board last October. No, I
suggest that CCOs purchase this because many others in your company may well do
so and it is the best single volume collection of all laws, rights and
obligations related to whistle-blowing that I have come across.
I thought about Kohn's book when I came across a couple
of whistleblower related items last month. The first one was an article in the
December 28, 2011 edition of the Wall Street Journal (WSJ), entitled "Internal
BNY Mellon Documents Show Panic" by Jean Eaglesham and Michael
Siconolfi. In the article they report on some of the emails and other
documentary evidence that whistleblower Grant Wilson was able to obtain during
the two year period that he was operating "as a government informant" while
employed by Bank of New York Mellon (BNY). The WSJ obtained this evidence
through an open-records request. Wilson was part of a group which brought a
series of whistleblower lawsuits against BNY, which have led to several states,
and the Manhattan US attorney, filing civil suits against BNY. Eaglesham and
Siconolfi also reported that "the bank's [BNY] foreign-exchange traders grew
concerned about a leaker" and in an earlier WSJ article, entitled "Secret
Informant Surfaces in BNY Currency Probe", reporter Carrick Mollenkamp
stated "BNY Mellon sought to discover the insider's identity and to fight the
lawsuits."
I quote that final line because of a December 15, 2011
Court of Appeals decision from the Seventh Circuit Court of Appeals, styled "DeGuelle
v. Camilli et al", which is a whistleblower retaliation claim. As
reported by Richard Renner, in an article entitled "Major
Victory for Whistleblowers in Seventh Circuit Says Retaliation is a RICO
Violation", in the Whistleblowers
Protection Blog, the Court of Appeals found valid a claim for damages under
the Racketeer Influenced and Corrupt Organizations Act (RICO) for the
retaliation against a whistleblower who provides information about corporate
fraud to law enforcement officers under Sarbanes-Oxley Act (SOX). SOX
itself makes it a felony to retaliate against whistleblowers who bring forward
such information.
The SOX provision in question states that Congress made it
a crime to:
"knowingly, with intent to retaliate, take[]
any action harmful to any person, including interference with the lawful
employment or livelihood of any person, for providing to a law enforcement
officer any truthful information relating to the commission or possible
commission of any Federal offense[.]" 18 U.S.C. 1513(e).
The novelty and significance of the Seventh Circuit
decision is that it held "When an employer retaliates against an employee,
there is always an underlying motivation. In this case, for example, the
motivation was to retaliate against DeGuelle for disclosing the tax scheme.
Retaliatory acts are inherently connected to the underlying wrongdoing exposed
by the whistleblower."
This means that any company which terminates or in any
other way retaliates against a whistleblower may have engaged in a violation of
RICO, which itself is a criminal statute. This becomes relevant to Foreign
Corrupt Practices Act (FCPA) whistleblowers through the Dodd-Frank
Whistleblowers provision. In excerpts from the final Securities and Exchanges
Commission (SEC) comments, they stated "Employees who report internally in
this manner will have anti-retaliation employment protection to the extent
provided for by Section 21F(h)(1)(A)(iii) of the Exchange Act, which
incorporates the broad anti-retaliation protections of Sarbanes-Oxley Section
806, see 18 U.S.C. 1514A(b)(2)." In other words, if a person reports
internally to a company or externally to the SEC of a FCPA violation and there
is retaliation against that person, a RICO claim may arise.
Ladies and Gentlemen, this is scary stuff so your company
had better be ready and have a robust investigative protocol in place when an
internal report is made. And train, train, train and really, really, really
mean it when your company says that it will not retaliate against an employee
for making an allegation of a FCPA violation.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
This publication contains general information
only and is based on the experiences and research of the author. The author is
not, by means of this publication, rendering business, legal advice, or other
professional advice or services. This publication is not a substitute for such
legal advice or services, nor should it be used as a basis for any decision or
action that may affect your business. Before making any decision or taking any
action that may affect your business, you should consult a qualified legal
advisor. The author, his affiliates, and related entities shall not be
responsible for any loss sustained by any person or entity that relies on this
publication. The Author gives his permission to link, post, distribute, or
reference this article for any lawful purpose, provided attribution is made to
the author. The author can be reached at tfox@tfoxlaw.com.
© Thomas R. Fox, 2012
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