Posted by CHUA Sing Nee, Year 3 undergrad at the School of Social Science, Singapore Management University
About a year ago, we ran a post positing that 2014 would be huge for corporate whistleblowers on a number of fronts. The experts with whom we spoke then hit the nail on the head: every prediction came true. They were right about more Securities and Exchange Commission whistleblower awards arriving (including one for a record $30 million-plus), False Claims Act cases hitting a new record and courts further defining who counts as a whistleblower. Here what some whistleblower experts think may happen in the year ahead:More focus on employment contracts. The SEC has said it is scrutinizing companies’ use of contracts that forbid employees from reporting suspected wrongdoing to the government. “That’s of very big interest to them,” said Rebecca Katz, a member at law-firm Motley Rice LLC and head of its SEC whistleblower practice.
That could mean the agency could take action against a company that has used these contracts, Ms. Katz said.
The SEC will likely continue to focus on whistleblower retaliation, said Jordan Thomas, partner and head of the whistleblower representation practice at law-firm Labaton Sucharow LLP. “It’s becoming a standard area of inquiry with cases involving whistleblowers,” he said.
Last year, the agency brought its first-ever whistleblower retaliation case against a hedge-fund advisory firm.
Companies may become more cautious with tipsters. Given the spotlight on the way firms handle internal tipsters, companies will likely be more careful when employees raise concerns.
“Clients are calling me more and more to investigate on the front end,” meaning immediately when an employee makes a complaint, Proskauer LLP partner Steve Pearlman said. “Companies are being much more careful with how they act towards whistleblowers, even when they believe the whistleblower may be mistaken.”
Being more careful means avoiding any action against an employee that could be seen as retaliation, he said. For instance, if an employee the company was about to fire raised concerns that were then found to be unwarranted, the company may have gone ahead and fired that employee in the past. But now they may think twice about this to “avoid any misperception,” Mr. Pearlman said.
Record False Claims Act recoveries should continue. The federal government got a record nearly $5.7 billion in civil settlements and judgments under the False Claims Act in fiscal 2014.
The False Claims Act allows private litigants to bring suits claiming fraud against the government and share in the monetary recovery. In recent years, health-care and defense companies have had to shell out a lot in connection with these suits.
Law-firm Gibson Dunn projects that 2015 will be another big year in this area, judging by the fact that the Justice Department has already announced 22 settlements for the first quarter of the 2015 fiscal year, which began in October 2014.
Questions will linger for foreign whistleblowers. White-collar lawyers have saidthey are coming across a proliferation of foreign whistleblowers in their work. But whether these tipsters have the same protections as U.S. whistleblowers under the 2010 Dodd-Frank financial overhaul, which established the SEC’s program, remains unclear in the wake of recent court rulings.
“These foreign whistleblowers are a big force, they’re getting awards, they’re reporting things. But there’s a serious question of whether they have protections,” said Ms. Katz of Motley Rice.
Foreign tipsters made up about 12% of the tipsters submitting information to the SEC in fiscal 2014, according to the agency. But whether the Dodd-Frank whistleblower provisions intended to protect tipsters from retaliation apply equally to these foreigners remains unclear. A federal appeals court in August held that these anti-retaliation provisions don’t apply to a former Siemens China staffer.
AsianExtractor: Unearthing Accounting Fraud in Asia 