WHISTLEBLOWERSAN HISTORICAL OVERVIEW FROM THE CIVIL WAR TO DODD-FRANK
PAUL FIORELLI, J.D., M.B.A.,C.C.E.PPROFESSOR OF LEGAL STUDIES, XAVIER UNIVERSITY
[email protected], (513)745-2050
Agenda
Sarbanes-OxleyQui Tam Timeline
BOUNTY PROTECTION
Dodd-Frank Dodd-Frank
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Qui Tam Timeline
1863
1943
1986
2009Civil War Today
WWII
Star Wars
Civil War Today
Shoddy - “poor sleezy stuff, woven open enough for sieves, and then filled with shearman’s dust ... Soldiers, on the first day’s march or in the earliest storm, found their clothes, overcoats, and blankets, scattering to the wind in rags or dissolving into their primitive elements of dust under the pelting rain.”
Qui Tam Timeline
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Civil War Today
Qui Tam Timeline
Civil War Today
“You can sell anything to the government at almost any price you’ve got the guts to ask.”
Jim Fisk
Qui Tam Timeline
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1863
Civil War Today
False Claims Act passed by Congress on March 2, 1863Before the FBI and DoJPrivate bar brought lawsuits on behalf of the government"qui tam pro domino rege quam pro se ipso in hac parte sequitur,"
“he who brings an action for the king as well as for himself."
Double damages fines, plus $2,000 civil fine per violation“Relator” entitled to 50% of the amount recovered
Qui Tam Timeline
TodayWWII
Professional RelatorsWaited outside courthouse
After Government filed criminal claim they copied this information into a “Civil False Claims Actions”
Collecting 50% of the Government’s claim 1943
Qui Tam Timeline
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WWII
•Congress changed FCA•Give DoJ supporting evidence•DoJ had 60 days to intervene
•Relator could receive “fair & reasonable compensation”•10% cap if Government intervened•25% if they did not 1943
Today
Qui Tam Timeline
1986
Star Wars
Strategic Defense Initiative doubled Defense spending, fraud also increased1986 FCA Amendments
From $2,000 to $10,000 per violationFrom Double to Triple damagesRelator -
increased from 10% cap to 10-20% if the government intervenedIncreased from 10-25% to 20-35%
Today
Qui Tam Timeline
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Qui Tam Timeline
2009Today
FERA
Fraud Enforcement and Recovery Act (FERA)Troubled Asset Relief Program (TARP)
Congress wanted to make sure individualscould sue, “unscrupulous mortgage brokers and Wall Street financiers.”
Awards
Qui Tam Awards
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2500000000
5000000000
7500000000
10000000000
1987-1991 1992-1996 1997-2001 2002-2006 2007-2011
9767949095
5888379685
4149188395
1085574146128468802
Qui Tam Awards
Fraud Statistic - Overview, October 1, 1987-September 30, 2011, Civil Division, U.S. Department of Justicehttp://www.crowell.com/pdf/FalseClaimStat.pdf
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WHISTLEBLOWERPROTECTION
Sarbanes-OxleyDodd- Frank
• “I’ve seen a mini-explosion of whistleblower claims by people who are marginal performers, if not malingerers.”
Victor Schacter, employment partner, Fenwick & West
• “Once high-performing, well-respected employees blow the whistle, suddenly they become, in retrospect, terrible, if not incompetent, employees.”
Jeffrey Ross, plaintiffs attorney, Dickson Ross
Sarbanes-Oxley
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Sarbanes-Oxley
• § 301• § 806• § 1107
Section 301
• Audit Committees of Publicly held companies
• Establish procedures for the receipt, retention & treatment of complaints
• Re: accounting, internal accounting controls, or auditing matters
• Confidential, anonymous reporting
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Section 806
• 18 USC 1514A (2005) - Whistleblower Protection (Sec. 806)
• No publicly traded company will discharge, demote or threaten an employee who reasonably believes a securities fraud or SEC violation has occurred, and reports to:
• Federal regulatory or law enforcement agency
• Member of Congress or Congressional committee
• Supervisor or person with authority to investigate
• File with D.O.L. (OSHA handles investigation and prosecution)
• Entitled to compensatory damages, reinstatement, back pay (with interest), litigation expenses and reasonable attorneys fees
Section 1107
“Whoever knowingly with the intent to retaliate, takes ANY ACTION harmful to ANY PERSON, including interference with the lawful employment or livelihood of ANY PERSON for providing to the law enforcement officer ANY TRUTHFUL INFORMATION relating to the commission, or possible commission of ANY FEDERAL OFFENSE, shall be fined under this title, or imprisoned for not more than 10 years, or both.
18 USC § 1513 - Retaliating against a witness, victim or informant.
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Dodd-Frank
• §922 of Dodd-Frank amended Securities Exchange Act of 1934
§922
• Bounty Provision
• Anti-retaliation provisions
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§922 - Bounty
• Amended Securities Exchange Act of 1934
• If SEC levies sanction exceeding $1,000,000
• Whistleblower providing original information entitled to 10-30% of the sanctions imposed
• Applies to both public and private companies
• Whistleblower may report to the SEC without reporting internally first
• May create a tension, and incentive to let problems fester, to grow larger for bigger bounty
§922 - Bounty
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Dealing with Concerns
Possible Problem Identification
Contact your supervisor
Contact the Directorof Operational Risk
or Employee Relations
Contact yoursupervisor’ssupervisor
Contact theHelpline/Hotline
May 25, 2011 SEC Adopts Rules for
Whistleblowers under Dodd-Frank
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SEC COMPLIANCE LINE
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§922- Anti-retaliation• Protection of Whistleblowers
• “No employer may discharge, demote, suspend, threaten, harass ... or discriminate against a whistleblower ...
• Relief
• Reinstatement with same seniority
• 2 x back pay owed
• litigation costs, expert witness, reasonable attorneys fees
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Action Items
• Increase Awareness
• Promote a sense of Agency
• Help Employees Feel Secure
• Help Employees Develop a Sense of Connectedness
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Awareness
• resources available to employees who have questions
• Behaviors the company considers wrong
• (for managers) the situations that constitute reports of misconduct
Agency
• Demonstrate to employees that they make a difference when they report
• Communications campaign
• Acknowledge and reward reporter’s courage
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Security
• Communicate the well-being of the company
• Provide resources to seek advice
• In high risk situations, give increased support
• Provide stories about those who reported, and were supported by the company
Connectedness
• Give opportunities for employees to connect around common interests in ethics
• Support employee involvement in their communities
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Support
• Train managers to respond to reports
• Develop ombuds programs
• Provide rewards to employees who report
• Offer support to families of employees who report misconduct
“If everyone has a sense of long-term stewardship over our assets every day, then people will also start to speak up more if they have concerns. I want us to sharpen our everyday attitude to operational and technical risk, to ensure it is the norm for people on the frontline to speak about risk, and for managers to listen.”
“I don’t assume that I always know the answer to something. I can draw on years of experience and intuition, but we need to be constantly enquiring and learning and listening to everyone – including the quietest voice in the room. We have to keep thinking the unthinkable – be it operational, financial or compliance risk. Nobody has all the answers. Only by working together and making the most of everyone’s capabilities will we begin to move the company forward.”
Listening to the Quietest Voice in the Room
Bob Dudley, CEO of BPReplaced former CEO, Tony HaywoodJuly 27, 2010
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ALL THAT IS NECESSARY FOR EVIL TO TRIUMPH IS FOR GOOD MEN (AND WOMEN) TO DO NOTHING.
EDMUND BURKE
ANY QUESTIONS?Please Contact
Paul [email protected]
(513)745-2050
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