Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

This week, the FBI released a public service announcement by actor Michael Douglas encouraging the public to report financial fraud. On its face this sounds like a good thing. However, the FBI left out some key information, namely other avenues of reporting that are likely better for whistleblowers.

There are robust financial incentives for filing a claim with the Securities Exchange Commission (SEC), the Internal Revenue Service (IRS), and the Commodity Futures Trading Commission. NWC General Counsel David Colapinto told the Washington Post if a whistleblower goes “to the FBI, they are probably going to get zero. The FBI’s not obligated to do anything for them.” The FBI’s rewards would be solely at the discretion of the Department of Justice. This is scary. Just take a look at how they treat their own whistleblowers.

As pointed out by the Huffington Post, the financial crisis has put financial fraud on more people’s radar. The SEC has seen an increase in securities fraud reports, despite the fact that nearly 70 percent of Americans are unaware of the SEC’s whistleblower program (see recent report by Labaton Sucharow).

If the FBI is truly interested in encouraging people to come forward and protecting those who do, they should not hide the ball. Give workers information about all their rights, including the much more robust financial reward programs at the SEC, IRS and the CFTC.

We always tell whistleblowers who contact us that is in their best interest to know their rights before they blow the whistle. Make sure you educate yourself and consult an attorney before you blow the whistle.

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On February 3, 2012, two judges of the U.S. Court of Appeals for the First Circuit dismissed the SOX whistleblower claims of Jackie Lawson and Jonathan Zang. The case is Lawson v. FMR, LLC, Case No. 10-2240 (1^st Cir. 2012). To justify this dismissal, the two judge majority held that the SOX whistleblower statute was not remedial, that it is but a “relatively small part” of SOX, that the Department of Labor (DOL) deserves no deference in SOX cases, and that the SOX whistleblower protection does not apply to the employees of contractors of publicly traded companies. Judge Thompson, dissenting, got it right. Judges Lynch and Howard got it very wrong.

On the February 7, 2012, episode of Honesty Without Fear, I interviewed Indira Talwani, the attorney who represents Jackie Lawson. Thankfully, she has filed a petition for rehearing and asked the First Circuit to reverse its decision. We did not have enough time to cover all the issues raised in the decision. I am doing so here and now in this blog.

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Yesterday, the National Whistleblowers Center filed an amicus, or friend of the court, brief with the U.S. Court of Appeals for the Third Circuit in its case of Wiest v. Lynch, Case No. 11-4257. The main issue is whether the Court should adopt the ARB's broad "reasonable belief" standard for determining protection activity, or whether it should affirm the district court's narrow "definitively and specifically" standard. The brief also argues that Wiest's internal complaints should be protected under SOX's participation clause, and that he had no duty to inform management about the basis for his reasonable belief.  The Third Circuit adopted a similar broad scope of protection under the Clean Water Act in Passaic Valley Sewerage Comm. v. U.S. Department of Labor, 992 F.2d 474, 478-79 (3rd Cir. 1993). Hopefully, it will do the same for the Sarbanes Oxley Act (SOX).  This should be easier after the ARB issued its good decision in its Sylvester case.

Stephen M. Kohn, Executive Director of the National Whistleblowers Center (NWC) is the lead attorney for the brief.

UPDATE: The Third Circuit has scheduled oral argument in this case for the morning of September 25, 2012, in Philadelphia, Pennsylvania.  Available here are:

July 21, 2011, district court order of dismissal

November 15, 20122, district court order denying reconsideration

January 25, 2012, brief of appellant

February 15, 2012, NWC amicus brief

April 23, 2012, brief of appellees

April 30, 2012, Chamber of Commerce amicus brief

May 7, 2012, reply brief of appellant

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