Whistleblower Protection Blog

NWC Executive Director To Lead Whistleblower Workshop In Kenya

Stephen M. Kohn, Executive Director of the National Whistleblower Center (NWC), has travelled to Kenya this week to teach a workshop on wildlife whistleblowing. The event is hosted by the International Fund for Animal Welfare (IFAW).

The workshop will take place in Namanga, Kenya, a town that sits on the Kenya-Tanzania border. Attendees will include those working in the region to combat wildlife trafficking; illegal, unreported, unregulated (IUU) fishing; and illegal logging.

Kohn has represented whistleblowers for over 30 years, setting numerous precedents that have helped define modern whistleblower law. He has also published nine books on whistleblower law, including The New Whistleblower’s Handbook, the seminal guide to all things whistleblower today.

In the workshop, Kohn will discuss how whistleblower laws can be used to fight wildlife trafficking on a global scale. There are currently over 40 wildlife protection laws in the U.S. with provisions to reward those that report valuable information on wildlife crime. Rewards are available for both U.S. citizens and non-citizens alike. These provide a powerful incentive for insiders to step forward and share information that can halt wildlife crime in its tracks.

Kohn’s seminar is a part of the work of NWC’s Global Wildlife Whistleblower Program, which provides a platform where people can securely and confidentially report wildlife crimes. The NWC Global Wildlife Whistleblower Program’s mission is to educate people, worldwide, about the powerful set of legal tools at their disposal.

As Kohn writes in The New Whistleblower’s Handbook, “when fully implemented, the wildlife whistleblower laws will have significant worldwide impact.” This training is a crucial part of making that reality happen.

Photo credit: Leslie Rose Photography

Customs Fraud, Wildlife Crime, and the Value of Whistleblowers

In late 2017, federal prosecutors in the Southern District of New York (considered one of America’s most important judicial districts) settled a case against Notations, a garment wholesaler. In a case originally brought by a qui tam relator (a.k.a. a whistleblower), Notations admitted to ignoring repeated warning signs that its Chinese importer was lying about the value of its imported goods to avoid paying customs fees. As a result, Notations has agreed to pay $1 million in fees.

While the Department of Justice did not release the portion of the award that went to the whistleblower, under the False Claims Act a whistleblower plaintiff is entitled to somewhere between 15% and 30% of the total reward.

The principles of this case can and should be applied to the wildlife crime context. As Stephen M. Kohn, Executive Director of the National Whistleblower Center, explained in his award-winning article, expanded use of wildlife whistleblowing could be a boon to animals and the environment. Criminal networks that import wildlife have been known to falsely label their animal products when they enter the country. This is a crime. Customs officials need to be trained to detect such fraud and prosecutors should seek to bring more wildlife crime cases.

The False Claims Act and other laws with whistleblowers provisions like the Lacey Act have the potential to be powerful tools for unearthing wildlife crime. NWC, as a part of its mandate as a Grand Prize Winner of the Global Crime Tech Challenge, is promoting the existence of these reward laws and has a global wildlife program to inform wildlife whistleblowers of their rights.

The Notations case demonstrates how falsified customs documents, whistleblowers, and the False Claims Act intersect. The next frontier for such cases should be wildlife crime.

Read the full DOJ press release here.

NWC Executive Director Stephen Kohn Featured in Washington Post Video

The release of the Steven Spielberg film The Post (starring Tom Hanks and Meryl Streep) has prompted a new upsurge in interest about whistleblowers. In 1971, Daniel Ellsberg released the Pentagon Papers to the New York Times, Washington Post and other newspapers which published the shocking revelations of how the American people had been lied to about the Vietnam War for decades.

In an interview with the Washington Post, Stephen Kohn, executive director of the National Whistleblower Center, explains how whistleblowing is a fundamentally American creed. The country’s original whistleblower law dates to the founding fathers and whistleblower protections can be found in three places in the First Amendment: the freedom of speech (so whistleblowers can inform about misconduct), the freedom of the press (so whistleblowers can get their message to the public), and the ability to petition the government for redress (so whistleblowers can seek institutional change).  The release of the Pentagon Papers and the Courts’ subsequent protection of Ellsberg and the press reaffirmed these core American values.

Watch the video here: What is a whistleblower: How to be a journalist

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Stephen M. Kohn, is an partner in the Washington, D.C. based law firm of Kohn, Kohn & Colapinto and the author of The New Whistleblower’s Handbook. Mr. Kohn created a special online resource for each of the rules contained in the book to be used as a tool for his readers: 30 Rules and Resources for Whistleblowers.

LuxLeaks: Antoine Deltour Recognized as Whistleblower by Luxembourg Court

LUXEMBOURG CITY, LUXEMBOURG | January 11, 2018 — A Luxembourg court today has overturned the verdict against a “LuxLeaks” whistleblower who was convicted of leaking thousands of documents that revealed tax breaks for multinational firms. Former PricewaterhouseCoopers (PwC) employee Antoine Deltour was serving a six-month suspended sentence for leaking files related to tax-evasion schemes.  

Mr. Deltour is one of the two whistleblowers behind the LuxLeaks scandal in which nearly 30,000 documents exposed deals struck between Luxembourg and a long list of multinationals, including Amazon, Apple, IKEA, and Pepsi.

“Today is a victory,” Mr. Deltour said as he left the courtroom.

This decision is a significant step in the protection of whistleblowers in Europe,” Mr. Deltour’s lawyer, William Bourdon, told AFP news agency.

“For the first time in Europe, a high court recognizes the jurisprudence of the European Court of Human Rights,” Mr. Bourdon added.

Luxembourg’s highest appeals court said Mr. Deltour was wrongly accused and that he should have been fully recognized as a whistleblower as defined by the European Court of Human Rights. This status allows individuals to violate certain obligations, such as business secrecy, if it serves the public interest.

However, the sentence against Mr. Deltour’s colleague Raphael Halet, who received a 1,000-euro fine after an appeal, was upheld as the court said he did not fit the whistleblower definition. The Court found that the documents he had disclosed, “did not provide any hitherto unknown information that could revive or fuel the debate on tax evasion.”

For #MeToo Moment to Last, Strengthen Whistleblower Protections

(This article was published on January 8, 2018 in the Baltimore Sun.)

The Golden Globe Awards this Sunday put the #MeToo movement in the spotlight. Many actresses wore black to express to solidarity, and a number of them brought important activists as their dates. Millions were raised for a legal defense fund to help women fight sexual harassment and abuse.

This is good news for women around the country. The #MeToo movement has shown that women who have been harassed in the workplace are far from alone, and that even powerful men can be brought down for their misdeeds. It has demonstrated that consumers, companies and voters do not want to bolster misbehaving men. Increased funding for legal organizations will not only help women bring cases but also improve case law through impact litigation.

Yet for this moment to represent a permanent shift rather than a large aberration, whistleblower laws and policies protecting those who disclose inappropriate sexual behavior by colleagues and bosses must be significantly strengthened. It is notable that many women who have come forward to report misconduct (or much worse) have themselves been prominent figures: actresses and singers like Taylor Swift, Ashley Judd, Rose McGowan and Alyssa Milano, and media personalities like Megyn Kelly and Wendy Walsh all feature among the “Silence Breakers” who were named person of the year by Time magazine. Salma Hayek’s recent article describing predatory and revolting behavior toward her by film mogul Harvey Weinstein catapulted to the most read article on the New York Times site.

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Whistleblowers Save Taxpayers $3.4 Billion

Last week, the Department of Justice announced that it collected $3.7 billion in settlements and judgements from False Claim Act (FCA) cases against the government in 2017. The FCA is a statute that allows individual whistleblowers, called relators in this context, to file lawsuits on behalf of the government.

Known as Lincoln’s Law, the FCA was originally passed in the Civil War when avaricious contractors supplied the Union with faulty weapons and failing supplies. Over the last decade, FCA cases filed have grown in number and become one of the government’s premier tools for policing corporate fraud.

The cases this year covered a wide range of unscrupulous conduct. Several pharmaceutical companies bilked Medicare to the tune of hundreds of millions of dollars while two housing finance companies endorsed mortgages for federal insurance that failed to meet basic underwriting standards. Agility Public Warehousing, a Kuwaiti-based military food provider, agreed to pay $95 million for overcharging the US government for fruits and vegetables meant for American soldiers fighting in the Middle East, while Bechtel Corp was fined $125 million for fraudulently charging the Department of Energy for deficient nuclear materials.

Of the $3.7 billion collected, a stunning 92% ($3.4 billion) came from lawsuits brought by whistleblowers under the False Claims Act.

Whistleblowers were the driving factor behind these victories for the taxpayer. Of the $3.7 billion collected, a stunning 92% ($3.4 billion) came from lawsuits brought by whistleblowers under the False Claims Act. Chad Readler, Acting Assistant Attorney General of the Justice Department’s Civil Division, stated “[b]ecause those who defraud the government often hide their misconduct from public view, whistleblowers are often essential to uncovering the truth.” He added further, “the Department’s recoveries this past year continue to reflect the valuable role that private parties can play in the government’s effort to combat false claims concerning government contracts and programs.”

Readler is exactly right and the DOJ should be commended for embracing whistleblowers. Unfortunately, not all parts of the government seem to have gotten the memo. The recent tax bill dropped two vital whistleblower amendments, and will make life easier for tax cheats as Executive Director Steven Kohn recently explained. Meanwhile, the Department of Interior has failed to effectively publicize wildlife crime whistleblower provisions that have been signed into law for decades.

Incentivizing whistleblowers is crucial for the detection and enforcement of fraud. Individuals inside companies are best placed to know about corporate misfeasance, and they are uniquely positioned to report on and collect evidence of civil and criminal violations occurring behind the scenes at a company.

Strong whistleblower laws and aggressive enforcement of whistleblower provisions already on the books will save taxpayers money and make crime easier to uncover. For 2018, let’s hope all the federal government realizes this important truth.

Key Whistleblower Protections Cut from Tax Reform Law, Criminal Fraudsters Protected

Washington, D.C. December 16, 2017. The final version of the Tax Cuts and Jobs Bill has eliminated two key provisions to protect whistleblowers who report major criminal tax frauds.

The National Whistleblower Center today issued an Action Alert asking the American public to oppose the tax bill based on the elimination of these two critical anti-fraud protections.

The House-Senate Conference cut Section 11079 of the Senate bill, which would have ensured that whistleblowers who report criminal tax frauds are covered under the whistleblower tax law.  The provision made certain that whistleblowers could qualify for rewards based on criminal fines and sanctions collected by the government that was based on their original information.  Section 11078, which was also cut, ensured that corporate whistleblower would not have been subjected to double-taxation on rewards in securities fraud cases.

The Senate had unanimously approved the two amendments, but both were cut from the final version of the bill approved in the House-Senate conference over the weekend.

“This is a betrayal of the public trust. Whistleblowers, especially those who work in foreign banks that engage in money laundering (such as Deutsche Bank), are without adequate protection even as they risk their careers to expose criminal frauds,” explained Stephen M. Kohn, Executive Director of the National Whistleblower Center.

Links:

Whistleblower Reforms Cut from Final Tax Bill

Criminal Tax Fraudsters Protected Under Trump Tax Law.

Washington, D.C. December 16, 2017. The final version of the Tax Cuts and Jobs Bill has eliminated a key provision that would have protected whistleblowers who report major criminal tax frauds.

As we have previously reported, the IRS and Department of Justice have argued that whistleblowers who report criminal tax frauds, such as those committed by Swiss banks, should be excluded from the tax whistleblower law. The Senate had unanimously approved Section 11074 (“Clarification of Whistleblower Awards”), which would insure that whistleblowers who testify in Grand Juries, or who report criminal tax frauds, such as those committed by big banks, would be covered under the whistleblower law.

However, Section 11074 was cut from the final version of the bill approved in the House-Senate conference.

“This is a betrayal of the public trust.  Whistleblowers, especially those who work in foreign banks that engage in money laundering (such as Deutsche Bank) are without protection, even as they risk their careers to expose criminal frauds,” explained Stephen M. Kohn, Executive Director of the National Whistleblower Center.

“The elimination of these protections in the tax bill particularly hurts international bankers with direct knowledge of how U.S. citizens illegally hide their wealth overseas.  These whistleblowers face criminal penalties and jail for violating their country’s bank secrecy laws. Ultimately, the America people will lose billions of dollars in tax revenue to tax cheats who use Swiss banks and money laundering schemes promoted in Panama and the Cayman Islands to avoid paying taxes,” Kohn added.

Despite this setback, the National Whistleblower Center continues to fight the arguments advanced by the Justice and Treasury Departments, that whistleblowers who report criminal tax frauds are excluded under current law.  “It is disgraceful that the Justice and Treasury Departments are advocating on behalf of criminal tax cheats in federal court proceedings. We hope that the courts will set this right,” said Kohn.

The House-Senate conference also cut a provision from the Senate version of the bill that would have protected corporate whistleblowers from double-taxation on their awards.  Section 11073 (“Attorneys’ Fees Relating to Awards to Whistleblowers”) involved the taxation of whistleblower rewards. Due to a U.S. Supreme Court ruling, some whistleblowers are subjected to double-taxation.  The decision was overturned by Civil Rights Tax Reform Act, but some whistleblower laws may fall outside the scope this Act.  This amendment would have clarified coverage for all major whistleblower laws and allowed whistleblowers to deduct certain legal fees to stop the double-taxation of corporate whistleblower rewards.

These two provision were critical to whistleblowers and would have addressed issues vital to oversight, accountability and whistleblower protection.

NWC Condemns Removal of Intelligence Community Whistleblower Advocate

Washington, D.C. December 14, 2017. According to a report today by Foreignpolicy.com, the Executive Director of Intelligence Community Whistleblowing and Source Protection, Dan Meyer, has been removed from his position and faces an internal “tribunal” that will determine his final employment status. Meyer was placed on administrative leave and escorted from the Intelligence Agency Building in late November.

Meyer, who oversaw the whistleblower protection program governing 17 intelligence agencies, including the CIA and NSA, had strongly advocated on behalf of numerous national security whistleblowers. In 2011, he was named a “Finalist” for the prestigious Samuel J. Heyman Service to America Medals program for his work in protecting whistleblowers.

“Dan Meyer was a strong advocate for whistleblowers,” said National Whistleblower Center Executive Director Stephen M. Kohn.  “His removal is very troubling and a potential threat to all national security whistleblowers. Mr. Meyer’s office was the last bastion of hope and protection for employees at the NSA, CIA, and other intelligence agencies who had the courage to report waste, fraud and corruption.” Kohn continued.

In July of 2017, Meyer spoke at the annual National Whistleblower Day celebration held on Capitol Hill. He appealed to intelligence community whistleblowers who have information on wrongdoing to come to him so that he could advise them on how to “blow the whistle” legally and be protected. Watch the video below.

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NWC Releases New Video: “Whistleblowers Change the World”

The National Whistleblower Center released a new video featuring four prominent whistleblowers who share their personal stories of blowing the whistle and the backlash they faced for doing the right thing. “Whistleblowers Change the World,”  highlights the crucial role whistleblowers serve in exposing corruption at all levels of society and why we need a sustained grassroots movement to ensure the legal protections they require are upheld.

The video’s release coincides with International Anti-Corruption Day (Saturday, December 9th), an annual event that raises awareness of the major impact of fraud and corruption on a global scale, and encourages open discussions on new ways to tackle these issues.

“Whistleblowers remain the key source of information on fraud and corruption at home and abroad,” said Stephen M. Kohn, Executive Director of the NWC and author of The New Whistleblower’s Handbook. “However, they still face retaliation in many countries around the world. We need to rally our efforts to ensure that whistleblowers are protected and empowered. The first step toward making that happen is to make sure whistleblowers and anti-corruption groups understand the legal tools they have available to them.”

Watch the new video, “Whistleblowers Change the World” below. Help raise awareness of why we all must support whistleblower protections by sharing it on your social networks using #UnitedAgainstCorruption for International Anti-Corruption Day.

CFTC Expanding Whistleblower Program

The return from Thanksgiving holiday has been tough for advocates of whistleblower protections and common sense financial regulation. Last week, the Supreme Court heard Digital Realty Trust v. Somers, which concerned whistleblower protections under the Dodd-Frank Act. The Court appears poised to eviscerate internal whistleblower protections, as the justices seemed sympathetic to Digital’s argument that whistleblowers must report alleged misconduct to the Securities and Exchange Commission (SEC) to avail themselves of anti-retaliation protections. As the National Whistleblower Center explained in its highly-praised brief, both foundational rules of statutory construction and pragmatic policy concerns should push the Court to rule in favor of the whistleblower. Unfortunately,  Supreme Court watchers are currently predicting the opposite: a unanimous decision against whistleblower protections.

If that were not enough on the financial regulatory front, the Consumer Financial Protection Bureau (CFPB) has also become caught up in controversy. Following Director Richard Cordray’s sudden departure, he named Leandra English the acting director of the agency. The Trump administration, however, claimed it, not Cordray, had the power to name the temporary leader of the agency. The President picked Director of the Office of Management and Budget (OMB), Mick Mulvaney to temporarily head the CFPB. As a Congressman, Mulvaney had previously called the CFPB a “sick, sad joke.” Last week, a federal judge has ruled that Mulvaney is the temporary head of the agency, though the case is being appealed.

The news concerning a lesser-known, but still highly important financial regulator is more promising. The Commodities Futures Trading Commission (CFTC) appears set to expand whistleblower protections. As the regulator of the financial derivatives market, the CFTC has grown in clout over the past decade. This is largely because mania in the over-the-counter derivatives market was a leading cause of the financial crisis of 2007-2008. Such being the case, whistleblower protections for those who report wrongdoing and illegal conduct in the derivatives market are important for financial markets and our economy.

As with the SEC’s aforementioned whistleblower program, the CFTC’s whistleblower protections stem from the 2010 Dodd-Frank Act passed in wake of the financial crisis. The CFTC program pays monetary awards which lead the CFTC to bring a successful enforcement action exceeding a million dollars and also awards to whistleblower who provide information to the CFTC that result in a successful action brought by a different government entity. The total amount the whistleblower receives is between 10% and 30% of the sanctions collected by the commission. Factors affecting the percentage include the significance of the information, the degree of assistance provided, and the whistleblower’s culpability or lack thereof in the illegal conduct he or she reported. Employers cannot retaliate against whistleblowers or encumber potential whistleblowers from communicating with the CFTC.

Unfortunately, the program got off to a slow start. During the last fiscal year, the CFTC did not pay out any money in awards, and the Commission only paid out four awards totaling $11 million since 2011. But the CFTC has amended its whistleblower rules to ramp up the program.

Early results are clear. This year the CFTC expects to pay out $45 million in whistleblower awards. Christopher Ehrman, the director of the CFTC’s whistleblower office, has stated “this year for us is going to be huge.” Over 465 whistleblowers have submitted repots to the CFTC this year, a significant jump over previous years. Past reports have involved activities such as virtual currency trading, market manipulation, and fraud in foreign currency exchanges.

While it may seem bad that reports of misconduct have spiked, in reality the jump in CFTC whistleblower submissions is about an increase in reporting rather than a spike in underlying illegal conduct. Whistleblowers have long been on the front lines of conducting effective financial regulation, as financial scandals ranging from Enron to tax fraud in Swiss banks have been uncovered because of whistleblowers. Incentivizing whistleblowers is one of the most efficient ways to ensure that financial scandals come to light and to protect consumers and taxpayers from fraud and illegal conduct.

It is terrific news that the CFTC has chosen to encourage whistleblowers. Hopefully the new CFPB director, be it Mick Mulvaney or Leandra English, will take the same approach.

Support Whistleblowers on GivingTuesday

Today is GivingTuesday– a global day of giving that harnesses the collective power of individuals, communities and organizations worldwide to encourage people to donate to the causes close to their heart. With your support NWC has made some incredible progress in advocating for whistleblower rights! We’re looking forward to celebrating them all in the NWC end-of-year report, but in the meantime, here are just a few highlights from 2017.

National Whistleblower Day Celebration 2017:

This year was the most successful National Whistleblower Day Celebration yet! Leading members of Congress, key government officials, and prominent whistleblowers all came together for the first time, in a historic celebration on the Hill to honor the courageous achievements of whistleblowers in exposing corruption, and chart a new course for the future of whistleblower policy in the United States.

Speakers included Senators Ron Wyden and Charles Grassley (co-chairs of the Senate Whistleblower Protection Caucus, a fact which speaks to the bipartisan nature of this issue), John C. Cruden (former Asst. Attorney General for the Environment and Natural Resources Division), and Representative Kathleen Rice (co-sponsor of the END Wildlife Protection Act and founding co-chair of the House Whistleblower Protection Caucus), among others. Watch the videos of this year’s speakers.

NWC’s Global Wildlife Whistleblower Program:

NWC wanted to find innovative ways to connect with wildlife crime whistleblowers around the world to push for real change on the ground, where wildlife trafficking and destruction actually occurs. After the program won grand prize in the USAID Wildlife Crime Tech Challenge, funding was used to launch the program’s informational website and the Secure Online Reporting System for wildlife crime whistleblowers in January 2017. Additionally, NWC did global outreach, partnering with many NGOs and created educational resources translated in 28 different languages. As this program continues to develop, NWC is confident 2018 will continue to bring in more wildlife crime whistleblower cases.

NWC in the Courts:

NWC has filed two amicus briefs on landmark whistleblower cases. Digital Realty Trust, Inc. v. Somers, Paul, will determine if whistleblowers who report misconduct internally are covered under the Dodd-Frank Act’s anti-retaliation law. This case is currently with the Supreme Court and could have a devastating impact on the rights of whistleblowers reporting corporations. NWC’s amicus brief was called “the most thought-provoking amicus brief” and a key contribution to the considerations of the Court.

The second amicus brief filed by NWC is before the Tenth Circuit in Genberg v. Porter. The Genberg case deals with the definition of reasonable belief under the Sarbanes-Oxley Act (SOX).

The New Whistleblower’s Handbook 2017:

In July 2017, NWC’s Executive Director and leading whistleblower attorney, Stephen Kohn released the third edition of the first ever consumer guide to whistleblowing. It is an incredibly important time for us all to know our rights, and this easy to read step-by-step guide can help potential whistleblowers to navigate the complex labyrinth of U.S. whistleblower rules and procedures across every state. Order your copy now.

Further Reading:

 

 

Supreme Court Poised to Eviscerate Internal Reporting

Washington, D.C. November 28, 2017. Rejecting arguments by Senator Charles Grassley, the Securities and Exchange Commission (“SEC”) and numerous representatives from the whistleblower community, during today’s oral argument in Digital Realty Trust v. Somers (No. 16-1276), the U.S. Supreme Court Justices expressed support for stripping internal whistleblowers of protection under the Dodd-Frank Act (“DFA”).

“Any employee who is considering raising a fraud complaint must file a claim with the SEC before they alert their management to the issues,” said Stephen M. Kohn, leading whistleblower attorney and executive director of the National Whistleblower Center.

At oral argument the justices expressed skepticism regarding the need to ensure that employees who report fraud concerns to audit committees and other mandatory internal procedures are protected under the DFA. Instead, through their questioning and comments, the Justices gave a green light for every employee to file fraud complaints directly to SEC and circumvent internal reporting procedures.

“We fear that many employees will lose valuable rights because they follow common sense internal reporting requirements. But the comments of the Justices during oral argument unequivocally warn all corporate employees that to be protected under DFA they must file with SEC,” Kohn stated.

Important links:

Supreme Court Hears Major Whistleblower Case Today

Thousands of Whistleblowers At-Risk of Losing Protection

WASHINGTON, DC – DISTRICT OF COLUMBIA, UNITED STATES, November 28, 2017 — The United States Supreme Court will hear oral argument today in a major precedent setting whistleblower case, Digital Realty Trust v. Somers. the first whistleblower case under the Dodd-Frank Act (DFA) to reach the Supreme Court.

At issue is whether or not employees who raise concerns to their supervisors are protected under the Dodd-Frank Act’s anti-retaliation law. Digital Realty, backed by the U.S. Chamber of Commerce, is arguing that “whistleblowers” under the DFA must disclose their concerns directly to the U.S. Securities and Exchange Commission (SEC) to be protected.

Most employees initially report fraud concerns to their supervisors. Digital is asking the Supreme Court to permit companies to fire employees who alert their managers about fraud.

According to Stephen M. Kohn, Executive Director of the National Whistleblower Center, the case will impact the rights of thousands of employees:

“Digital’s argument defies logic and common sense. Employees should be encouraged to report fraud, not fired when they have the courage to do so. Why would corporations want to discourage employees from reporting fraud to their supervisors or in-house compliance programs? Firing employees who report fraud internally will have a massive chilling effect and undermine investor confidence.”

Numerous other whistleblower laws define “whistleblower” in a manner similar to the DFA, and will also be impacted by the Court’s ruling. These include the whistleblower provisions in the Commodity Exchange Act, Clean Air, Water Pollution, Toxic Substances and Surface Mining Acts, and all the major banking whistleblower laws, including those covering credit unions, FDIC-insured institutions, and international monetary transactions.”

Numerous public interest groups and government officials supported the whistleblower, Paul Somers, and filed friend of the court briefs urging the Supreme Court to protect internal whistleblowers. These included the SEC, Senator Charles Grassley, and the National Whistleblower Center.

Important Links:

Thousands of Whistleblowers at Risk

Washington, D.C., November 27, 2017.  On Tuesday, Nov. 28th  the United States Supreme Court will hear oral argument in Digital Realty Trust v. Somers, the first whistleblower case under the Dodd-Frank Act (DFA) to reach the Supreme Court.

At issue is whether or not employees who raise concerns to their supervisors are protected under the DFA.  Digital Realty, backed by the U.S. Chamber of Commerce, is arguing that “whistleblowers” under the DFA must disclose their concerns directly to the U.S. Securities and Exchange Commission (“SEC”) to be protected.

Attorneys for the whistleblower, Paul Somers, maintain that employees who disclose securities frauds directly to their managers or a company’s internal compliance program are fully protected under the DFA.  The SEC, Senator Charles Grassley, and the National Whistleblower Center (among others) filed briefs in support of Mr. Somers.

Stephen M. Kohn, who is representing the amici National Whistleblower Center, explained how this case will impact thousands of whistleblowers:

“The vast majority of employees initially report fraud directly to their managers or internal compliance programs.  Stripping internal whistleblowers of protections will result in the automatic dismissal of thousands of potential whistleblower cases.  It will discourage employees from reporting concerns to their bosses, and will undermine investor confidence.  Refusing to protect  internal whistleblowers will have a catastrophic impact on corporate compliance programs.”

Kohn also explained the wide-reaching impact of the case:  “The legal arguments raised by Digital and the Chamber are applicable to other whistleblower laws that have similar statutory definitions of whistleblowing, including the Commodity Exchange Act, whistleblower protections in the Clean Air, Water Pollution, Toxic Substances and Surface Mining laws, and all the major banking whistleblower laws, including those covering credit unions, FDIC-insured institutions, and international monetary transactions.”

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Federal Employee Whistleblowers Denied Due Process

Washington Post reports: Trump’s lack of appointments creating intolerable backlog of cases.

Washington, D.C. November 22, 2017. For years, whistleblowers have complained about the political nature of the Merit System Protections Board.  Federal employees cannot have their whistleblower cases heard in federal district court, but instead must go before the MSPB, which is appointed by the President.

The predicament of federal employee whistleblowers is now critical.  According to a report in yesterday’s Washington Post, President Trump’s foot-dragging on appointments is creating a “steadily growing backlog” with more than “660 pending cases.”  One of those backlogged cases is that of Army Corp of Engineers whistleblower, Dr. Toni Savage.

Dr. Savage is stuck in a legal limbo as the MSPB requires a quorum of three members and since January 7, has only had one member.  The MSPB cannot issue a final decision in any whistleblower cases until President Trump appoints new members.

A grassroots campaign to demand that Congress pass legislation to permit federal employee whistleblowers to file their cases in federal district court was launched by the National Whistleblower Center.  The NWC issued an Action Alert calling out Trump’s failure to nominate members to the MSPB, as a denial of federal employee whistleblower’s, such as Dr. Savage, basic due process rights.

“Without court access, federal employee whistleblower rights are non-existent.  The MSPB administrative process, even before the current crisis brought on by the lack of quorum, was criticized by every major whistleblower advocacy group in the nation,” said National Whistleblower Center Executive Director Stephen M. Kohn.  He continued, “Now with the lack of quorum and year-long backlog, the broken system is simply not fixable. Federal employee whistleblowers need what other whistleblower laws provide, access to federal court and independent judges.”

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Dr. Whitehurst and the FBI Lab Scandal

When Dr. Frederic Whitehurst initially blew the whistle on the systemic forensic fraud in the FBI crime lab, he could never have known it was the start of a lifelong fight for government accountability.

In 1994, he reported his concerns with FBI lab practices internally. It was “alterations of reports, alterations of evidence, folks testifying outside their areas of expertise in courts of law”, said Whitehurst, but “really what was going on was human rights violations. We have a right to fair trials in this country… And that’s not what was going on at the FBI lab.”

After his superiors failed to take any action, he took his concerns to the Department of Justice. Whitehurst faced significant and ongoing retaliation from the FBI, who highly criticized his claims, attacked his credibility, and fired him from his position at the FBI crime lab as chemist and lab supervisor.

Bad Science and Forensic Fraud

 Eventually, investigations were launched into Whitehurst’s allegations, but failed to lead to any justice. It wasn’t until ten years later that Whitehurst was finally vindicated, when a scathing 500+ page study of the lab by the Justice Department Inspector General, Michael Bromwich, concluded major reforms were required in the lab. This included the use of forensic hair analyses, which had been used for decades in state and federal criminal cases, and was proven flawed and inaccurate more that ninety percent of the time. Some of the cases Whitehurst had reported included the 1993 World Trade Center attack, the Oklahoma City bombing, and the O.J. Simpson murder case.

As a result, the FBI agreed to unprecedented reforms. These included outside accreditation of its crime lab, the appointment of an objective and independent scientist to oversee lab operations, and the removal of various lab officials who had engaged in misconduct. The FBI pledged to review all cases potentially affected by the lab’s flawed forensic science.

Department of (In)Justice

While Dr. Whitehurst received $1.16 million as settlement from the FBI in 1998, he continued to investigate and research FBI misconduct in cases that used hair analysis, compiling the data as head of the National Whistleblower Center’s (NWC) Forensic Justice Project. It was here that he discovered the Justice Department had failed to keep its promise to review the potentially affected cases and to notify the adversely affected defendants.

In 2012 the Washington Post published an extensive review of the FBI and DOJ failures to properly review the cases impacted by the FBI lab scandal, based on Whitehurst’s research. As a result, the DOJ agreed to conduct yet another review of hair cases in collaboration with the Innocence Project and the National Association of Criminal Defense Lawyers (NACDL).

  • 3,000 cases were identified by the government that had used microscopic hair analysis from FBI examiners.
  • 500 have been reviewed as of March 2015.
  • 268 included pro-prosecution testimony from FBI examiners.
  • 257 (96 percent) contained erroneous statements from “FBI experts”.

One example of the many people falsely imprisoned is Donald Eugene Gates, who served twenty-seven years for a violent crime he did not commit before his exoneration.

For some, however, it was too late. Defendants in at least 35 of these cases received the death penalty and errors were identified in 33 (94 percent) of those cases. Nine of these defendants have already been executed and five died of other causes while on death row.

To Serve and Protect

It has taken the FBI and Justice Department more than twenty years to actually review these problems – and the government still does not know the full extent of damage caused by the FBI lab scandal.

But Whitehurst does not regret his decision to blow the whistle on systemic government forensic fraud and corruption. “I took an oath of office and whoever was breaking the law, whoever was committing civil rights violations or human rights violations, I was supposed to do something about it. Yes, absolutely, I’d do it all over again… there have been amazing changes in the FBI laboratory…they are light years ahead of where they were.”

America’s first successful FBI whistleblower, Dr. Frederic Whitehurst, changed the U.S. Justice system forever.

 

Further Reading:

Chemical Safety Board Reneges on Recommended Whistleblower Protections

At a meeting last week, the Chemical Safety Board (CSB) announced that it would reverse its recommendation to institute whistleblower protections to workers on offshore oil rigs. This unfortunate turn will be bad for workers, destructive to the environment, and quite possibly even harmful to the energy industry.

The CSB is a small independent government agency charged with investigating chemical accidents. It mission is to find the root cause of such accidents and make recommendations to both private and public actors so they can institute policies to avoid future disasters. The CSB does not have the authority to make law or issue fines, but its thorough review of accidents and carefully considered recommendations are often implemented and always evaluated seriously.

The agency’s recommendation to implement whistleblower protections for offshore oil rig workers stemmed from one of the greatest environmental disasters of our era­­­­­­­­­­—the 2010 Deepwater Horizon BP oil spill.  The blowout off the coast of Louisiana killed 11 workers and was the largest marine oil spill in history. Fishing and tourism, two of the region’s biggest industries, were devastated as the toxic water annihilated the area’s ecosystem. The spill killed hundred of baby dolphins and was ruinous for thousands of other species, has had disturbing health effects on humans, and was estimated to have cost the tourism industry $23 billion. By 2016, the price tag of the spill for BP was astonishing $62 billion.

Despite these seismic effects, the CSB has backed off calling for whistleblower protections. This is perplexing as in its thorough, four-part 2016 report it determined that:

“to manage a reporting program effectively, the operator must remove penalties for reporting safety issues.” It added that “as long as…potential sources of federal oversight fail to provide protection for whistleblowers or workers seeking to stop work in the offshore environment, offshore process safety suffers.” In its final recommendation section, it called on the Department of Interior to provide “Protections for workers participating in safety activities with a specific and effective process that workers can use to seek redress from retaliatory action,” with the goal of providing “a workplace free from fear that encourages discussion and resolution of safety issues and concerns.” The CSB also called for elected worker safety representatives to be able to issue work stoppages should (if and only if) important safety concerns were to arise.

The analysis above makes perfect sense. Indeed, there were widespread warning signs of problems with Deepwater Horizon before the deadly and disastrous explosion. But if workers don’t have the power or protection to call out disturbing risks and risk losing their job should they do so, than few if any will come forward. Even in its recantation this week, the CSB board said there is “unanimous agreement…that worker participation, effective ‘whistleblower’ protections, and stop work authority are vital in any safety management regime.” But now it says that it not should have addressed these recommendations to the Department of Interior’s Bureau of Safety and Environmental Enforcement (BSEE) for jurisdictional reasons. A dissenting board member, Rick Angler, noted however “have failed to make a convincing case that BSEE does not have statutory authority to enhance worker participation” and incorrectly claim that other agencies are better alternatives.

Merely two days after the CSB’s decision, the Keystone (land-based) pipeline was temporarily shut down after a disastrous oil spill. Whistleblowers are crucial for protecting against such economic and environmental catastrophes, and is truly unfortunate that the CSB has pulled its recommendation. While this sudden reversal does no favors for the CSB’s reputation as an impartial analyst, as always, it will be the victims of the next maritime oil spill who ultimately pay the price.

SEC’s Annual Report Confirms $50 Million Paid to Whistleblowers

SEC anticipates paying an additional $221 million to whistleblowers in FY2018.

Washington, DC, November 16, 2017.  The Securities and Exchange Commission’s Office of the Whistleblower issued its annual report today. The Commission confirmed that “whistleblowers have provided tremendous value to its enforcement efforts and significantly helped investors.” It also confirmed that whistleblower disclosures have “directly” contributed to “hundreds of millions of dollars returned to investors.”

In FY 2017, the Commission paid $50 million in rewards to twelve whistleblowers. Since 2012, the Commission has paid $160 in whistleblower rewards.

Moreover, in its 2017 Financial Report the SEC “recognized a contingent liability” of $221 million for “liability for estimated whistleblower awards where the payment is considered probable.” This contingent liability is based on the Commissions practice of issue preliminary determinations setting forth specific reward amounts prior to finalizing a reward payment.

Stephen M. Kohn, the executive director of the National Whistleblower Center issued the following statement:

“The SEC manages the best whistleblower office in the U.S. They have taken strong position to fight retaliation, promoted compliance programs, and provided significant online recourses to help whistleblowers file claims that have resulted hundreds of millions of dollars in sanctions paid by fraudsters and numerous successful enforcement actions. Their 2017 report is a testament to the contributions whistleblowers make to the American people.”

“The Commission’s recognition that it has reached preliminary determination to award whistleblower over $200 mill over the next fiscal year confirms the growth and effectiveness of the program.”

“The Commission also manages a highly successful international program which has received complaints from one hundred-fourteen counties. In 2017, five hundred-fifty whistleblowers from seventy-two foreign counties provided info about misconduct by publicly traded companies worldwide. The SEC is currently operating he most successful transnational program in the world.”

Links:

Proposed Grassley Amendment Important for Whistleblowers

Washington, D.C. November 15, 2017. Senator Charles Grassley (R-IA) has put forth two amendments to the Tax Cuts and Jobs Bill that are important to whistleblowers.

The major amendment addresses an issue that has been the subject of previous posts, defining the term “collected proceeds” in I.R.C. section 7623(b).  The IRS and Department of Justice have taken the position whistleblowers who report criminal tax frauds, such as the numerous crimes committed by the largest Swiss banks, cannot obtain a whistleblower reward. They have argued that whistleblower rewards should not be paid on any criminal fines.

The Grassley amendment would fix this problem as it would clarify the basis for such awards by providing a definition for “proceeds” that would include criminal fines. It would also amend 7623(b)(5)(B) so that the $2 million threshold is updated to be based on the “proceeds” as defined in the updated definition.

An additional amendment by Grassley involves the taxation of whistleblower rewards.  Due to a U.S. Supreme Court ruling, some whistleblowers are subjected to double-taxation.  The decision was overturned by legislation, but some whistleblower laws may fall outside the scope of the Civil Rights Tax Reform Act.  Grassley’s amendment clarifies that the law covers all major whistleblower laws and allows for whistleblower to deduct certain legal fees to prevent double-taxation of whistleblower rewards.

Both amendments address issues critical to oversight, accountability and whistleblower protection. The National Whistleblower Center has issued an action alert to calling on Members of Congress to support the Grassley Amendments.  Stephen M. Kohn, the executive director of the National Whistleblower Center released the following statement:

“The NWC is strongly supporting these amendments regardless of where citizens stand on the overall tax bill. The Grassley amendments are the key vehicles for achieving desperately needed reforms to the IRS whistleblower program. Regardless of the outcome of the current tax reform bill, if Congress endorses Grassley amendment the ability of these provisions to be signed into law in the near future will be radically enhanced. It is imperative that whistleblower advocates utilize this opportunity to push for critically needed whistleblower reforms and create a legislative pathway for these reforms to become law, even if the current tax bill is defeated.  Regardless of where you stand on the tax bill, we need to send a strong message to Congress that the IRS whistleblower law must fully cover criminal tax frauds.”

Links:

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