Whistleblower Law Blog

ROCKVILLE, MD — 02/29/08 — A jury in the Circuit Court of Montgomery County, Maryland yesterday rendered a verdict of $1 million in a re-trial against Mile One - Herb Gordon - Tischer - Atlantic Automotive for having a sexually hostile work environment in the case Sterling v. Atlantic Automotive Corporation.

While working for Tischer Subaru as a service advisor from May 2001 to March 2002, Gail Sterling was subjected to sexual harassment by her supervisor, Jay Sponseller. Judge Nelson W. Rupp, Jr. presided over the three-day trial. Mrs. Sterling was represented by R. Scott Oswald and Adam Augustine Carter of The Employment Law Group in Washington, D.C. Atlantic Automotive was represented by Craig Ballew and Tracey McLauchlin of the Baltimore firm, Ferguson, Schetelich & Ballew, P.A.

In 2004, Mrs. Sterling won a jury verdict of $195,000 on this same claim which was reduced to $100,000 by the original trial judge Michael Mason. He also awarded an additional $350,500 in attorneys’ fees and costs against Atlantic Automotive, who appealed that verdict and won a retrial for a single defective jury instruction.

“This verdict is a tremendous vindication of the abuse suffered by Gail Sterling at the Mile One car dealership in Silver Spring. It sends a strong message to employers that they can be held responsible for failing to protect employees from ongoing harassment,” said Mr. Carter. “The jury’s compensation took into consideration the emotional distress that Gail Sterling suffered when her supervisor preyed upon her, and the failure of her employer who kept the supervisor in a position to continue his pattern of abuse even after she filed a complaint.”

“We are so pleased for our client, and especially proud of the way she has continued to fight all these years for a workplace that is free of discrimination,” said Mr. Oswald. “We are privileged to represent such a courageous woman.”

On February 27, 2008, The Employment Law Group achieved a victory for a whistleblower who suffered retaliation because he opposed fraud on the government that he believed would endanger the lives of U.S. troops in Iraq. In a memorandum opinion, in Glynn v. EDO et al., No. JFM 07-1660 (D.Md. Feb. 27, 2008), Judge Motz rejected defendants’ narrow construction of the False Claims Act, concluding that Glynn’s disclosures to senior management and to the Department of Defense Office of Inspector General about his former employer’s provision of allegedly malfunctioning military equipment to the government constitutes protected conduct.

Glynn’s complaint alleges that his former employers EDO and IST terminated his employment in retaliation for Glynn opposing EDO/IST’s scheme to defraud the government by supplying defective IED jamming devices and providing false information to the Department of Defense about testing of IED jammers. When management refused to take corrective action, Glynn reported his concerns to the DOD’s Office of Inspector General, which triggered an investigation. Despite his strong performance at EDO/IST, Glynn was terminated because of his whistleblowing.

Scope of Protected Conduct Under the False Claims Act

EDO/IST asserted that Glynn never engaged in protected conduct because his disclosures merely concerned IST’s failure to fulfill contractual requirements. Judge Motz rejected that contention, finding that Glynn’s allegation that he reported IST’s provision of dysfunctional equipment to the United States Armed Forces is “significant in light of the potential harm that could befall members of the Armed Forces if the IED countermeasure systems were to fail.”

Incredibly, EDO/IST tried to portray Glynn’s concerns as a minor, technical violation of a government contract, but Judge Motz soundly rejected that argument, concluding that “the actions engaged in by Glynn [as pled in the complaint] are precisely the sort of investigatory acts that the FCA was designed to protect. Glynn identified a problem with a product that his company was supplying to the United States military. He alerted his supervisors to the problem, ensured that it was fixed, and became troubled over his company’s refusal to inform the government of the flaws in the previously shipped products. He pursued his concerns internally, and was allegedly stonewalled. At this point, worried that his company had provided the military with dysfunctional equipment and submitted claims for payment reflecting the price of functional equipment, Glynn contacted government agents, told his story, and triggered an investigation.”

EDO/IST insisted that Glynn’s False Claims Act retaliation claim should be dismissed because he never saw the government contracts, and thus could not plead every detail of what he reasonably believed to be a violation of the False Claims Act. Characterizing this argument as a “paper tiger” and relying upon a key D.C. Circuit decision on the False Claims Act, Judge Motz held that “there is no requirement that to be protected, a plaintiff must have gathered all of the evidence by the time of the retaliation.” Yesudian ex rel. United States v. Howard University, 153 F.3d 731, 740 (D.C. Cir. 1998). In other words, the Rule 9(b) heightened pleading standard that applies to qui tam claims does not apply to retaliation claims under the False Claims Act.

Role of the False Claims Act in Combating Fraud Related to the War in Iraq

Congress originally enacted the False Claims Act in 1863 to deter war profiteering related to the Civil War. One hundred forty five years later, the False Claims Act remains a critical and necessary tool to punish contractors who defraud the U.S. government. Glynn’s disclosures concerning defective IED jammers highlights the need for the Department of Justice to prosecute unscrupulous contractors. More than 80 qui tam cases have been filed related to the War in Iraq, yet the Department of Justice has not intervened in one of those cases. Hopefully, this Administration will consider holding contractors accountable, rather than protecting them.

In Chambers v. Dept. of Interior, No. 2007-3050 (Fed. Cir. Feb. 14, 2008), the Federal Circuit held that the Merit Systems Protection Board erred by conflating the standards for evaluating disclosures of risks to public health and safety and disclosures of gross mismanagement under the Whistleblower Protection Act (WPA). Chambers, the former Director of the National Park Service, was placed on administrative leave and subsequently terminated shortly after she disclosed to the media and to Congress staffing and security problems at the national monuments. The MSPB evaluated her disclosures as pertaining solely to gross mismanagement, a category of protected conduct that is difficult to establish because it requires a showing that reasonable people could not debate the error in the policy. The Federal Circuit held that Chambers’ disclosures about the consequences of a policy decision to provide what she considered inadequate funding for security at national monuments can be considered disclosures about a danger to public safety, a category of protected conduct that is established where the employee reasonably believes that the problem evidences a substantial and specific danger to public safety: “While Chambers certainly expressed a disagreement with a policy decision, she also potentially disclosed a danger to public safety that may have resulted from that decision . . . . Chambers’s opinions about the consequences of the policy decisions could have disclosed a danger to public safety.” Coincidentally, the Interior Department’s Inspector General released a report lapproximately one week prior to the issuance of the Federal Court’s opinion revealing that the Park Service is understaffed and that security at the national monuments is inadequate, thereby corroborating the concerns that Chambers raised in 2004. Chambers should not have had to wait nearly four years for her disclosures to be validated. Fortunately, both the House and Senate recently approved amendments to the WPA that would provide genuine protection for whistleblowers in the federal government, including the option to remove WPA actions into federal court for a jury trial. Hopefully, Congress will soon enact amendments to the WPA.

In Ciavarra v. BMC Software, Inc., C.A. No. H-07-0413 (S.D.Tex. Feb. 7, 2008), Judge Atlas broadly construed the whistleblower protection provision of SOX:

SOX Coverage Defendants moved for summary judgment in part on the basis that Plaintiff was an employee of BMC Software Distribution, Inc., a subsidiary company that is not publicly traded and is therefore not covered under SOX. Judge Atlas held that Plaintiff presented evidence from which a trier of fact could find that he was a covered employee under SOX, including evidence that he was offered a separation agreement prepared at the direction of BMC Software, Inc., the publicly traded parent company of BMC Software Distribution, Inc., and evidence demonstrating that a BMC Software, Inc. officer was the supervisor of Plaintiff’s immediate supervisor and therefore had the authority to affect Ciavarra’s employment.

Protected Activity Plaintiff alleged that he engaged in protected conduct by reporting to superiors at BMC and to BMC’s otside auditor that a $67 “reversion” invoice was not properly recognizable because it was not collectible. Holding that protected conduct under SOX “includes providing information regarding any ‘conduct which the employee reasonably believes constitutes a violation’ of Sarbanes-Oxley, any rule or regulation of the Securities and Exchange Commission (“SEC”), or any provision of Federal law relating to fraud against shareholders,” Judge Atlas concluded that there was a genuine issue of material fact as to whether Plaintiff provided information to BMC management and to its outside auditor regarding the anticipated recognition of a $67 million “reversion” invoice to Verizon, and that he reasonably believed that the improper recognition of the amount reflected in the invoice was a violation of Sarbanes-Oxley and other federal laws relating to fraud against shareholders.

Temporal Proximity is Sufficient to Raise an Inference of Causation Judge Atlas held that a gap of approximately three months between Plaintiff’s protected conduct and his discharge raised an inference of causation sufficient to avoid summary judgment.

Level of Detail Required in Pleading Protected Conduct Following the close of discovery, Defendants moved to amend their answer to plead that Plaintiff failed to exhaust his administrative remedies because his complaint did not plead every detail of his protected conduct. Holding that “there is no requirement that a party exhaust each factual allegation in the complaint,” Judge Atlas concluded that Plaintiff “clearly exhausted his claim that his employment was terminated in retaliation for having brought the recognition issue to the attention of his boss’s superiors and of the outside auditors.”

The Employment Law Group is a contributing author of an annual update on the whistleblower retaliation provision of the Sarbanes-Oxley Act of 2002, a copy of which is available here. This annual update is a project of the ABA Section of Labor and Employment Law Committee on Federal Labor Standards Legislation Subcommittee on the Sarbanes-Oxley Act of 2002.

More than five years after SOX was enacted, the scope of protected conduct is still unsettled, but one aspect of protected conduct is becoming clear – SOX protection is not limited solely to disclosures about shareholder fraud. Disregarding the plain meaning of SOX, employers have convinced a few DOL ALJs and at least one federal judge that SOX protected conduct is limited exclusively to complaints pertaining to shareholder fraud. On February 7, 2008, Judge Marrero of the Southern District of New York held in O’Mahony v. Accenture Ltd., 2008 WL 344710 (S.D.N.Y 2008) that SOX “contains six provisions that enumerate six specific forms of misconduct which, if reported by an employee, protect the whistleblower from employer retaliation: (1) § 1341 (mail fraud); (2) § 1343 (wire fraud); (3) 18 U.S.C. § 1344 (bank fraud); (4) 18 U.S.C. § 1348 (securities fraud); (5) any rule or regulation of the SEC; or (6) any provision of federal law relating to fraud against shareholders.” Applying basic principles of statutory construction, Judge Marrero rejected the employer’s contention that the phrase “related to fraud against shareholders” modifies each of the preceding phrases. Accordingly, a disclosure about a reasonably perceived violation of any rule of regulation of the SEC, including rules designed to prevent fraud, is protected under SOX. For example, a disclosure about inadequate internal accounting controls would be protected.

The Ethics Resource Center (”ERC”) released a report underscoring the need for stronger whistleblower protection laws. The ERC’s survey found that 1) nearly six in ten government employees saw at least one form of misconduct in the past twelve months; 2) one in four government employees works in an environment conducive to misconduct; 3) only one in 10 said there is a strong ethical culture in their federal workplace; 4) three in ten employees did not report because they feared retaliation from management; and 5) one in six employees who reported misconduct they observed experienced retaliation. When federal employees do not report misconduct, public health and safety, and the public fisc are at risk. Fortunately, Congress has an opportunity to enact robust whistleblower protection legislation. In 2007, the House and Senate passed amendments to the Whistleblower Protection Act and Congress is expected to vote on a final bill in the coming weeks. The ERC’s report is available at https://www.ethics.org/research/nges-order-form.asp.

The Ethics Resource Center (”ERC”) released a report underscoring the need for stronger whistleblower protection laws. The ERC’s survey found that 1) nearly six in ten government employees saw at least one form of misconduct in the past twelve months; 2) one in four government employees works in an environment conducive to misconduct; 3) only one in 10 said there is a strong ethical culture in their federal workplace; 4) three in ten employees did not report because they feared retaliation from management; and 5) one in six employees who reported misconduct they observed experienced retaliation. When federal employees do not report misconduct, public health and safety, and the public fisc are at risk. Fortunately, Congress has an opportunity to enact robust whistleblower protection legislation. In 2007, the House and Senate passed amendments to the Whistleblower Protection Act and Congress is expected to vote on a final bill in the coming weeks. The ERC’s report is available at https://www.ethics.org/research/nges-order-form.asp.

On January 28, 2008, President Bush signed into law the National Defense Authorization Act for Fiscal Year 2008 (H.R. 4986), which includes a provision protecting employees of defense contractors who blow the whistle on contracting fraud. Section 846 amends 10 U.S.C. § 2409 to protect employees who disclose to Congress, an Inspector General, the Government Accountability Office, or a Department of Defense employee responsible for contract oversight or management “information that the employee reasonably believes is evidence of gross mismanagement of a Department of Defense contract or grant, a gross waste of Department of Defense funds, a substantial and specific danger to public health or safety, or a violation of law related to a Department of Defense contract (including the competition for or negotiation of a contract) or grant.”

A complainant must be filed with the Inspector General (IG) of an agency, and unless the IG determines that the complaint is frivolous, the IG will conduct an investigation. Once the complainant exhausts administrative remedies, the complainant may bring a de novo action in federal court and is entitled to a jury trial. Remedies at the administrative level and in federal court include reinstatement, back pay, compensatory damages, and attorney fees and costs.

On January 22, 2008, the Fifth Circuit issued an opinion providing significant guidance about the parameters of protected conduct under Section 806 of the Sarbanes-Oxley Act. See Allen v. Administrative Review Board, No. 06-60849 (5^th Cir. Jan. 22, 2008). Affirming the ARB’s decision that the plaintiff did not engage in protected conduct, the Fifth Circuit established the following standards for assessing whether a SOX whistleblower engaged in protected conduct:

• “Reasonable Belief’ Standard Protects a Mistaken Belief That an Employer Violated an SEC Rule. Consistent with the plain meaning of Section 806, which requires a plaintiff to demonstrate only a “reasonable belief” that there was a violation of one of six enumerated categories of protected conduct (not an actual violation), the Allen Court held: “Importantly, an employee’s reasonable but mistaken belief that an employer engaged in conduct that constitutes a violation of one of the six enumerated categories is protected.” This is significant because it counters a popular defense contention that a SOX whistleblower must demonstrate that shareholders have been harmed by the SEC violation or other misconduct about which the whistleblower complained.

• “Objective Reasonableness” is Not Solely a Question of Law. In Welch v. Cardinal Bankshares Corp., 2003-SOX-15 (ARB May 31, 2007), the ARB erroneously held that objective reasonableness is a question of law. That decision is pernicious because it encourages ALJs who lack knowledge of securities law to determine prior to trial whether a SOX whistleblower engaged in protected conduct. The Allen Court, however, has held that while the objective reasonableness of an employee’s belief can be decided as a matter of law in some cases, “the objective reasonableness of an employee’s belief cannot be decided as a matter of law if there is a genuine issue of material fact . . . . [and if] reasonable minds could disagree on this issue,” the objective reasonableness of an employee’s belief should not be decided as a matter of law.”

• SOX Protects a Disclosure About a Reasonably Perceived Violation of “Any Rule or Regulation of the SEC”. Although the plain language of Section 806 protects an employee who provides information to a person with supervisory authority over the employee related to a violation of “any rule or regulation of the SEC,” many employers continue to argue that protected conduct is limited to disclosures about shareholder fraud. The Fifth Circuit has rejected that tortured construction of SOX, holding that a disclosure about a violation of any SEC rule is protected.

• Consult a Securities Law Expert Before Engaging in Protected Conduct. Unfortunately, the Fifth Circuit appears to be requiring SOX complainants to become experts in securities law in order to engage in protected conduct. In particular, the Fifth Circuit held that because the plaintiff was a licensed CPA, “the objective reasonableness of [plaintiff]’s belief must be evaluated from the perspective of an accounting expert” and she therefore should have known that internal consolidated financial statements need not be compliant with SAB-101, which prohibits publicly-traded companies from recognizing sales revenue before they deliver merchandise to the customer. Under this decision, complaining to management about internal accounting repots overstating gross profit is not protected conduct because the relevant SEC rule does not technically apply to internal financial statements. This aspect of the Allen Court’s holding completely misses the point of Section 806. As Judge Levin pointed out in Morefield v. Exelon Servs., Inc., 2004-SOX-2 (ALJ Jan. 28, 2004), Section 806 “is largely a prophylactic, not a punitive measure” designed to encourage employees to “head off the type of ‘manipulations’ that have a tendency or capacity to deceive or defraud the public. By blowing the whistle, they may anticipate the deception buried in a draft report or internal document, which if not corrected, could eventually taint the public disclosure.” Section 806 is not a private right of action to enforce SEC rules, but instead is a retaliation action designed to ensure that employees can disclose accounting fraud and reasonably perceived violations of SEC rules without fear of reprisal, before shareholders are defrauded. Blowing the whistle on deceptive or inaccurate draft financial statements should be protected because if left uncorrected, the draft statements will be distributed to shareholders. If an employee is retaliated against for blowing the whistle on misleading internal financial statements, then the employee will not take the risk of blowing the whistle on publicly-filed financial statements. Finally, a SOX whistleblower should not need to consult a securities lawyer in order to engage in protected conduct.

Although Section 806 of SOX has been narrowed by some courts, it continues to afford robust protection to whistleblowers and does not require proof of an actual violation of an SEC rule. The lesson of Allen is that SOX whistleblowers need to plead protected conduct in detail and be prepared to establish a strong link between their disclosure and a reasonably perceived violation of an SEC rule, which in some cases will require expert witness testimony.

Today Rep. Wynn introduced the Congressional Disclosures Act (HR 4650), which would protect federal employees and employees of government contractors who disclose information to a Member of Congress or a Congressional Committee concerning a violation of any law, gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety. The Congressional Disclosures Act amends the Lloyd Lafollette Act, codified at 5 USC § 7211, which prohibits interfering with or denying “[t]he right of employees, individually or collectively, to petition Congress or a Member of Congress, or to furnish information to either House of Congress, or to a committee or Member thereof.” As described by Government Accountability Project Legal Director Tom Devine, the Lloyd Lafollette Act is a “right without a remedy” in that there is no private right of action to enforce the right conferred by the statute. Under the Congressional Disclosure Act, however, a whistleblower subjected to retaliation could bring an action in federal court for triple lost wages, lost benefits, reinstatement, costs including reasonable expert witness fees, triple attorney fees, triple compensatory damages including emotional distress and lost reputation, and equitable, injunctive, and any other relief.

Today New Jersey Governor Jon Corzine signed into law the New Jersey False Claims Act, which is similar to the federal False Claims Act. New Jersey is the 17th state to adopt a False Claims Act. The New Jersey False Claims Act closes a loophole that the D.C. Circuit read into the federal False Claims Act in United States ex rel. Totten v. Bombardier Corp., 380 F.3d 488 (D.C. Cir. 2004). Under Totten, liability is limited to companies that present false claims directly to the federal government. This loophole has enabled subcontractors to escape liability for submitting a false claim to prime contractor where the claim was not directly presented to the federal government. The New Jersey False Claims Act closes the Totten loophole by prohibiting any company from “knowingly presenti[ng] or caus[ing] to be presented to an employee, officer or agent of the State, or to any contractor, grantee, or other recipient of State funds, a false or fraudulent claim for payment or approval.”

On December 31, 2007, President Bush signed into law the “Openness Promotes Effectiveness in our National Government Act of 2007,” which amends the Freedom of Information Act (FOIA) by providing an online mechanism for FOIA requesters to track their requests; establishes an ombudsman program to resolve FOIA disputes; imposes penalties for failure to comply with the response times set forth in the FOIA; clarifies that FOIA encompasses records maintained by government contractors; and requiring agencies to pay attorney fees from their own budgets. While this legislation addresses many critical issues, it remains to be seen whether it will result in improved response times absent increased appropriations for agency FOIA offices. In whistleblower litigation, FOIA can be a critical means of obtaining documents that corroborate the whistleblower’s concerns. However, when it takes more than a year to get a response to a FOIA request, the case may have already been tried on the merits. Hopefully, this new legislation will enable whistleblowers to promptly obtain documents.

The Internal Revenue Service released new guidelines for whistleblowers to report tax fraud and possibly claim a reward based on the amount of additional tax, penalties and interest that is owed. Under the new procedures, the award for reporting tax fraud ranges from 15% to 30% of the collected proceeds. To be eligible for an award, the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed in the aggregate $2,000,000 and, if the allegedly noncompliant person is an individual, the individual’s gross income must exceed $200,000. The new guidelines are posted at http://www.irs.gov/pub/irs-drop/n-08-04.pdf.

Yesterday the Senate approved by unanimous consent S. 274, Federal Employee Protection of Disclosures Act (FEPDA). The FEPDA would significantly improve both substantive and procedural protections for federal employee whistleblowers and would close the many loopholes that the Federal Circuit and the Merit Systems Protection Board have read into the Whistleblower Protection Act of 1989. In particular, the FEPDA would:

• Remove the Federal Circuit’s monopoly on whistleblower appeals;

• Reverse the judge-made requirements of “irrefragable proof,” of the whistleblower being the original source of the report of a violation, and of immediate reporting of the violation;

• Protect reports made as part of job duties (thus clarifying that the Garcetti duty speech doctrine does not apply to federal employees); and

• Recognize denial of a security clearance as an adverse employment action.

Under the FEPDA, protected conduct includes “any disclosure that-`(i) is made by an employee or applicant of information required by law or Executive order to be kept secret in the interest of national defense or the conduct of foreign affairs that the employee or applicant reasonably believes is direct and specific evidence of–`(I) any violation of any law, rule, or regulation; (II) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety; or(III) a false statement to Congress on an issue of material fact.”

The companion bill in the House (HR 985), which was passed in March 2007, is stronger than S274 in that it enables a whistleblower to remove a WPA claim to federal court for a jury trial if there is no final MSPB decision within 180 days after the date on which a request for corrective action has been duly submitted, and it applies the protections of the WPA to employees of national security agencies. As summarized by the Government Accountability Project, HR 985 would:

• Codify the legislative history for “any” protected disclosure, meaning the WPA applies to all lawful communication of misconduct. This restores “no loopholes” protection and cancels the effect of the Supreme Court’s Garcetti v. Ceballos decision limiting federal workers’ First Amendment rights.

• Provide those covered by the WPA access to jury trials in federal district court to challenge reprisals.

• End the Federal Circuit Court of Appeals monopoly on appellate review of the Whistleblower Protection Act (The Court has single-handedly gutted the WPA, leading to a 2-178 record against whistleblowers for decisions on the merits from October 1994 through February 12, 2007), restoring all-Circuit review, as in the original 1978 Civil Service Reform Act and the Administrative Procedures Act. This provision was approved today by a voice vote amendment.

• Extend rights to all national security whistleblowers, including those at the FBI and intelligence agencies.

• Extend rights to federally-funded contractors.

• Extend WPA rights to some 40,000 airport baggage screeners.

• Provide normal whistleblower rights to those who disclose misconduct in litigation testimony, or who refuse to violate the law.

• Restore independent due process review of security clearance determinations for whistleblower reprisal, unavailable since a 1985 Supreme Court decision.

• Create specific protection in the law for scientific freedom, making it an abuse of authority to censor, obstruct dissemination, or misrepresent the results of federal research.

• Restore the unqualified, original “reasonable belief” standard established in the 1978 Civil Service Reform Act for whistleblowers to qualify for protection.

• Define the “clear and convincing evidence” legal burden of proof for an employer’s affirmative defense of independent justification, after an initial reprisal case is established.

• Make permanent and provide a remedy for the anti-gag statute – a rider in the Treasury Postal Appropriations bill for the past 17 years – that bans illegal agency gag orders. The anti-gag statute neutralizes hybrid secrecy categories like “classifiable,” “sensitive but unclassified,” “sensitive security information” and other new labels that lock in prior restraint secrecy status, enforced by threat of criminal prosecution for unclassified whistleblowing disclosures by national security whistleblowers.

• Codify protection against retaliatory investigations, giving whistleblowers a chance to end reprisals by challenging preliminary “fact-finding” charades.

• Provide specific authority for whistleblowers to disclose classified information to Members of Congress on relevant oversight committees or their staff.

• Provide compensatory damages and reimbursement for expert witness fees to prevailing whistleblowers, establishing consistency with other remedial employment laws. This was another strengthening amendment added today.

• Modify the burdens of proof to make it more realistic for the Office of Special Counsel to seek disciplinary accountability against those who retaliate.

• Provide the Special Counsel with authority to file friend of the court briefs in support of whistleblower rights cases appealed from the administrative level.

The Washingtonian magazine’s list of top lawyers in the Washington, D.C. metropolitan area lists Jason Zuckerman ,Of Counsel, at The Employment Law Group on its list of top whistleblower lawyers. The Employment Law Group has established key precedent under the whistleblower provision of the Sarbanes-Oxley Act and has substantial experience representing corporate and government whistleblowers in a wide variety of state and federal statutory and common law whistleblower retaliation actions, including actions under the Sarbanes-Oxley Act and the False Claims Act. We are proud of the results we achieve for our clients, and are equally proud of our role in helping clients blow the whistle on corporate fraud, government contractor fraud, tax fraud and misconduct that threatens public health and safety.

Department of Labor Administrative Law Judge William Dorsey has denied summary judgment in a SOX case brought by a former in-house attorney who was terminated for blowing the whistle on violations of SEC rules. Judge Dorsey’s order resolves several significant substantive and procedural issues under SOX, including:

· The Duty Speech Doctrine Does Not Apply to SOX. The employer argued that the complainant could not have engaged in protected conduct because she was merely doing her job an in-house attorney, and therefore her disclosures cannot be protected unless she acted outside her role as in-house counsel. Applying well-established DOL precedent, Judge Dorsey unequivocally rejected this argument, holding that an employee whose own job duties encompass reporting illegal conduct may obtain whistleblower relief. Judge Dorsey noted: “The SOX Act and the Secretary’s implementing regulations specifically protect reports employees make to their supervisors. Nektar cannot invent exceptions to those federal protections.” The employer also argued that the Supreme Court’s duty speech doctrine set forth in Garcetti v. Ceballos, 126 S. Ct. 1951 (2006) applies to SOX and therefore employees must step outside their official duties to be protected. Judge Dorsey held that Garcetti is inapposite as it “involved no whistleblower protection statute [and] it dealt with public employees who claimed their termination,” whereas a SOX action “is a statutory claim a private employee filed . . . . [and has] nothing to do with the reach of First Amendment.”

· Protected Conduct is Not Limited to Disclosures of Shareholder Fraud. While some ALJs have erroneously held that protected conduct under SOX is limited to disclosures about shareholder fraud, Judge Dorsey, applying the plain meaning of SOX and the ARB’s decision in Klopfenstein v. PCC Flow Technologies Holdings, ARB No. 04-149, ALJ No. 2004-SOX-11 (ARB May 31, 2006), held that “allegations of fraud are not the sole means for whistleblowers to secure SOX protections.” In particular, Judge Dorsey held that disclosures about violations of SEC-mandated internal controls can constitute protected conduct.

· The Cat’s Paw Doctrine Applies to SOX. The employer claimed that the decision-maker was an officer who has joined the company shortly before the complainant was terminated and knew nothing about her protected conduct. Judge Dorsey rejected the employer’s effort to pin the decision on a clean slate, holding that the “clean slate” relied heavily upon the input of a supervisor who knew of the complainant’s protected conduct. “A complainant may hold an employer liable for discrimination without proof that the individual who made the final decision to terminate her knew of her protected activity. The employee need only make a protected disclosure to an individual “with supervisory authority over” her. 18 U.S.C. § 1514A(a)(1)(C). Once an employee’s supervisor has actual knowledge of the protected activity, that knowledge is attributed to the ultimate decision-maker.”

· Individual Liability Does Not Require a Showing of Malice. While more than 800 SOX retaliation claims have been filed, very few opinions address the standard for individual liability. Judge Dorsey held that individual liability under SOX can be established absent a showing of actual malice. Instead, “[a]n individual’s liability is assessed in same manner that the corporate employer’s liability is assessed. Individual liability must be predicated on retaliatory intent that contributed to the decision to take an unfavorable personnel action; it need not be the sole factor that motivated the named individual.”

· Formal Rules of Evidence Do Not Apply to SOX Claims. Judge Dorsey also clarified the standard of admissibility at the summary decision stage. In this action, the employer filed 506 pages of objections to the complainant’s statement of material facts, contending that the materials submitted by the complainant were not properly authenticated and contained hearsay. Judge Dorsey rejected the employer’s attempt to strictly construe the rules of evidence at the summary judgment stage, noting that formal rules of evidence do not apply to SOX claims. Moreover, as “[w]histleblower discrimination claims commonly turn on inferences drawn from circumstantial evidence,” the adjudication of such claims requires “full presentation of a broad range of evidence that may prove, or disprove, retaliatory animas and its contribution to the adverse action taken.” Judge Dorsey also held that discovery documents and depositions need not be authenticated on personal knowledge when submitted in opposition to a motion for summary decision.

On behalf of the Government Accountability Project, the National Whistleblower Center and Taxpayers Against Fraud, the leading whistleblower advocacy organizations, The Employment Law Group filed an amicus brief in Welch v. Chao urging the Fourth Circuit to reverse the Department of Labor Administrative Review Board’s decision establishing a standard for protected conduct that is plainly contrary to the plain meaning and intent of Section 806 of SOX.

In order to protect a broad range of disclosures about potential accounting fraud, securities fraud, and violations of securities laws, Congress specifically included in the language of Section 806 a “reasonable belief” test under which a complainant can engage in protected conduct without disclosing an actual violation of law. Contrary to the plain meaning and intent of SOX, the ARB is requiring complainants to prove that they disclosed unequivocal, actual violations of securities law and is requiring complainants to demonstrate that their disclosures pertained to actual investor fraud even though Section 806 expressly protects disclosures about a violation of any SEC rule. The ARB’s standard undermines the prophylactic purpose of Section 806 depriving employers of the opportunity to receive an early warning of potential violations of Securities and Exchange Commission (“SEC”) rules that can ultimately result in shareholder fraud. For example, protecting disclosures about deficient internal accounting controls or misleading financial reporting enables employers to correct these problems before investors are harmed. Moreover, by speculating about whether Welch’s disclosures implicated securities laws, rather than consulting the pertinent SEC rules, the ARB has adopted an “I know it when I see it” standard that will chill employees from making the disclosures that Congress intended to protect and encourage. If allowed to stand, the ARB’s erroneous interpretation of protected conduct will undermine the clear intent of Congress and inevitably increase the risks of the very financial disasters that SOX was enacted to prevent.

Rep. Lynn Woolsey (D-CA), Chairwoman of the House Education and Labor Subcommittee on Workforce Protections, has introduced robust and comprehensive whistleblower protection legislation for private sector employees. H.R. 4047 would close loopholes in existing federal whistleblower protection statutes and protect employees who disclose threats to public health and safety, financial fraud, insurance fraud, or violations of environmental protection laws, food and drug safety laws, or transportation safety laws. A section-by-section analysis of the legislation from the Education and Workforce Subcommittee is available here. The bill would also create a new office at DOL to investigate whistleblower complaints. While there are many hardworking OSHA investigators who try to conduct thorough investigations of whistleblower complaints, OSHA has shown itself often unwilling and unable to enforce existing whistleblower protection laws. This is due in part to OSHA applying incorrect legal standards and OSHA’s propensity to adopt employers’ pretextual allegations against whistleblowers instead of conducting investigations. Under the current Administration, OSHA has found for employers in more than 90% of whistleblower claims and now appears to require smoking gun evidence to find for an employee. DOL’s failure to enforce whistleblower protection laws has real consequences for public health and safety. Indeed, Congressional testimony about recent mine explosions and collapses revealed that many of the miners killed in these tragic “accidents” were aware of violations of mine safety laws, but were afraid to report such violations for fear of losing their jobs. Hopefully, Congress will promptly enact H.R. 4047, and in the interim, hopefully DOL will consider enforcing existing whistleblower protection laws, rather than undermining them. The Government Accountability Project has done a terrific job informing Congress of the flaws and loopholes in existing whistleblower protection laws and working with the House Education and Labor Subcommittee on Workforce Protections to devise appropriate legislative corrections. GAP’s testimony concerning the inadequacy of existing whistleblower protection laws is available here.

On October 30, 2007, the Senate Committee on Commerce, Science and Transportation unanimously approved the CPSC Reform Act S. 2045 which includes protection for employees who disclose to the Federal government or a state Attorney General information relating to any violation of a consumer product safety standard, regulation, or order of the Consumer Product Safety Commission. In addition to protecting whistleblowers form retaliation, S. 2045 rewards whistleblowers whose disclosures about consumer product safety issues result in civil penalties. Similar to the qui tam provision of the False Claims Act, a whistleblower whose disclosure to the CPSC or a state AG results in successful prosecution would receive between 15 to 25 percent of the civil penalty. Unlike the qui tam provision of the False Claims Act, however, only the government could bring an action prosecuting a violation of consumer product safety regulations or orders.

According to data released by the Department of Justice this week, disclosures by qui tam relators have led to recoveries of $1.45 billion in fiscal year 2007. Approximately 75% of all recoveries in False Claims Act suits resulted from disclosures by qui tam relators. This highlights the importance of the qui tam provision of the False Claims Act in combating contractor fraud. Unfortunately, some courts have erected barriers to qui tam actions that are inconsistent with the plain meaning of the False Act and that discourage whistleblowers from reporting fraud on the government. Senator Grassley recently introduced the False Claims Correction Act to restore the original intent of the 1986 amendments to the qui tam provision of the False Claims Act. At a time when contractors are taking advantage of lax oversight, it is critical to strengthen the False Claims Act.