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Sarbanes-Oxley Compliance Journal Publishes Article by The Employment Law Group® Managing Principal, R. Scott Oswald


According to The Employment Law Group® law firm’s managing principal, R. Scott Oswald, “2011 marked a sea change for whistleblowers at the Department of Labor’s Administrative Review Board (ARB).”  The Sarbanes-Oxley Compliance Journal recently published an article by Mr. Oswald which discusses the impact of recent ARB decisions on whistleblower protection and describes why “2011 was an important year for whistleblowers.”

In the article, Oswald highlighted 2011’s significant developments in whistleblower law, noting that “the ARB changed the standard of proving protected activity, embraced the concept of corporate knowledge, established the most generous standard for an adverse action in employment law, and established the fact that most Sarbanes-Oxley cases should proceed to an evidentiary hearing.”

Specifically, Oswald discussed the significance of the following 2011 ARB decisions:

  • In Sylvester v. Parexel International LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-039, 042 (May 25, 2011), the ARB affirmed that whistleblowers are protected under SOX even when mistaken and held that an employer’s disclosure of the whistleblower’s identity constitutes an adverse employment action, and, finally, found that whistleblowers can establish causation by showing that their whistleblowing activity was merely a contributing factor in the employer’s decision to take the adverse employment action.
  • In Funke v. Federal Express Corporation, ARB No. 09-004, ALJ No. 2007-SOX 043 (ARB July 8, 2011), the ARB expanded whistleblower protections by confirming that an employee’s disclosure that a FedEx customer was using FedEx services to engage in mail fraud was protected activity under SOX, as was the whistleblower’s reporting of the customer’s conduct to local law enforcement.
  • In Vannoy v. Celanese, ARB No. 09-118, ALJ No. 2008-SOX-064 (ARB September 28, 2011) the ARB “relieved whistleblowers from the heavy burden of proving their claims without using any of the employer’s confidential information,” whereas previously, Oswald noted, “whistleblowers could be subject to serious penalties for doing so.”
  • In Menendez v. Halliburton, ARB Nos. 09-002, 09-003, ALJ No. 2007-SOX-005 (ARB September 13, 2011) the “ARB affirmed that whistleblowers are protected under SOX even when they are mistaken about the nature of their complaints” and held that an employer’s disclosure of the whistleblower’s identity constitutes an adverse employment action.
  • In Johnson v. Siemens Bldg. Techs, Inc., ARB No. 08-032, ALJ No. 2005-SOX-015 (ARB March 31, 2011) the ARB “declared that whistleblowers may seek SOX’s protections from non-publically traded subsidiaries of publically traded companies.”
  • Finally, in Villanueva v. Core Laboratories, ARB No. 09-108, ALJ No. 2009-SOX-006 (ARB December 22, 2011) the ARB “found that SOX can protect disclosures of violations of United States law by foreign whistleblowers who work for foreign branches or subsidiaries of United States companies”.  In the article, Mr. Oswald noted that, “as a result” of this decision, “even complaints to foreign compliance offices should be taken seriously and investigated when the violation claimed refers to U.S. law” because “foreign offices or subsidiaries can still violate U.S.s securities laws and resolutions.”

In addition to ARB decisions expanding whistleblower protections, 2011 also saw “the Consumer Financial Protection Bureau extend whistleblower protections to new industries pursuant to the Dodd Frank Act of 2010 – most recently payday lenders, student loan companies and mortgage finance companies”.

With this expansion of whistleblower protection, according to Oswald, “the ARB’s influence over the scope and contours of whistleblower protection, articulated in its precedents in 2011, will be felt for years to come by employers in areas of the US economy that may have had few, if any, whistleblower protections before.”

The article, entitled “More Protection for Whistleblowers”, was published in the April 25, 2012 edition of the Sarbanes-Oxley Compliance Journal and was also syndicated in Compliance Daily, as well as Governance, Risk Management & Compliance Daily.

The Employment Law Group® law firm is a leader in the field of whistleblower law and has an extensive nationwide whistleblower practice representing employees who have exposed illegal activity by their employer.

U.S. Department of Labor Files OSH Act Lawsuit Against Florida Canvas Manufacturer for Terminating Whistleblower Who Complained About Rodent Infestation

The U.S. Department of Labor Occupational Safety and Health Administration (OSHA) filed a whistleblower retaliation lawsuit against Aquatech Canvas & Consignment, a division of LOTO Services, LLC, and its owner, Allan R. Lochhead, for terminating an employee who raised health concerns about Aquatech’s facility in Stuart, Florida.  According to OSHA, Aquatech Canvas & Consignment “specializes in the preparation, sale and installation of canvas, including covers for boats and upholstery.”

OSHA filed suit in the U.S. District Court for the Southern District of Florida after its investigation found that Aquatech and Lochhead violated the whistleblower provisions of Section 11(c) of the Occupational Safety and Health Act when they terminated the employee for raising health concerns.  The employee reported to management that the offices were infested with rodents and that rodent droppings could be seen in various places.   Although Lochhead personally placed rodent traps in the office, the problem persisted and the employee complained again.  When Lochhead insisted that there was no rodent problem, the employee filed a health complaint with OSHA.  One day after OSHA notified Aquatech and Lochhead about the complaint the company fired the employee.

In addition to requesting back wages, interest, and compensatory and punitive damages, OSHA is asking the employee be reinstated and that Aquatech expunge from the employee’s personnel records any negative information relating to this matter.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

Whistleblower Awarded $462,500 for Alerting U.S. Coast Guard of Major Pollution Violation

Baltimore, Maryland U.S. District Judge Marvin Garbis has awarded Salvador Lopes, the ship’s third engineer, $462,500 for blowing the whistle on Greek ship manager Efploia Shipping Co. and Denmark-based Aquarosa Shipping. In January, both shipping companies pled guilty to violating the Act to Prevent Pollution from Ships (APPS) by intentionally releasing oil and plastic waste in the port of Baltimore. Lopes could receive an additional $462,500 if the judge dismisses Efploia’s argument that Lopes should have notified company officials before complaining to the U.S. Coast Guard.

Officials state that Lopes provided the Coast Guard valuable information leading to this verdict, which include a handwritten note detailing illegal dumping of oil waste and garbage from the vessel Aquarosa, copies of the ship’s log, and over 300 cell phone photos documenting the violations.  Lopes also showed the Coast Guard where to find the “magic pipe” that allowed the ship to discharge pollutants undetected by illegally bypassing pollution prevention equipment.

Judge Garbis has also ordered that Efploia and Aquarosa each pay $952,000 in fines and donate $275,000, as part of their community service, to the National Fish and Wildlife Foundation, which has a mission of restoring the Chesapeake Bay and other Maryland waterways.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.

Networking Equipment Company Pays $2 Million to Partially Settle a Qui Tam Whistleblower Lawsuit

On April 16 2012, the U.S. Department of Justice (DOJ) announced that Cablexpress Corp, which operates under the name CXtec, agreed to pay $2 million to settle allegations that it violated the Trade Agreements Act (TAA). The lawsuit claims that CXtec unlawfully sold to the federal government counterfeit gigabit interface converters (GBICs) as well as networking and voice communication equipment  that were manufactured in countries prohibited by the TAA .

Timothy Kuney, a former high-ranking employee at CXtec, brought the law suit under qui tam provisions of the False Claims Act (FCA). The FCA allows a private citizen with knowledge of an organization committing fraud against the government to file a lawsuit against the organization on behalf of the government in order to recover fraudulently obtained federal funds.

Kuney filed the complaint in 2008 with the U.S. District Court for the Northern District of New York, claiming that CXtec  knowingly violated the TAA by selling products that were manufactured in China, Taiwan, Indonesia, Malaysia and Thailand, to federal agencies. The contract between CXtrec and the government required that all products be compliant with TAA. According to the complaint, CXtrec also established a specialized operation to sort, test and repackage counterfeit GBICs in order to deceive the government that they were authentic products.

Kuney will receive an award of $380,000 as a result of the settlement. The $2 million settlement resolves some claims in the complaint, but not all. The lawsuit will continue to move forward on additional allegations that CXtec sold to the government other products that violated the TAA .

“We are gratified that the government’s attorneys and investigators aggressively pursued our client’s allegations with respect to the unlawful sale of cables and counterfeit GBICs in violation of the False Claims Act, and we intend to continue our investigation and litigation of the remaining qui tam claims in the case,” said Jonathan Tycko, one of Kuney’s attorneys.

The Employment Law Group® law firm is a leader in the field of whistleblower law and has an extensive nationwide whistleblower practice representing employees who have exposed illegal activity by their employer.

Former Infosys Principal Consultant Blows the Whistle on Company’s Illegal Visa Practice, Prompting Federal Investigation

Last week CBS News reported that Jay Palmer, a former principal consultant for Infosys Limited, filed a whistleblower retaliation lawsuit against the information technology firm, sparking a federal investigation by the Department of State and Homeland Security and Senator Charles Grassley (R-Iowa).

Palmer alleges that Infosys used the H-1B and B-1 visa programs to commit visa fraud. According to Palmer, the company used these visa programs to bring to the U.S. Indian workers who would be willing to work for less than American worker:

“[Infosys] could outbid everyone or underbid everybody on every contract (because they were paying less.) For example… if I’m gonna pay you $15,000 a year why would I pay an American or a legal worker $65,000 a year? It makes no – it’s just economics.”

In order to bring Indian workers to the U.S., Infosys first used H-1B visas, a program intended for foreign workers with specialized skills or technical abilities that cannot be found among American workers. However, Palmer states, many workers that Infosys brought to the U.S. under this program lacked the specialized skills necessary to qualify for the H-1B visa program.

Furthermore, Palmer alleges that once the U.S. State Department began to limit the number of H-1B visas issued, Infosys began bringing workers to the U.S. under B-1 visas, which are meant for foreign employees traveling to the U.S. to attend training seminars or conventions.  Because the B-1 program prohibits holders from using the visa to work in the U.S., Infosys maintained a list of “do’s and don’ts” on how to obtain B-1 visas for that prohibited purpose. Palmer says that once he blew the whistle on the company’s illegal practices, Infosys executives retaliated against him.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice  representing employees who have been victims of retaliation.