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Thad Guyer, a GAP Adjunct Attorney for the past two decades, and partner at T.M. Guyer and Ayers & Friends, has prepared an analysis of the whistleblower provisions of the Dodd-Frank Act, Final Dodd-Frank Whistleblower Rules: Are you prepared? The Whistleblower Perspective, (June 15, 2011). To date, I view this to be among the most comprehensive treatments of the law since the May 25, 2011 final regulations were issued, and it should serve as an aid to corporate whistleblowers and whistleblower advocates.
Under the new SEC Rule 21F, if a whistleblower has provided "information relate[d] to a possible violation of the federal securities laws (including any rules or regulations thereunder)" that results in penalties or recoveries by the SEC or agencies, then that whistleblower is eligible to receive from 10 to 30 percent of that penalty or recovery. The bulk of final Rule 21F sets forth the conditions, processes and exceptions of eligibility for these rewards, but Guyer explains that the very liberal whistleblower protections against retaliation are just as important to the whistleblower cause.
In the 30 page paper, Guyer makes the case that Dodd-Frank Section 922 protections are broader than the whistleblower provisions of Section 806 of the Sarbanes Oxley Act, since the whistleblower's allegations need not be related to shareholder protection as many courts have held. Instead, a Dodd-Frank whistleblower may receive awards and anti-retaliation protections connected with "any judicial or administrative action" brought by the SEC, or specified "related actions" brought by the Department of Justice and other specified federal agencies, self-regulatory organizations, and even state attorney generals. These "related actions" for which a whistleblower may receive awards and protections include court or agency actions against corporations by the Attorney General of the United States, any appropriate regulatory authority, including self-regulatory organizations, or even a State attorney general in connection with any criminal investigation. Rule 21F will be effective 60 days after they are submitted to Congress or published in the Federal Register.
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The Securities and Exchange Commission (SEC) yesterday formalized new rules implementing section 922 of last year's Dodd–Frank Wall Street Reform and Consumer Protection Act, which compensates whistleblowers whose disclosures lead to successful law enforcement recovery of over one million dollars. GAP's Tom Devine characterized this well, stating "Yesterday the SEC took the high road to strengthen the role of whistleblowers against corporate fraud. It rejected demands by a big business 'fraud lobby' and House Republicans to twist whistleblowing into obstruction of justice."
Business lobbyists had demanded an SEC eligibility requirement that whistleblowers first share evidence of corporate fraud with their companies. They also pushed for a "job duties" loophole that would disqualify company employees who are responsible for detecting and acting on illegality. GAP, Voices for Corporate Responsibility, the Project on Government Oversight (POGO) and other good government organizations briefed SEC staff and every commissioner to protest. In a February 18, 2011 comment after staff briefings, GAP argued that there was no rational public policy basis for the demands, which would weaken law enforcement rather than strengthening it.
To resolve the issue, the SEC issued "win win" rules that provide extra compensation for those who work within good faith corporate accountability programs, in advance or simultaneously with the SEC. But the Commission declined to require advance company warnings. Whistleblowers will have the choice of where to bring their evidence to maximize effectiveness. The new rule also permits disclosures by auditors, compliance officers, and others with relevant job duties against corruption. But the rule requires those whistleblowers either to demonstrate imminent serious consequences, corporate bad faith, or inaction for 120 days on internal reports on illegality.
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Join GAP and Georgetown University's Law School for an online event today (Thursday, April 21) at 5:15 p.m. EDT to discuss GAP's newly released step-by-step guide to corporate whistleblowing, The Corporate Whistleblower's Survival Guide: A Handbook for Committing the Truth.
The authors of the book, GAP Legal Director Tom Devine and litigator Tarek F. Maassarani, will be speaking alongside notable whistleblowers whose disclosures play an important role in current pivotal issues:
- Wendell Potter, the noted health insurance company whistleblower who authored Deadly Spin.
- Dr. Janet Chandler, who earned a Supreme Court landmark victory against hospital fraud with help from her then-lawyer Barack Obama, will share her marathon ordeal.
- Larry King, the nuclear whistleblower who was Project Manager for the Three Mile Island cleanup. His whistleblowing on reckless cleanup practices likely prevented a meltdown after the accident.
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GAP is proud to announce the release of the single most comprehensive publication ever created about corporate whistleblowing, The Corporate Whistleblower's Survival Guide: A Handbook for Committing the Truth. Published by Berrett-Koehler, this step-by-step guide details key information that potential business whistleblowers should know before, during, and after blowing the whistle.
Topics include: whistleblowing strategies that have proved successful; common pitfalls; key survival tips; typical retaliatory tactics; working with the media; available resources and help groups; and current legal protections, just to name a few.
The authors of the book, GAP Legal Director Tom Devine and former GAP litigator Tarek F. Maassarani, will be speaking at an online event this Thursday alongside notable whistleblowers from the nuclear and healthcare industries. Noted health care whistleblower Wendell Potter will participate.
Praise for the book has been overwhelming. Many high-profile whistleblowers and good government advocates have reviewed the book and hailed its importance for truth-tellers everywhere. The Corporate Whistleblower's Survival Guide is filled with essential tips for navigating every step of the whistleblowing process -- from detailing what individuals should do if they are simply considering taking action to expose wrongdoing, to navigating the storm of retaliation that inevitably follows.
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Every once in a while during a crisis, the mask of ‘democracy’ slips off the face of US foreign policy, and we see how the federal government really works at its highest levels, using its heaviest hitters. Frank G. Wisner is just such a cleanup batter.
His mala fides
were on display this morning in the press, as an envoy to teetering Egyptian President Hosni Mubarak from US President Barack Obama, who must salvage US ‘interests’ as one of the West’s favorite and most expensive regimes in the Middle East falls apart.
Wisner is exactly what the rest of the world thinks of as the US government, and his résumé explains why popular movements abroad try to steer clear of the American Embassy in their capitals. When a Third World situation gets tricky, and one of our allied dictators, such as Mubarak, faces charges of corruption, authoritarianism and human rights violations, Wisner is the man to call. He can mange the situation by speaking to the tired old monster “as a friend,” and showing him the exit.
Wisner, 72, has spent a career at the interstices of the State Department and multinational corporations that play fast and loose with investors’ money and the law. He has “served” as the United States Ambassador to Egypt (1986-91), the Philippines (1991-92) and India (1994-97), among other assignments.
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As the 111th Congress draws to a close, the heat is on
to confirm James Cole as Deputy Attorney General. Despite the last-minute push, Cole still has serious problems that haunt and disqualify him
from taking a senior position at the Justice Department.
From 2005 through December 2009, James Cole served as an independent monitor
in the Compliance Office of the American International Group (AIG), placed there by the Securities and Exchange Commission (SEC) as part of a deal that allowed AIG to escape prosecution for fraud.
While Americans and their elected representatives are notorious for their short attention spans, it’s worth remembering, in this case, that AIG was the corporation that nearly drove the US economy off a cliff in September 2008. AIG’s Financial Products Division (AIG-FP), based in London, wrote credit default swaps involving staggering amounts of money that had to be covered with a US government bailout in the range of $180 billion.
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Some say money can’t buy everything. But for BP, money sure seems to be able to buy enough litigation and lobbying power to stay in business, even with its persistent, egregious safety violations that have led to more than one deadly disaster.
While BP’s older crimes may have been overshadowed lately by the more current and devastating Gulf oil spew, it should not be forgotten that the company is still litigating charges related to a 2005 blast at a Texas refinery that killed 15 workers. With the Gulf oil spill and the 40-day release of toxic chemicals from its Texas refinery, BP has its hands full with not one, but three environmental catastrophes. All three remain unresolved.
2005 BP Texas City incident diagram
Regarding the refinery case, the Justice Department recently decided
not to revoke the three-year probation it had imposed on BP due to the numerous safety violations (both criminal and civil) found during the federal investigation into the 2005 accident. Although the probation period allowed BP time to respond to violations, it has to date failed to properly respond to all safety issues or fully pay its fines. Although the government warned that it might revoke or renew the probation, it then backed off of its threat – presumably to avoid subjecting the company to further criminal prosecution. Of course, family members of those killed in the accident have been advocating for more, not less, prosecution.
Furthermore, a probe into safety issues at the refinery found that the initial violations noted by federal regulators only scratched the surface of a trove of (shock!) even more violations. This mirrors what we’ve seen in the Gulf – both in the spill itself as well as in the cleanup – where the information that has come forward continues to prompt yet more questions.
Photo by flickr user IBRRC
We now know that dangerous dispersants were being used in the cleanup and that BP was barring media access to oil-soaked sites. But why has the cleanup effort been shrouded in a veil of secrecy in the first place? What about the devastating ailments plaguing Gulf Coast residents, the reports of massive kill zones and dead marine life, and the widely disparate scientific studies on what’s happened to all that oil and dispersant? In light of a 1978 oil spill cleanup in Brooklyn
, in which oil dating back to 1948 was found, somehow assurances that “75 percent of the oil is gone” don’t quite make sense. Let’s not forget that the initial (BP-backed) flow rate estimates of 1,000 barrels per day skyrocketed to over 60,000.
It seems that the more we continue to investigate BP, the more dark secrets we shall find. This is not a surprise. Yet, the question remains -- how far will it go before meaningful changes are enacted to protect those who have suffered from the carelessness of BP, and those courageous few insiders who have blown the whistle?
Lindsay Bigda is Communications Fellow for the Government Accountability Project, the nation's leading whistleblower advocacy organization.
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In news regarding automaker Toyota’s continuing problems with “unintended acceleration” – a sudden increase in speed that may be linked to several accidents and deaths since 2001 – preliminary findings from federal officials seem to support the company’s claims that problems lie not in faulty electronics, but rather in other issues such as sticking pedals, floor mat entrapment, and driver error.
Government regulators are investigating this issue using data collected from Toyota’s ‘black box’ recorders – devices installed in vehicles that record data such as velocity and acceleration. Of course, keep in mind that federal regulators are reviewing the accuracy of Toyota’s electronic system with an electronic device made by… Toyota? On this note, a handful of safety consultants are asking similar questions, such as: Is the black box device a scientifically validated instrument?
This raises the bigger question of the government’s willingness to trust automakers’ claims. It also brings up the familiar catch of free markets versus government regulation. On the one hand, self-regulation has always been problematic (remember when BP assured us that most companies had voluntarily adopted safeguards to protect against oil spills?). On the other, government regulation is sometimes equally faulty. Toyota’s ongoing acceleration issue highlights both sides of the debate.
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The Senate Judiciary Committee is scheduled to vote on James Cole’s nomination for Deputy Attorney General tomorrow – Tuesday, July 20th. Serious doubts remain, however, about Cole’s role at AIG before, during and after the company’s financial collapse in September 2008. I posed him some questions prior to Cole’s hearing last month on GAP’s YouTube channel.
Over the past two weeks, a number of Senators have posed written questions to Cole about his role at AIG. His answers are troubling – particularly those he provided to Senator Charles Grassley.
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On July 2nd, Senator Charles Grassley (R-Iowa) posed written questions to James Cole, the Obama administration’s nominee for the post of Deputy Attorney General. Many of these questions focused on Cole’s role as the Independent Consultant placed at AIG from 2005 through 2009 as part of two deferred prosecution agreements (DPAs). The first of these DPAs resulted from charges of aiding and abetting securities fraud in the AIG Financial Products subsidiary based in London, the AIG appendage that crashed the world economy in 2008 and required a $182 billion bailout courtesy of the US taxpayer. Some of Cole’s responses to Grassley’s questions were both puzzling and contradictory, and others we know to be misleading.
Under the terms of the 2006 DPA, Cole was asked to examine “the adequacy of whistleblower procedures designed to allow employees or others to report confidentially matters that may have a bearing on AIG’s financial reporting obligations.” In written questions Grassley asked Cole to provide a “discussion of the scope of your work under the 2006 DPA.” In response, Cole simply quotes from the DPA, which is, of course, available to Senator Grassley and the rest of the world on the DOJ website. A meaningful written discussion of whistleblower procedures at AIG would have to include an account of the layoff of ten compliance attorneys and officials in the aftermath of the corporation’s financial collapse in September 2008. Several of the ten were whistleblowers who had written to senior management at AIG about deficient compliance procedures. None of them was interviewed confidentially by Cole, who acceded to the demand of Suzanne Folsom, then Chief Compliance Officer, that Cole interview her staff only when she or her designee were present. As a result, the whistleblowers were summarily terminated under guise of a staff reduction.