WHISTLEBLOWER LITIGATION: NEW DEVELOPMENTS AND STRATEGIES

Transcription

1 Litigatin Management: Driving Great Results WHISTLEBLOWER LITIGATION: NEW DEVELOPMENTS AND STRATEGIES Bill Crnin Crr Crnin Michelsn Baumgardner & Preece

2 Whistleblwer Prtectin: The Ddd- Frank Wall Street Refrm and Cnsumer Prtectin Act s Expansin f SOX Whistleblwer Prtectins Gregry G. Thiess / Vice President and Assistant General Cunsel Rbert Bsch LLC 2800 S. 25th Avenue Bradview, IL gregry.thiess@us.bsch.cm Sarbanes- Oxley, 15 U.S.C et seq., prtects cmpany whistleblwers under 18 U.S.C. 1514A. It prhibits publicly held cmpanies, their fficers, emplyees, cntractrs, subcntractrs r agents frm effrts t discharge, demte, suspend, threaten, harass, r in any ther manner discriminate against an emplyee in the terms and cnditins f emplyment because f any lawful act dne by the emplyee t reprt, assist in reprting r assist in an investigatin regarding cnduct which the emplyee reasnably believes cnstitutes a vilatin f the Securities Exchange Act, any rule r regulatin f the SEC, r prvisin f Federal law relating t fraud against sharehlders. While SOX des nt itself prvide whistleblwers with financial incentives fr reprting vilatins f securities laws, the Securities Exchange Act, 15 U.S.C. 78u- 1(e) prvides fr such rewards t emplyees wh reprt insider trading, and the False Claims Act, 31 U.S.C prvides rewards t emplyees wh reprt fraud n the federal gvernment. Since passage f SOX, the Department f Labr has cnsistently held that the whistleblwer prtectins f 18 U.S.C. 1514A applicable t publicly held cmpanies d nt extend t emplyees f privately held subsidiaries f public cmpanies. 1 Financial reward prvisins f the SEA, while in place since 1988, have resulted in very few payments under the prgram, due t its limitatin t insider trading allegatins and the brad, smewhat vague criteria fr such awards. 2 Althugh the reward prvisins f FCA have resulted in substantial recveries fr persns reprting fraud claims cvered by that statute 3, the FCA bunty prvisins are limited t claims f fraud n the federal gvernment. DOL decisins nt t apply whistleblwer prtectins t private subsidiaries f public cmpanies have drawn criticism frm sme members f Cngress. 4 1 See Stevensn v. Neighbrhd Huse Charter Schl, N SOX (ALJ Sept. 7, 2005), and Paz v. Mary's Center fr Maternal & Child Care, N SOX- 7 (ALJ Dec. 12, 2005) (SOX whistleblwer prtectins are based slely n whether the cmpany has a class f stck registered under Sectin 12 f the Exchange Act r whether it is required t make reprts pursuant t the Act s Sectin 15(d). 2 See Assessment f the SEC s Bunty Prgram, Reprt N. 474, published by the SEC Office f Inspectr General March 29, 2010, page 2. 3 DOJ Press Release 11/19/09 ( Justice Department Recvers $2.4 Billin in False Claims Cases in Fiscal Year 2009; Mre Than $24 Billin Since 1986 ). 4 See, e.g., Octber 6, 2010 letter f Senatrs Patrick Leahy and Charles Grassley, published at

3 In March 2010 the SEC recmmended changes t its whistleblwer prtectin and enfrcement mechanisms, including: An utreach prgram t prvide the general public and SEC persnnel mre infrmatin abut its bunty prgram. Psting t its web site a publicly available whistleblwer applicatin frm. Establishing plicies fr agency fllw- up f whistleblwer reprts, t clarify claims in such reprts, btain readily available supprting dcumentatin and t prvide status reprts t reprting whistleblwers. Develping specific criteria fr awarding bunties, including that whistleblwers may rely in part n publicly available infrmatin and still be eligible. Establishing frmal paper and electrnic files fr each received claim. 5 The decisins nt t apply whistleblwer prtectins f SOX and related statutes t privately held affiliates f public cmpanies allwed thse cmpanies t structure cmpliance plicies less rigrusly than public cmpanies, and a means t cntest whistleblwer claims filed with regulatry agencies. Privately held affiliates have nt t date been expsed t the SOX related remedies fr whistleblwers, such as SEA and FCA bunty payments. Publicly held cmpanies that were subject t the whistleblwer remedies culd rely n the specificity f claims fr which the remedies are available, t determine where bunties may apply. The Ddd- Frank Wall Street Refrm and Cnsumer Prtectin Act, Pub. L (July 21, 2010), amends the SOX whistleblwer prvisins t include any subsidiary r affiliate whse financial infrmatin is included in the cnslidated financial statements f public cmpanies. (Sectin 929(a)). Ddd- Frank als extends the availability f bunty payments t a brader array f claims, including any claim under the securities laws that results in mnetary sanctins exceeding $1,000,000. (Sectin 922(a)(1)). The statute als prvides new penalties/remedies fr whistleblwer retaliatin claims, including pssible duble back- pay with interest and a separate cause f actin fr retaliatin that des nt require first filing a claim with the DOL. (Sectin 922(h)). 5 See Assessment f the SEC s Bunty Prgram, supra

4 In- Huse/Outside Cunsel Challenges Bard members, senir managers and their in- huse and utside cunsel at privately held affiliates f public cmpanies have nt t date been required t implement plicies r prcedures that prvide the same measure f whistleblwer prtectin as their publicly held parents, wners r cunterparts. T prtect clients frm triggering the expanded whistleblwer prtectins/remedies that will nw be applied t bth public and certain privately held cmpanies, in- huse and utside cunsel fr thse cmpanies must: i. educate their Bards, senir management, cmpliance/ethics fficers and HR persnnel abut the extended requirements, and ii. prvide directin fr evaluatin f current cmpany cmpliance, ethics and auditing plicies and implementatin f needed whistleblwer plicies r plicy imprvements. Recmmended Actins 1. Cunsel evaluatin f individual cmpany plicies t determine whether they are sufficiently rigrus t prvide required prtectins t whistleblwers. 2. Similar review f cmpliance and auditing practices t assure that a cmpany respnds apprpriately t reprted vilatins. 3. If existing plicies, cmpliance prgrams and auditing practices are fund lacking, develpment f plicies that assure cmpliance with the new requirements. 4. Develpment f training/educatin prgrams cvering expanded whistleblwer prtectins/remedies, t be prvided t Bards f affiliate cmpanies affected by the new requirements. 5. Develp specific reslutins fr their Bards t implement the new r mdified plicies and prcedures, where needed. 6. Training n new requirements and new r revised plicies and prcedures fr ethics, cmpliance and HR persnnel fr implementatin and cmmunicatin t emplyees. 7. Fllw- up meetings/cmmunicatins with ethics and cmpliance persnnel, t assure maintenance f apprpriate investigatins and fllw- ups t reprted claims. 8. Peridic evaluatin (minimum yearly) f cntacts t ethics and cmpliance htlines, 800 numbers r ther surces where emplyees can reprt perceived legal and ethics vilatins, t identify any changes in frequency r cntent ver time

5 1001 Furth Avenue Suite 3900 Seattle, WA Tel: (206) Fax: (206) William Crnin Partner Representative Clients Alyeska Pipeline Service Cmpany Atlantic Richfield Cmpany Amazn.cm Aramark Arc Alaska, Inc. AT&T Wireless Champin Internatinal Earle M. Jrgensen Cmpany Exxn and ExxnMbil Crpratin Gergia-Pacific Glacier Nrthwest Lngview Fibre Cmpany Lynden Transprt Pendletn Wlen Mills The Prt f Seattle Ryal Bank f Canada Suthland Crpratin State f Washingtn Tdd Shipyards U.S. Filter, Inc Significant Cmplex / Cmmercial Litigatin Mr. Crnin is a funding partner f the Crr Crnin law firm. Mr. Crnin was frmerly c-chair f the Bgle & Gates litigatin department frm 1995 t Mr. Crnin is a Fellw in the American Cllege f Trial Lawyers and has been named as ne f the tp business litigatrs in Seattle in every ne f Seattle Magazine s tp lawyer surveys since Mr. Crnin was ne f the five named tp business litigatrs in 2001 and 2003 and ne f the fur named in 2005 (his partner, Kelly Crr, was als named as a tp business litigatr in each survey). Fr 8 years in a rw Mr. Crnin has been listed in the Best Lawyers in America. He has als been selected as a Super Lawyer n multiple ccasins by Washingtn Law & Plitics and has been named as ne f the Tp 100 Super Lawyers in the state. Practice / Experience Mr. Crnin s practice fcuses n business litigatin, representing bth plaintiffs and defendants. He has cnsiderable experience representing law firms, accunting firms, crprate fficers and directrs, and majrity and minrity stckhlders in securities litigatin, prfessinal liability litigatin, and crprate cntrl disputes. During his career, Mr. Crnin has represented: Exxn Crp. in a large tax dispute with the State f Alaska invlving a claim in excess f $1 billin; Exxn and Arc Alaska in a majr dispute with Chevrn, Mbil and Phillips ver the respective wnership interests in the Prudhe Bay Oil Field, the largest il field in Nrth America; Gergia Pacific Crpratin, AT&T Wireless, Pendletn Wlen Mills, Tdd Shipyards and Champin Internatinal as plaintiffs in majr insurance cverage disputes; and Amazn.cm and AT&T Wireless in majr cntract disputes. Educatin / Backgrund J.D., University f Suthern Califrnia Law Schl, 1975 >Order f the Cif >Briedenbach Schlarship >American Jurisprudence Award fr Cnstitutinal Law, 1974 University f Oregn Law Schl, >Oregn Law Alumni Schlarship B.A., cum laude, Brwn University, 1970 Jined Bgle & Gates PLLC in 1978, and was a Member frm 1983 t 1999 Assciate Attrney, O Melveny & Myers, Ls Angeles, Califrnia, Admitted t the Bar in Califrnia in 1975 and in Washingtn State in