Whistleblower Law Blog
Topic: Enforcement Bodies
Nation’s Largest Accreditor of For-Profit Colleges Loses Federal Recognition
The Department of Education (DoE) terminated federal recognition of the Accrediting Council for Independent Colleges and Schools (ACICS) on September 22, 2016. Earlier this year, the National Advisory Committee on Institutional Quality and Integrity (NACIQI) recommended ACICS for shutdown to the DoE.
On June 23, 2016, NACIQI recommended to the Senior Department Official (SDO) of the DoE that ACICS be denied recognition as an accreditor. ACICS is no stranger to scrutiny, accrediting controversial schools like Corinthian Colleges, and the recently shutdown ITT Technical Institute. Despite many questionable accreditation decisions made by ACICS over the years, ACICS remained a trusted business partner by the DoE for many years.
Tenth Circuit Court of Appeals Upholds ARB Decision in Favor of Truck Driver Who was Fired After He Abandoned His Disabled Vehicle to Avoid Freezing to Death
In a recent case before the United States Court of Appeals for the Tenth Circuit, the Court upheld an Administrative Review Board (ARB) decision finding that a truck driver was terminated in violation of the whistleblower provisions of the Surface Transportation Assistance Act (STAA). The truck driver, Alphonse Maddin, unhitched his truck from a trailer and drove away to avoid freezing to death after the brakes on the trailer froze due and roadside assistance failed to respond. Maddin had reported to his employer, TransAm Trucking, both the condition of the trailer and the threat to his health due to the freezing weather conditions. The Court held that Maddin had engaged in protected activity under the STAA by reporting the frozen brakes and the threat to his health; and that the driver’s termination for leaving the trailer to seek safety violated the whistleblower protection provisions of the STAA.
Whistleblower Exposes Hedge Fund for Misleading Investors
Dhir v. Carlyle Group, 3:16-cv-00219, U.S. District Court, District of Connecticut
A hedge fund employee decided to blow the whistle on the company’s misstatements to investors regarding its financial investments in certain derivative products. The plaintiff, Nikhil Dhir, a former portfolio manager at the hedge fund, claims that the firm misstated both the amount of assets the firm had invested in these derivative products, as well as the risk associated with the products. Dhir alleges that Vermillion hedge fund founders, Chris Nygaard and Drew Gilbert, “knowingly and intentionally” advertised the fund has having low risk and volatility, even though freight derivatives are highly volatile and not liquid.
Michigan Court Upholds Right to Pursue FRSA Cases in Federal Court
In a recent case in the U.S. District Court for the Eastern District of Michigan, the court denied Grand Trunk Railroad’s Motion to Dismiss, holding that a plaintiff may pursue a Federal Railroad Safety Act (FRSA) whistleblower retaliation claim in federal court, even after he has pursued the same claim administratively with the Department of Labor. The court held that pursuing remedies in both venues did not constitute bad faith on the part of the complainant, did not present a res judicata (claim preclusion) issue, and did not violate the due process rights of the defendant railroad. This case is important because it affirms the options available to a whistleblower to fully adjudicate claims of unlawful retaliation.
ARB Upholds “Reasonable Belief” Standard for Fraud Claims Under SOX
The Department of Labor’s Administrative Review Board affirmed an Administrative Law Judge’s (ALJ) decision that found the following: Timothy Dietz reported violations of the federal mail and wire fraud statutes to his former employer Cypress Semiconductor Corporation and, in retaliation, Cypress placed an undeserved disciplinary memo in his personnel file, and then constructively discharged him, thereby violating the whistleblower provision of the Sarbanes-Oxley Act (SOX). The ARB’s decision was issued in Dietz v. Cypress Semiconductor Corp., ARB Case No. 15-017, ALJ Case No. 2014-SOX-002
ARB Resolves a 20 Year Dispute Involving Racially Motivated Hiring at Bank of America
In April 2016, the Department of Labor’s Administrative Review Board (ARB) settled a twenty-year dispute in Office of Federal Contract Compliance Programs, United States Department of Labor v. Bank of America. Judge Luis A. Corchado authored the ARB opinion affirming an Administrative Law Judge’s (ALJ) August 2004 ruling regarding discriminatory hiring practices allegedly used by Bank of America (BOA) to exclude African American applicants in 1993. But relying on statistical analysis, Judge Corchado reversed the ALJ’s ruling that BOA utilized similar discriminatory hiring practices between 2002 and 2005. Judge Corchado’s opinion defined the contours of legally persuasive statistical analysis.The ARB cited a long-established principle regarding the role of statistical analysis in employment discrimination cases: “[S]tatistical evidence may be used to rule out chance.” Bank of America, ARB No. 13-099, LJ No. 1997-OFC-016 slip op. at 13 (ARB April 21, 2016)(Corchado L.). Courts have consistently considered disparities exceeding two standard deviations to be significant. And the more extreme the statistical disparity, the less additional evidence a Plaintiff need present to prove that racial discrimination caused the variation.
DOL Administrative Review Board Member Calls for ARB to Determine Whether Mandatory Arbitration Agreements Apply to Whistleblower Cases
In a recent case before the Department of Labor’s Administrative Review Board, which is the appellate body within the DOL that issues final agency decisions, Judge Luis Corchado, in his concurrence, called for the ARB to decide whether whistleblower laws enforced by the DOL, such as AIR 21 (protecting airline employees) or Sarbanes-Oxley (protecting those who disclose securities violations), can be subjected to mandatory arbitration. A holding that definitively determined that all whistleblower anti-retaliation claims could be subjected to mandatory arbitration would likely have detrimental effects in furthering the purposes of those laws.
Under mandatory arbitration provisions, typically seen in employment agreements or settlement agreements after litigation, parties agree that legal claims that could be pursued in court or administrative bodies must instead be submitted to a private arbitrator. The outcomes of such cases are almost always confidential. Further, in most arbitration, the arbitrator’s decision is final and is immune from appeal to a court absent a showing of extraordinary circumstances. Arbitration often serves to promote judicial economy by reducing litigation costs and lessening judges’ caseloads. But because of its inherently private nature, arbitration can also conceal wrongdoing from public knowledge.» Read more
GAO Report Urges Enhanced IRS Whistleblower Protections
In a report released November 30, 2015, the Government Accountability Office found that the IRS Whistleblower Office had recovered $2 billion in tax revenue that would have been lost without the efforts of whistleblowers. But despite this success, the GAO concluded that the IRS Whistleblower Office is plagued by administrative issues, and recommended that Congress pass new employment protections for tax whistleblowers.
The Tax Relief and Health Care Act of 2006 created the Whistleblower Office within the IRS. It manages and tracks claims made under two programs, one for claims of under $2 million (26 U.S.C. 7623(a)) and the other for claims of more than $2 million (26 U.S.C. 7623(b)). The 7623(b) program was also created by the Tax Relief and Health Care Act of 2006.
Tax whistleblowers have helped the IRS collect nearly $2 billion in additional revenue since the first 7623(b) claim was paid in 2011 under the expanded program that awards whistleblowers between 15 percent and 30 percent of collected proceeds. Since that time, the Whistleblower Office has awarded more than $315 million to whistleblowers.
Pending Legislation Seeks to Expand Whistleblower Protections
Whistleblowers are a legal class of persons who expose what they reasonably believe to be unlawful activity to a person or entity that has the power to correct that wrongdoing. A number of laws at both the federal and state level protect whistleblowers from retaliation. These protections exist because whistleblowers often expose fraud or other unlawful activity that would otherwise remain undisclosed. The Department of Labor’s Occupational Safety & Health Administration, for example, enforces the anti-retaliation provisions of twenty-two different statutes that protect employees in the private sector. The United States Office of Special Counsel enforces the Whistleblower Protection Act, which covers most, but not all, civilian employees of the federal government. In recent years, whistleblower protections have been extended, through the National Defense Authorization Act of 2013, to employees of government contractors who disclose fraud or mismanagement related to a contract with the federal government. And in 2014, the Supreme Court extended the anti-retaliation provisions of the Sarbanes-Oxley Act to employees of contractors who provide services to publicly held companies.
But there are limits to the many protections that already exist for whistleblowers. The WPA, for example, specifically excludes members of the Intelligence Community. Members of the Intelligence Community are covered instead under the Intelligence Community Whistleblower Protection Act, which lacks an anti-retaliation provision. Even Presidential Policy Directive 19, which President Obama signed in October 2012 to provide some protection from retaliation to those serving in the Intelligence Community, fails to provide a private right of action to an aggrieved employee. And in recent years, there have been a number of cases involving whistleblower retaliation in the Department of Veterans Affairs.
SEC Paid $37 Million to Whistleblowers in FY 2015
Fiscal 2015 was arguably the most successful year in the short history of the whistleblower program at the Securities & Exchange Commission: In the 12 months ended September 30, almost 4,000 tips were received from whistleblowers around the world — a record number — and more than $37 million was paid out in rewards.
The whistleblower program was created by the Dodd-Frank Act of 2010: Under the statute, people who report securities violations may be eligible for a reward if the SEC uses their information to recover more than $1 million for taxpayers.
The 2015 tallies are reported in the SEC program’s new annual report. Beyond the monetary rewards being paid to whistleblowers, the report highlights a number of steps taken by the SEC to help insiders who share information about corporate wrongdoing.