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R. Scott Oswald, Managing Principal of The Employment Law Group®, Publishes Article in The Washington Post on Recent Expansions of Employee Rights

April 11, 2012

R. Scott Oswald, managing principal of The Employment Law Group® recently published an article in The Washington Post discussing new expansions of employee rights in the areas of whistleblower protection and wage and hour law.

In the piece, Mr. Oswald discussed recent developments in employee protection law that, if ignored, could result in penalties and other sanctions for employers, including: the miscategorization of workers as independent contractors; expansions in the protection afforded by whistleblower laws; and new wage and overtime protection for home healthcare workers.

On the subject of employee misclassification, Mr. Oswald wrote that:

“in this tough economy, employers may be tempted to miscategorize an employee as an independent contractor in order to skirt requirements to pay unemployment insurance, Social Security, workers compensation and other employee benefits.”

However, employers could face stiff penalties for misclassifying workers, according to Oswald. Specifically, in Maryland, employers found to be in violation of the law can be liable to pay both restitution to the misclassified worker and a $1,000 civil penalty. Other states’ protections provide even more protection to employees, for example, according to a recently enacted law in California, employers can be subject to a fine of up to $15,000 for each violation and even up to $20,000 if the employer is found to have engaged in a “pattern or practice of these violations”.

Mr. Oswald also discussed new federal protections for whistleblowers under the Dodd-Frank Act which “has created a national whistleblower standard that applies not only to employees at publicly traded corporations but also to corporations that are regulated by the Consumer Financial Protection Bureau (CFPB).” Among the industries now affected by the new whistleblower protections include, according to Oswald, “payday lenders, private education lenders, and mortgage finance companies.”

Also highlighted in the article were recent regulatory changes by the Department of Labor which will assist in “reigning in wage abuses in certain industries not traditionally covered by protections, including the home healthcare industry.” As a result, more home healthcare workers will soon be protected by federal minimum wage and overtime laws, whereas currently there are nearly 30 states that do not offer such workers minimum wage or overtime protections.

As a result of these new laws and regulations, Mr. Oswald commented that “employers must be more careful in how they pay their workers and must be more rigorous in their human resources compliance.”

The Employment Law Group® law firm has a nationwide whistleblower practice representing employees who have been the victims of retaliation, as well as and extensive wage and hour practice representing employees whose rights have been violated, including nonpayment of wages and denial of overtime pay.

SEC Whistleblower Chief Reportedly Pleased With High-Quality Leads Received Since Beginning of Whistleblower Rewards Program

March 15, 2012

According to a report this week in the Financial Times, the chief of the Securities Exchange Commission’s new Whistleblower Office, Sean McKessey, stated that the SEC has “received notes, audio recordings of conversations and simple recollections” of securities fraud and other wrongdoing since a new whistleblower reward program promising rewards for whistleblowers began last year.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires that the SEC pay rewards to whistleblowers who voluntarily provide the SEC with original information that leads to successful enforcement actions. Under the new law, whistleblowers who report fraud can qualify to receive 10 to 30% of the amount that the SEC recovers through lawsuits and settlements.

McKessey noted that his office has “been very pleased with the percentage of whistleblowers tips that have [signs] of reliability either because they’re from somebody working at the company they’re complaining about or there’s a sufficient amount of specificity, or both.”

McKessey also clarified that his office accepts both electronic and paper tip submissions and, while the SEC receives a greater amount of tips electronically, in at least one case, McKessey found a paper submission to be “extraordinarily specific and credible.” One such whistleblower tip reportedly formed the basis for the SEC opening a case last week.

The Employment Law Group® law firm is a leader in the field of whistleblower law and recently published a guide on the SEC’s new rules for the Dodd-Frank whistleblower program.

Former Executive Alleges that GE Retaliated against Him for Objecting to Company’s Efforts to Influence Iraqi Officials

February 17, 2012

Khaled Asadi, a former General Electric executive based in Iraq, filed a lawsuit in federal court in Houston, Texas, against General Electric (GE) on February 3, 2012, alleging that the company retaliated against him after he raised concerns about potential internal corruption. Asadi states in his complaint, that he was coerced to step down from his position at GE because he objected to a decision that he believed could damage GE’s international reputation and may even violate the Foreign Corrupt Practice Act.

Asadi claims that in 2010, GE hired a woman who could influence a senior Iraqi official to help GE obtain contracts from the Iraqi Ministry of Electricity. After he raised the issue with his supervisor and the GE ombudsperson, GE assigned Asadi an “extremely negative and troubling performance review” and forced him to step down from his position, which he had held since 2006.

Asadi brought his suit under the Anti-Whistleblower Retaliation provisions of the Securities Exchange Act, which protects employees of publically traded companies who report unlawful behavior by their employers. Asadi is seeking reinstatement to his prior position at GE, lost wages, and attorney fees and costs.

A spokesman for GE denied the accusation and stated, “Mr. Asadi’s termination had absolutely nothing to do with any allegations he is making. Regarding our contracts in Iraq, GE followed all requirements and his allegations are false.”

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

BNY Mellon Whistleblower Provides Information Aiding Several States’ Lawsuits

January 06, 2012

Last month, Louisiana Municipal Police Employees’ Retirement System (“LAMPERS”) filed a securities class action lawsuit in the U.S. District Court for the Southern District of New York against The Bank of New York Mellon Corporation (BNY Mellon) under the Securities Exchange Act of 1934. The lawsuit filed by LAMPERS, discussed in an article published by Reuters, arose from the actions of whistleblower Grant Wilson, a former employee of BNY Mellon, who exposed widespread overcharging of pension funds by the bank.

Wilson worked for BNY Mellon for 19 years as a foreign-exchange trader and left the company this past spring. During the last few years of his employment with BNY Mellon, Wilson began to gather evidence that the bank was improperly charging state and local pension funds for foreign currency exchanges. The information that Wilson disclosed provided the basis for lawsuits filed against BNY Mellon by five states, including Florida, New York, and Virginia.

According to the LAMPERS complaint, “While BNY Mellon’s FX trading services were offered to clients as [being] ‘free of charge,’ in truth, BNY Mellon rigged the pricing of its FX transactions in order to reap illicit profits.” The complaint also alleges that “the Company’s deceptive practice began to surface in January 2011 after two whistleblower (or qui tam) lawsuits against BNY Mellon were unsealed in Virginia and Florida,” leading to other lawsuits, including the recent suit filed by LAMPERS.

SEC Charges GlaxoSmithKline Unit with Defrauding Employees in Low Valuation Stock Buybacks

December 22, 2011

Seal of the U.S. Securities and Exchange Commi... — Image via Wikipedia

Last week, the Securities and Exchange Commission (SEC) charged Stiefel Laboratories Inc. (Stiefel Labs), a subsidiary of GlaxoSmithKline PLC, and the company’s former chairman and chief executive officer Charles Stiefel with defrauding employees and company shareholders by allegedly making stock buybacks at significantly undervalued prices.

The SEC alleges that Stiefel Labs failed to report certain information to employees and shareholders, thereby enabling the company to buy back stock from employees and shareholders at undervalued prices. According to the SEC’s complaint, which was filed in the U.S. District Court for the Southern District of Florida, “Charles Stiefel knew that five private equity firms had submitted offers to buy preferred stock in November 2006 based on equity valuations of Stiefel Labs that were approximately 50 to 200 percent higher than the valuation later used for stock buybacks.” Despite knowing of the offers, Stiefel Labs continued to purchase stocks that were below estimated equity valuations. Shareholders and employees who sold undervalued stock to Stiefel Labs lost more than $110 million, according to Eric I. Bustillo, director of the SEC’s Miami Regional Office.

The SEC is seeking permanent injunctive relief for shareholders and employees, financial penalties, disgorgement of ill-received gains with prejudgment interest against both Stiefel Labs and Charles Stiefel. The SEC is also seeking to permanently bar former CEO Charles Stiefel from serving as an officer or director of any publicly traded company

SEC Uncovers Millions Lost in D.C. Area Ponzi Scheme

November 23, 2011

The Securities and Exchange Commission (SEC) charged North Bethesda resident Garfield M. Taylor and his associates with running a multi-million dollar Ponzi scheme in which he promised investors annual returns of about 20 percent with little or no risk. Instead, Taylor lost investors money on highly risky options and used funds from new investors to pay the interest promised to other investors.

According to the SEC, Garfield collected more than $27 million from investors between 2005 and 2010. Any whistleblowers who reported Garfield’s Ponzi scheme to the SEC would likely be eligible for an award under the SEC’s Whistleblower Award Program, which was established following the recent financial crisis that lead to the uncovering of the multi-billion dollar Bernard Madoff Ponzi scheme.

Post-Madoff, a Greater Awareness of Ponzi Schemes (dealbook.nytimes.com)

SEC Whistleblower Reward Program Goes into Effect August 12

August 12, 2011

The SEC Whistleblower Reward Program signed into law last year under theDodd-Frank Wall Street Reform and Consumer Protection Act is effective as from today, August 12, 2011.

As the U.S. economy continues to struggle, compounded by a lowered Standard & Poor’s rating that sent the New York Stock Exchange and European markets spiraling, corporate whistleblower cases are likely to increase as corporations try to tighten budgets and cut costs.

The SEC will now begin rewarding those whistleblowers who come forward with information regarding securities laws violations at public companies.

SEC Adopts Favorable Rules for Whistleblowers(employmentlawgroupblog.com)
SEC adopting new system of whistleblower awards(seattletimes.nwsource.com)
SEC whistleblower chief pushes back at critics (marketwatch.com)

SEC Adopts Favorable Rules for Whistleblowers

May 26, 2011

300px-US-SecuritiesAndExchangeCommission-Seal — Image via Wikipedia

The Securities and Exchange Commission is being praised by whistleblower advocates for issuing finalized rules that will effectively incentivize employees to disclose fraud and other securities law violations. The Dodd-Frank Act – enacted in July of 2010 – established a new whistleblower program within the SEC, requiring the SEC to reward whistleblowers who provide original information with between 10% and 30% of the amount recovered by the SEC.

The rules do not require whistleblowers to report fraudulent or illegal activity internally to their employer as a prerequisite to eligibility for an award – a position advocated by many corporations – but instead allow whistleblowers to blow the whistle directly to the SEC. Allowing employees to report information directly to the SEC will not diminish the strong incentive for employees to blow the whistle internally because employees can still be rewarded for reporting internally so long as the employee also provides the same information to the SEC within 120 days.

The SEC wisely chose not to require all employees to report fraud internally. Internal compliance programs failed miserably to avert the financial crisis. Where fraud is pervasive in upper management, it would be futile for an employee to blow the whistle internally, and it is in the best interest of shareholders for the whistleblower to disclose fraud directly to the SEC. But where companies have implemented effective programs that are not merely a tool of management to cover-up violations, employees will want to use those internal compliance programs.

For more information on reporting fraud, click here.

TELG Quoted by Investment News About Proposal to Weaken SEC Whistleblower Reward Program (employmentlawgroupblog.com)
Rules offer big cash awards to whistle-blowers (usatoday.com)
Corporate America Not Totally Thrilled With New Whistleblower Rules(blogs.wsj.com)

SEC Issues Rules Favorable to Whistleblowers

May 26, 2011

The Securities and Exchange Commission is receiving praise from whistleblower advocates for issuing finalized rules that do not require whistleblowers to report fraudulent or illegal activity internally to their employer, but instead allow whistleblowers to blow the whistle direct to the SEC. The Dodd-Frank Act established a new whistleblower program at the SEC, requiring the SEC to reward whistleblower who provides original information with between 10% and 30% of the amount recovered by the SEC. Allowing employees to report information directly to the SEC does not diminish the strong incentive for employees to blow the whistle internally, because employees can still get a reward so long as the employee provides the same information to the SEC within 120 days.

Internal compliance programs failed miserably to avert the financial crisis. Where fraud is pervasive in upper management, it would be futile for an employee to blow the whistle internally and it would be in the best interest of shareholders for the whistleblower to disclose fraud directly to the SEC. But where companies have implemented effective programs that are not merely a tool of management to cover up violations, then employees will use those programs. Unfortunately, far too many find their company’s internal compliance program is deficient and in some cases a tool for management to retaliate against whistleblowers.

The new reward program is already beginning to bear fruit. Similar whistleblower rewards under the False Claims Act where extremely effective at inducing employees t report fraud to the government, leading to the recovery of over 27 billion dollars.

TELG Quoted by Investment News About Proposal to Weaken SEC Whistleblower Reward Program

May 16, 2011

Investment News reported that Rep. Michael Grimm, R-N.Y. circulated draft legislation that would require a whistleblower to first report fraud through an internal compliance program as a prerequisite to recovering an award before the whistleblower would be eligible for a reward from the SEC under the whistleblower reward provision of the Dodd-Frank Act. TELG opposes such a requirement because blowing the whistle in a company where fraud is pervasive or where the internal compliance function is not independent is not only futile, but can undermine the SEC’s ability to combat the fraud. Indeed, TELG has found that many whistleblowers who come forward in good faith through an internal compliance program suffer retaliation. Jason Zuckerman, a Principal atThe Employment Law Group® law firm, told Investment News that he hopes that the SEC’s final rules implementing the whistleblower reward provisions of Dodd-Frank will offer strong to whistleblowers, and notes that “In order to put your job on the line, there has to be a real financial incentive.”