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Extra-territorial Application of the Anti-Retaliation Provision of Dodd-Frank

In October 2013, Judge William Pauley of the U.S. District Court for the Southern District of New York ruled that provisions to protect whistle-blowers under Dodd-Frank did not extend outside the United States.  In Liu v. Siemens AG, Civ. No. 13 Civ. 317 (WHP) Slip Op. (S.D.N.Y. Oct. 21, 2013), Judge Paley held that the whistleblower protection provisions of the Dodd-Frank Act do not apply outside the United States. ( Click here to read more about whistleblowers in the U.S. under Dodd Frank)

The Dodd-Frank anti-retaliation provision provides that:

(h) Protection of whistleblowers

(1)   Prohibition against retaliation

(A) In general

"No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower"

(i ) in providing information to the Commission in accordance with this section;

(ii) in initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or

(iii) in making disclosures that are required or protected under the Sarbanes- Oxley  Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j-1(m) of this title, section 1513(e) of title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

15 U.S.C. § 78u-6(h)(l)(a). The Dodd-Frank Act defines "whistleblower" as "any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission." 15 U.S.C. § 78u-6(a)(6).

What is the story behind Liu and why she blew the whistle at Siemens?

Liu, a resident of Taiwan, was employed as a compliance officer at Siemens' health care unit in China. He accused the German company, whose American Depositary Receipts trade on the New York Stock Exchange, of making inflated bids for medical imaging equipment sales to public hospitals and then selling the equipment at lower prices to intermediaries who gave kickbacks to hospital officials.  Liu raised his anti-bribery compliance concerns at Siemens China.  His employment contract was then terminated in 2011.  After his termination, he reported the violations of the U.S. Foreign Corrupt Practices Act (FCPA) to the SEC under its whistleblower program.

Liu then brought an action against Siemens, alleging that he was terminated in retaliation for raising compliance concerns under the FCPA.  The court found that the Dodd-Frank anti-retaliation provision did not protect him.

Read here to learn about internal protection for Dodd-Frank whisteblowers.

Asadi v. GE Energy: Does non-US cases qualify as a whistleblower under Dodd Frank?

In July 2013, the U.S. Court of Appeals for the 5th Circuit reached a similar result, albeit through different reasoning.  In Asadi v. GE Energy, 720 F.3d 620 (5th Cir. 2013), the Court ruled that a GE Energy employee in Iraq who was terminated after reporting potential FCPA violations to his employer (but not to the SEC) did not qualify as a whistleblower under Dodd-Frank, and thus was not protected by the anti-retaliation provision. Asadi, id. at note 13.  Just like the Liu court, the lower court in Asadi had held that Dodd Frank's anti retaliation provision did not apply because it does not apply extraterritorially. See Asadi v. GE Energy, 2012 U.S. Dist. LEXIS 89746 (S.D. Tex. 2012).

In late January 2014, Sean McKessy, chief of the SEC's Office of the Whistleblower, said at an American Bar Association event on whistleblower programs, that he is considering enforcing Dodd-Frank's anti-retaliation provisions against noncompliant employers by using cease-and-desist orders and monetary sanctions

The SEC has since announced that it will now file an amicus curiae brief in Liu v. Siemens AG in support of Liu Meng-lin, the Taiwanese whistle-blower.

Whistleblowers outside the United States of America

Tips to the SEC Whistleblower program involving foreign countries are not insignificant. The SEC reported that in Fiscal Year 2012, it fielded over 3,000 whistleblower allegations. See U.S. Securities and Exchange Commission, Annual Report on the Dodd-Frank Whistleblower Program, Fiscal Year 2012. Of those, 115, or 3.8 percent, were FCPA-related allegations, and thus involve practices in foreign countries.  With regard to China, where the conduct in Liu v. Siemens occurred, the SEC received 10 whistleblowing tips in 2011, 27 in 2012 and 52 in 2013. China was the third-largest source of tips to the SEC outside the US last year, behind Britain and Canada.

Contact Us To Learn More

We invite you to learn more from our Whistleblowers, Qui Tam & False Claims Act Practice Group. For more information or to schedule a confidential discussion about a potential false claims case, please fill out the form on the right. You can also call us at (215) 875-4699.

For further reading:

Immunity and Protection For Whistleblowers
Anti-Retaliation Provision of the False Claims Act
Types of False Claims Cases to take Action On
Whistleblowers, Qui Tam & False Claims Act Legal Blog by Berger & Montague

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