A recent case has held that whistle blowers seeking to recover a bounty for reporting fraud must first report the allegations to the Securities and Exchange Commission if the bounty is sought under the Dodd-Frank Consumer Protection legislation of 2010.This is the Asadi vs. General Electric case. California whistle blowers should take special heed of this case.
What’s remarkable is the corporate hypocrisy at work here. In many earlier cases, major US corporations have argued that whistle blowers should first report fraud to the company before seeking a financial reward. Now, they seem to be arguing that you can’t get the reward without first reporting to the company on an internal reporting basis. GE lawyers said in court (according to the Wall Street Journal on August 12) that “Without any allegation that he reported a securities=law violation to the SEC, Asadi is not a ‘whistle blower’ under Dodd Frank….”
Both UBS AG and Siemens AG have also taken this position in recent litigation brought by former employees. The issue has its origin in Section 922 of Dodd-Frank Wall Street Reform and Consumer Protection Act. Whistle blowers can recover up to 30% of the money the government receives in fines. This law (as does our favorite, the Federal False Claims Act, 31 United States Code 3729) prohibits retaliation against reporting employees. In our federal false claims cases, we ALWAYS consider adding an individual retaliation claim in order to ask the court to allow us to begin our “private rights” case even if the government is conducting a long investigation prior to unsealing the complaint.
Way back in ’10, when legislative guide lines where being examined by the SEC, these same types of corporations were arguing that no reporting was needed to the SEC because the company internal processes would assure compliance. Now that they faced large penalties, corporations did an about face that would make a football player proud and tried to get away with a feint to the other side of the field.
As always, the most important aspect of whistle blowing for California employees is to consult with an expert on the various procedures available and required under the particular false claim law upon which the claim rests. There are also varying statutes of limitation and rules for tolling (or stopping the running) of these time periods. In many cases, there are multiple and conflicting statutes of limitation so prompt consultation with an attorney is critical.