Last week, the Fifth Circuit Court of Appeals issued its decision in Asadi v. GE Energy (USA), No 12-20522, on appeal from the United States District Court for the Southern District of Texas.
As noted in a Duane Morris client alert on the decision, it was “hailed as a win for employers because it requires whistleblowers who bring retaliation claims under the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) to show that they suffered retaliation because they reported potential violations to the U.S. Securities and Exchange Commission (SEC). The Fifth Circuit expressly rejected the position adopted by the SEC in its regulations” that internally reporting concerns regarding Foreign Corrupt Practices Act (FCPA) violations was enough to invoke Dodd-Frank whistleblower protections.
However I believe that the decision was actually a loss for companies, their employees and anyone who believes that compliance with the FCPA is a laudable goal. Now there is no longer any incentive, nor indeed, any protection for employees who make reports of allegations relating to the FCPA internally. The only way to garner such protection for reporting any FCPA allegations is for an employee to run to the SEC and file a whistleblower report.
Corporate America fought long and hard to require that employees report allegations of corruption and bribery internally before they went to the government. The reason that companies made this request was that it was only fair to allow companies to fix problems of which they may not have been aware. While the SEC did not require internal reporting as a prerequisite for Dodd-Frank whistleblowing, it did incentivize such whistleblowers to report internally first before submitting information to the SEC.
But now that incentive is worthless if an employee who does so can be terminated at will for internally reporting concerns about bribery and corruption. The result will be that employees immediately turn to the SEC so that they can at least have the anti-retaliation protections offered under Dodd-Frank. The Asadi case could have had several outcomes but then one the Fifth Circuit left is with is the worst for FCPA compliance of all the possible outcomes.
Thomas Fox is a Contribing Editor of the FCPA Blog. He’s the founder of the Houston-based boutique law firm tomfoxlaw.com. A popular speaker on compliance and risk-management topics, Fox is also the creator and writer of the widely followed FCPA Compliance and Ethics Blog. His 2012 book Lessons Learned on Compliance and Ethics topped Amazon’s bestseller list for international law. He can be contacted here.