A federal lawsuit by the compliance officer for Siemens’ healthcare business in China who said he was fired for internally reporting FCPA violations was dismissed Monday. The U.S. District Court in New York said the anti-retaliation provisions of the Dodd-Frank Act don’t apply outside the United States.
Taiwan-born Meng-Lin Liu alleged that he discovered a pattern of corruption at Siemens soon after joining the company in March 2008, in the sale of high-end medical imaging equipment in China and North Korea.
Liu claimed in his suit that Siemens was submitting intentionally inflated bids for multi-million dollar equipment sales to public hospitals, then selling the same equipment at lower prices to intermediaries designated by the hospitals’ procurement officials.
According to his complaint, Liu reported what he found to Siemens’ chief financial officer for healthcare in China in October 2010, after multiple attempts to warn his upper management. He was fired a month later and told not to return to work, even though his contract didn’t expire until March 2011. On May 17, 2011, Liu reported possible FCPA violations at Siemens to the SEC.
On Monday, the federal court granted Siemens’ motion to dismiss. The court said (1) the anti-retaliation provisions of Dodd-Frank don’t apply extraterritorially, (2) disclosures of FCPA violations are not required or protected by the Sarbanes-Oxley Act, and (3) Liu didn’t report possible FCPA violations to the SEC until after his employment had ended.
Dodd-Frank is silent about where it applies, the court said, so there’s a presumption against extraterritoriality, even as to whistleblowers outside the U.S.
Because Liu didn’t report possible FCPA violations to the SEC until after his employment at Siemens had ended, he never became a whistleblower under Dodd-Frank during his employment. So he couldn’t use the law to invoke federal protection as a whistleblower.
In April, the Supreme Court said in Kiobel v. Royal Dutch Petroleum that there’s a presumption U.S. law “governs domestically, but does not rule the world.” That case was about part of a federal law passed in 1789 called the Judiciary Act. Plaintiffs were using it to sue corporations in U.S. courts for overseas human rights abuses.
The district court Monday cited the Fifth Circuit Court of Appeals’ decision in Asadi v. GE Energy (USA). In July, a former employee of a foreign subsidiary of GE lost his retaliation claim in federal court in Texas. The court said in that case the anti-retaliation provisions of Dodd-Frank didn’t reach foreign subsidiaries.
Julie DiMauro is the executive editor of FCPA Blog. She can be reached here.