The Securities and Exchange Commission filed a “friend-of-the-court” brief on Thursday, arguing that whistleblowers are entitled to protection from employer retaliation, even if they report the wrongdoing only to their employer and not to the SEC.
Companies have argued that individuals must report suspected wrongdoing to the SEC to qualify for whistleblower protection, and those who report only internally are not covered by the law’s anti-retaliation provisions.
The Fifth Circuit Court of Appeals agreed with that interpretation in July.
It ruled in General Electric’s favor in a whistleblower retaliation case brought by a former employee who reported an alleged Foreign Corrupt Practices Act violation internally.
The Sarbanes-Oxley Act of 2002, amended by Dodd-Frank in 2010, left unclear whether a whistleblower would have to report to the SEC to benefit from the anti-retaliation provisions of the law.
The SEC’s amicus brief was filed in a different case that involves a former China-based employee of a Siemens unit.
The former employee, Meng-Lin Liu, alleged that Siemens retaliated against him after he reported within the company alleged corrupt practices.
Liu claimed the Siemens subsidiary routinely engaged in kickbacks by inflating bids to sell medical-imaging equipment to hospitals in North Korea and China.
He said he raised his concerns about the practices in a variety of ways, all of them internally.
In response, he claimed, he was demoted and finally fired.
Following his termination in May 2011, Liu reported the possible FCPA violations by Siemens China directly to the SEC and filed his civil action against Siemens.
The U.S. District Court for the Southern District of New York dismissed Liu’s suit on the grounds that the anti-retaliation provisions didn’t apply to him.
Thursday’s amicus brief argued that employees who report offenses internally should be treated the same as those who report only to the SEC. There is no logic in creating a two-tiered system of whistleblower protections that rewards employees who report problems to the SEC but penalizes those who only complain internally, the SEC said.
“The SEC’s brief supports the anti-retaliation protections under the Dodd-Frank Act that I believe are critical to the success of the SEC’s whistleblower program,” according to a statement Thursday by Sean McKessy, Chief of the SEC’s Office of the Whistleblower.
A copy of the SEC’s amicus brief in Liu Meng Lin v. Siemens AG is here.
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Julie DiMauro is the executive editor of the FCPA Blog and can be reached here.
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