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The Foreign Corrupt Practices Act: A Whistleblower by Any Other Name

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Is an employee who makes only an internal complaint of alleged wrongdoing, and not one to the government, still entitled to whistleblower protection?

On July 17, 2013, the U.S. Court of Appeals for the 5th Circuit ruled in Asadi v. GE Energy (USA), L.L.C., No 12-20522 that people who desire whistleblower protection for reporting alleged Foreign Corrupt Practices Act (FCPA) violations must report to the Securities and Exchange Commission (SEC).

In 2006, Khaled Asadi became GE Energy’s Iraq Country Executive and moved to Amman, Jordan. At a meeting in 2010, Iraqi representatives told Asadi that GE Energy had hired a woman “closely associated with a senior Iraqi official” in order to influence that official during negotiations for what the Court called “a lucrative joint venture agreement.” Asadi, concerned that his employer may have violated the FCPA, reported the issue to his direct supervisor and to GE Energy’s ombudsperson for the region.

Shortly after that, Asadi received a “surprisingly negative” performance review. GE Energy demoted him to a lesser job with minimal responsibilities. Asadi refused to accept the new job, and GE Energy fired him. Asadi then filed a lawsuit in the U.S. District Court for the Southern District of Texas (Houston), claiming that GE Energy had fired him in retaliation for his internal reports of alleged wrongdoing. The trial judge dismissed the lawsuit, ruling that Dodd-Frank’s whistleblower protections only applied when an employee actually blew the whistle in a manner which could be heard by the Feds. In other words, internal whistle blowing is not protected by Dodd-Frank. The 5th Circuit Court of Appeals, which handles appeals from Texas, Louisiana, and Mississippi from its New Orleans headquarters, agreed.

Under Dodd-Frank, 15 U.S.C. Section 78u-6(a), a “whistleblower” is someone who provides information “ … relating to a violation of the securities laws to [the SEC].” Asadi alerted his employer, but neglected to alert the SEC. Asadi argued that Dodd-Frank should be loosely construed to include people in his situation, but the Court of Appeals said that the “plain language” of Dodd-Frank defines a protected whistleblower as someone who actually tips off the SEC, finding that language “ … not ambiguous at all.”

In Act II, Scene II of Shakespeare’s "Romeo and Juliet," Juliet explains to Romeo:


What’s in a name? that which we call a rose
By any other name would smell as sweet


A rose may be a rose, but a whistleblower wanting protection must actually blow a whistle to the Government.

Now, before we get too giddy about an apparent victory for employers, let’s consider what GE Energy must have been thinking when it hired someone “closely associated with a senior Iraqi official” to influence that official while a huge contract was being negotiated. Sounds as if the FCPA police were off eating donuts, but all of that could be the subject for another S&J Alert.

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