Whistleblower Lawyer

Seattle Securities Lawyer
John J Tollefsen

John has emphasized securities law since his law career began in 1974. He worked on a mixture of securities law litigation and transactional issues. He founded two broker-dealers and obtained the necessary licenses from the NASD (now FINRA) including his Series 7, Series 24, and Series 27. As his knowledge of the securities industry grew, he became concerned with the growing fraud on investors. After he personally experienced a major financial loss through affinity fraud, John actively sought to assist defrauded investors and became a whistleblower lawyer.

When the Sarbanes–Oxley Act of 2002 (Public Company Accounting Reform and Investor Protection Act) and (Corporate and Auditing Accountability and Responsibility Act) as a result of an epidemic of corporate fraud, it provided whistleblower protection in Section 806. One of the provisions activated protection if a possible Securities and Exchange Commission rule was violated. Because John was familiar with this technical area, he began representing whistleblowers who alleged financial fraud. This led him into becoming a Certified Fraud Examiner and Certified Controls Specialist. He has represented numerous whistleblowers under SOx in federal court, administrative proceedings, and appellate courts.

whistle blower lawyer In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act added additional protections and the Obama administration began to reverse the mistreatment of whistleblowers under George Bush. Although whistleblowing still requires great courage, there is now a reasonable chance of protection.

John only takes whistleblower cases involving financial fraud that can be construed as violations of SEC rules. These cases require sophisticated knowledge of SEC rules by the lawyer. An example of the need for expertise: there are SOx rulings that claim that alleging GAAP violations by the whistleblower is not enough to gain Section 806 protection even though there is an SEC rule that require GAAP usage. How can such a ridiculous decision be made? It was made by labor law judges who know next to nothing about securities laws. The whistleblowers’ lawyers were labor attorneys who also knew little about securities laws and did not point out the rule to the judge.


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Whistleblower Lawyer

Whistleblowers Lose Again

1802 Digital Realty Trust v Somers (download the case) One of the hopes of those who support whistleblowing as a remedy for fraud was that Dodd-Frank had plugged the holes in whistleblowing protection that existed under Sarbanes-Oxley. One common trap was the short deadlines of Sox. Originally the whistleblower had only 90 days to file a complaint with OSHA (increased to 180 days by Dodd-Frank). Often whistleblowers start out as team players and report internally only to be disappointed by the response after waiting many months for the company to address the problem. When they won’t let go of the issue after the company whitewashes it, the 180 days have elapsed, and they have no legal protection. Dodd-Frank seemed to fix this problem by giving six years to file in federal court and skip the OSHA step. Unfortunately, when congress defined “whistleblower” in Dodd-Frank it required a report to the SEC. On February 21, the U.S. Supreme Court confirmed that whistleblowers have 180 days to either file with OSHA or report to the SEC. Whistleblowers Lose...

U.K. Begins to Advance Protection of Whistleblowers

U.K. Begins to Advance Protection of Whistleblowers Jes Staley, the American CEO of Barclays went after whistleblowers the American way – “get that rat!” This time the U.K.’s Prudential Regulation Authority and Financial Conduct did something about it. They called it an ethical breach and put pressure on Barclays to do something. Barclays issued a statement stating it reprimanded Mr. Staley and will make a “significant” cut to his bonus. How does this balance out? The whistleblower loses his or her career and the executive who cause that damage may lose some part of their future bonus. In the U.S., the SEC insists on revealing the name of the whistleblower if there is a settlement. The SEC justifies its policy by claiming it is merely trying to buttress internal reporting. In my experience, corporations circle the wagons when there is credible whistleblowing. Corporate counsel interrogates and human resources attempts to find legal grounds to terminate. Investigators comb the whistleblower’s computer and office looking for something negative. Usually whistleblowing is a career ending exercise in the U.S. The U.K. does not give rewards to whistleblowers. The SEC does but refuses to allow anonymous filings. It allows temporary anonymity if the whistleblower uses an attorney to file the claim. Like many CEOs, Mr. Staley apparently thinks whistleblowers are disloyal and he felt in this case it was “an unfair personal attack.” After he was told it was not appropriate to inquire into the identity of the whistleblower, he continued to pressure his internal security investigator for the information. A U.S. law-enforcement agency was asked to help. Consider Wells Fargo Bank. It...

One-year statute of limitations – Embezzlement

ONE-YEAR STATUE OF LIMITATIONS – EMBEZZLEMENT Copy of case: (Travelers Casualty & Surety Co., v. Washington Trust Bank, No 92483-0) 1611-travelers-casualty-surety-co-v-washington-trust-bank Often the only hope of financial recovery from an embezzlement, other than from insurance policies, is from a bank which paid on forged endorsements (also spelled “indorsements”). A recent case (November 3, 2016) held that the statute of limitations in such cases is only one year in Washington State.1Travelers Casualty & Surety Co., v. Washington Trust Bank, No 92483-0 An employee of a nonprofit serving disabled adult client~ used her position to embezzle more than half a million dollars held by the nonprofit for its clients. She did this by drawing checks from the nonprofit’s account payable to its clients, signing the back of those checks with her own signature, and cashing them at the nonprofit’s local bank. The embezzlement was discovered in an admission in the employee’s suicide note. The Bank sent monthly bank statements during the embezzlement period. These statements included copies of the fronts of the checks that had been cashed at the Bank. The statements did not include copies of the backs of the checks, which would have readily revealed the embezzler’s signature. During the relevant period of time, the victim could access its checking account online at any time to view both the front and backs of checks that cleared its account. The online process required clicking an account to view, clicking a link for the front of the check, clicking a link for the back of the check, closing the check, and repeating as necessary. RCW 62A.4-406(f) provides: “Without regard to care or lack...

National Whistleblower Appreciation Day

CELEBRATING WHISTLEBLOWING Where were you on July 30, 2016? The United States Senate unanimously declared July 30, 2016 as “National Whistleblower Appreciation Day” in a resolution adopted on July 7, 2016. It stated “. . . in 1777, before the passage of the Bill of Rights,10 sailors and marines blew the whistle on fraud and misconduct harmful to the United States. . . . the Founding Fathers unanimously supported the whistleblowers in words and deeds, including by releasing government records and providing monetary assistance for reasonable legal expenses necessary to prevent retaliation against the whistleblowers. . . . on July 30, 1778, in demonstration of their full support for whistleblowers, the members of the Continental Congress unanimously enacted the first whistle blower legislation in the United States that read: ‘Resolved, That it is the duty of all persons in the service of the United States, as well as all other [of] the inhabitants thereof, to give the earliest information to Congress or other proper authority of  any misconduct, frauds or misdemeanors committed by any officers or persons in the service of these states, which may come to their knowledge’” The 2016 resolution further provided: “. . . . it is the public policy of the United States to encourage, in accordance with Federal law (including the Constitution, rules, and regulations) and consistent with the protection of classified information (including sources and methods of detection of classified information), honest and good faith reporting of misconduct, fraud, misdemeanors, and all other crimes to the appropriate authorities at the earliest time possible. . .” The resolution was cosponsored by Grassley and Wyden...

Whistleblower Protection: Dodd-Frank and SOX

by John Jacob Tollefsen1The author practices law in Oregon, Washington, California, Texas, D.C., and New York. He has been lead counsel on several SOx § 806 cases including Tides v. The Boeing Co., 644 F.3d 809 (C.A.9, Wash. 2011), cert. den. 132 S.Ct. 518 (2011) and Reid v The Boeing Company, 2009-SOX-27 (ARB Mar. 30, 2012).  Overview of Whistle Blower Protection under Dodd-Frank and SOX including the SEC Bounty Program The Sarbanes Oxley Act of 2002 (“SOx”) § 8063SOx § 806 is codified as 18 U.S.C. § 1514A(a)(1). was designed to protect certain employees who reasonably believe they are reporting a violation of a law, rules, or regulation listed in § 806. Due to drafting issues and the hostility of courts and administrative judges, few whistleblowers prevailed. The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 add additional protections designed to increase the whistleblowers chances of success. This article provides a brief overview of federal whistleblower protection under Sox and Dodd-Frank including the Securities and Exchange Commission bounty program.2There are numerous other whistleblowing protection provisions in federal law that may be helpful in a particular case including aircraft safety and environmental issues that are not covered by this article. Prepare to have your career ruined As a practical matter, whistleblowing protection has not been favored by judges. This is to be expected. For many people, a “whistleblower” is a “snitch”.4The English language is rife with pejorative terms for whistleblower like informer, fink, stoolpigeon, stoolie, sneak, blabbermouth, tattler, tattletale, squealer, mole, betrayer, rat, and rat fink. Even lawyers fight rules (like ABA proposed ethical rules) making reporting of...

False Claims Act Whistleblower

The False Claims Act provides that ¨Any employee who is discharged; or demoted; or suspended; or threatened; or harassed; or in any manner discriminated against is entitled to bring an action for reinstatement with same seniority; 2 times back pay with interest; special damages; emotional distress; attorneys’ fees and costs. No punitive damages are available. An “employee” includes: temporary worker; and demoted worker; and discharged worker. An independent contractor is not an employee. A false claims act whistleblower should expect harassment in the form of counterclaims filed in the retaliation action; industry blackballing; unprovable but real retaliation; reassignment for ostensibly unrelated reasons; other non-compensatable harassment; possible losing the case; and paying attorney fees and costs if the retaliation case is deemed frivolous. More on False Claims Act Whistleblower Protection Washington State False Claims Act Qui Tam (False Claims Act) procedure False Claims Act...

Washington State False Claims Act

Washington State False Claims Act Mirrors the Federal Act But Limited to Medicaid Fraud The federal False Claims Act has had a long history of government service. Not only does it reward whistleblowers (better known as “sentinels”), it also protects them from retaliation. Past attempts to pass a state version in Washington met with stiff opposition. Even the Attorney General opposed it, arguing that there was plenty of whistleblowing going on and there was no need to encourage more. On March 30, 2012, Washington finally joined the 29 other states that have False Claims Act (FCA) by passing the Medicaid Fraud False Claims Act (MFFCA). Like 10 of the 30 states that have a FCA, it is limited only to Medicaid. Washington’s MFFCLA has been reviewed by the U.S. Office of Inspector General (OIG) and has been approved for a 10 percentage-point increase in Washington State’s share of federal Medicaid FCA cases. History of Qui Tam The traditional name for cases which attempt to recover money defrauded from the government (i.e. the king) is “Qui Tam” litigation. Qui Tam is pronounced “kee tam” or “kway tam”) and is an abbreviation from the Latin “qui tam pro domino rege quam pro sic ipso in hoc parte sequitur” meaning “who as well for the king as for himself sues in this matter”. Qui tam legal actions can be traced back as far as 13th Century England where they were used by private citizens to gain access to the king’s court. The U.S. legal system, derived from the British system, allowed qui tam actions since the nation’s founding in 1776. They were...

Environmental whistleblower

The Importance of Being Earnest: An Environmental Whistleblower’s Guide to Protection Under SOx § 806 and Dodd-Frank By John J. Tollefsen 1The author practices law in Oregon, Washington, and New York. He has been lead counsel on several SOx § 806 cases including Tides v. The Boeing Co., 644 F.3d 809 (C.A.9, Wash. 2011), cert. den. 132 S.Ct. 518 (2011) and Reid v The Boeing Co., 2009-SOX-27 (ARB Mar. 30, 2012). The Sarbanes Oxley Act of 2002 (“SOx”) § 8064SOx § 806 is codified as 18 U.S.C. § 1514A(a)(1).protects certain employees who reasonably believe they are reporting a violation of a law, rules, or regulation listed in § 806. Their belief must be subjectively and objectively reasonable.2E.g., Tuttle v. Johnson Controls Battery Div., 2004-SOX-76 (ALJ Jan. 3, 2005), an ALJ explained: “Protected activity is defined under SOX as reporting an employer’s conduct which the employee reasonably believes constitutes a violation of the laws and regulations related to fraud against shareholders. While the employee is not required to show the reported conduct actually caused a violation of the law, he must show that he reasonably believed the employer violated one of the laws or regulations enumerated in the Act. Thus, the employee’s belief ‘must be scrutinized under both subjective and objective standards.’ Melendez v. Exxon Chemicals Americas, 1993-ERA-6 (ARB July 14, 2000)”. The employee must earnestly and sincerely believe in good faith that there is a violation. The courts and administrative law judges (“ALJs”) have been generally hostile to § 806, adding additional barriers to recovery with the result that few claimants have been protected. This paper argues that claims under...

Court Limits Whistleblower’s Attorney Fees

Overseas Shipholding Group 2010 – limits on contingency fees -Limits Whistleblower’s Attorney Fees This case was cited by the SEC in its bounty program comments in an attempt to limit attorney fees UNITED STATES of America, Appellee, v. OVERSEAS SHIPHOLDING GROUP, INC., 625 F.3d 1(C.A. 1; Mass; 2010) Before BOUDIN, DYK, and THOMPSON, Circuit Judges. Of the Federal Circuit, sitting by designation. DYK, Circuit Judge. Zack Hawthorn (“Hawthorn”) appeals from a district court decision limiting Hawthorn’s legal fees under two contingent fee agreements. The district court barred Hawthorn from receiving a fee in excess of $25,000 under a contingent fee agreement with Benedict Barroso (“Barroso”) and barred Hawthorn from recovering any fee at all under a contingent fee agreement with John Altura (“Altura”). We conclude that the district court did not err in finding Hawthorn’s contractual fee amounts with respect to both clients to be excessive. However, we conclude that the district court abused its discretion in disallowing any fee from the representation of Altura. We hold that Hawthorn should receive a fee of $25,000 for each client and accordingly affirm-in-part and reverse-in-part. II. This case arises out of a government investigation in six judicial districts into allegations that Overseas Shipholding Group, Inc. (“OSG”) had for years engaged in the practice of discharging oil from its vessels in American waters and falsifying mandatory ship records to conceal the discharges, in violation of the Act to Prevent Pollution from Ships (“APPS”), 33 U.S.C. § 1908(a). In September of 2005, Barroso worked aboard the M/T Pacific Ruby (“the Pacific Ruby “), a tanker ship owned and operated by OSG. On September...

SEC Whistleblower Compensation Rule

Proposed SEC Whistleblower Compensation Rule The Commission proposes the new rules and forms contained in this document under the authority set forth in Sections 3(b), 21F and 23(a) of the Exchange Act. List of Subjects 17 CFR Part§ 240 and 249 Securities TEXT OF THE PROPOSED RULES In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows. Part 240 – General Rules and Regulations, Securities Exchange Act of 1934 1. The authority citation for part 240 is amended by adding the following citation in numerical order to read as follows: Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78-i, 78j, 78j,-1, 78k, 78k-1, 78 /, 78m, 78n, 78 o, 78 o-4, 78p, 78q, 78s, 78u-5, 78w, 78x, 78 ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and 12 U.S.C. 5221(e)(3), unless otherwise noted. ***** Section 240.21F is also issued under Pub. L. No. 111-203, s922(a), 124 Stat. 1841 (2010). ***** 2. By adding § 240.21F-1 through § 240.21F-16 to read as follows: § 240.21F-1 General. Section 21F of the Securities Exchange Act of 1934 (“Exchange Act”) (15 U.S.C. 78u-6), entitled “Securities Whistleblower Incentives and Protection,” requires the Securities and Exchange Commission (“Commission”) to pay awards, subject to certain limitations and conditions, to whistleblowers who provide the Commission with original information about violations of the federal securities laws. These rules describe the whistleblower program that the Commission has established to implement the provisions of Section 21F, and explain...