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...

OSHA Issues New Guidelines for Whistleblower Case Settlements

The Occupational Safety and Health Administration has published new guidelines for approving settlements between employers and employees in whistleblower cases to ensure that settlements do not contain terms that could be interpreted to restrict future whistleblowing. The guidelines, issued Sept. 9, 2016 make clear that OSHA will not approve a whistleblower settlement agreement that contains provisions that may discourage whistleblowing. OSHA enforces more than 20 federal whistleblowing statures, perhaps the most well-known are the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9610, Section 1057 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 12 U.S.C. § 5567, and Sarbanes Oxley Act (SOX), 18 U.S.C.1OSHA has jurisdiction over the whistleblower provisions of the following statutes: Occupational Safety and Health Act (OSHA 11(c) ), 29 U.S.C. § 660(c); Surface Transportation Assistance Act (STAA), 49 U.S.C. § 31105; Asbestos Hazard Emergency Response Act (AHERA), 15 U.S.C. § 2651; International Safe Container Act (ISCA), 46 U.S.C. § 80507; Safe Drinking Water Act (SDWA), 42 U.S.C. § 300j-9(i); Federal Water Pollution Control Act (FWPCA), 33 U.S.C. § 1367; Toxic Substances Control Act (TSCA), 15 U.S.C. § 2622; Solid Waste Disposal Act (SWDA), 42 U.S.C. § 6971; Clean Air Act (CAA), 42 U.S.C. § 7622; Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9610; Energy Reorganization Act (ERA), 42 U.S.C. § 5851; Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR21), 49 U.S.C. § 42121; Sarbanes Oxley Act (SOX), 18 U.S.C. § 1514A; Pipeline Safety Improvement Act (PSIA), 49 ii U.S.C. § 60129; Federal Railroad Safety Act (FRSA), 49 U.S.C. § 20109; National...

Local EB-5 VISA Fraud

Local EB-5 VISA Fraud SEC Complaint: 15-sec-v-dargey-complaint Recent Seattle newspaper headlines have informed us that Lobsang Dargey, a local real-estate developer, has agreed to plead guilty to EB-5 fraud allegedly involving at least $125 million from 250 Chinese investors. This type of fraud is a form of securities and immigration fraud and has become more common on both sides of the transaction: investors make fraudulent claims regarding their eligibility for the program and promoters misappropriate their investments. EB-5 was enacted by Congress in 1990 to stimulate the U.S. economy through job creation and capital investment by foreign investors. Under a pilot program enacted in 1992, and regularly reauthorized since then, investors may also qualify for EB-5 visas by investing through regional centers designated by U.S. Citizenship and Immigration Services (USCIS) based on proposals for promoting economic growth. On September 29, 2016, President Obama signed Public Law 114-223 extending the regional center program through December 9, 2016. Ten thousand visas are allocated each year and processing times can be two years. Not only does the investor and family need to be vetted for the visa (e.g. where did the money come from?). There are two investment amounts $500,000 and $1,000,0000. Both require creation of ten full time (35 hours per week) permanent jobs. The $500,000 is by far the most popular and is only available in rural and high unemployment area. This is where the developers get involved. They package a deal, arrange for USCIS processing, and arrange permanent management. Teams of well-paid sales agents sell the package in China and elsewhere. Since the package involves an investment with an expectation...

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...

Federal Anti-kickback Statutes

There are at least three federal anti-kickback statutes the anti-fraud community should be familiar with. A fourth is the Stark Law (anti-physician self-referral). Federal Anti-kickback Statutes The earliest of the three is the Copeland “Anti-kickback” Act (Pub.L. 73–324, 48 Stat. 948, enacted June 13, 1934, codified at 18 U.S.C. § 874) which supplements the Davis–Bacon Act of 1931. Congress discovered that employers during the Depression were scheming to get around the prevailing wage provisions on federal contracts by requiring wage “kickbacks” from employees. The Copeland Act prohibits a federal building contractor or subcontractor from inducing an employee into giving up any part of the compensation that he or she is entitled to under the terms of his or her employment contract. The second anti-kickback statute was enacted as part of the Social Security Amendments of 1972 to make efforts to prosecute Medicare and Medicaid fraud easier. The statute was broadly construed in United States v. Greber (3rd cir., 1985).  Dr. Greber was convicted by a jury on 20 of 23 counts in an indictment charging violations of the mail fraud, Medicare fraud, and false statement statutes. His defense was that the payments were for professional services. The court held a jury could find him guilty if part of the reason for using the service was the payment. “If the payments were intended to induce the physician to use [the] services, the statute was violated, even if the payments were also intended to compensate for professional services”. The ruling prohibited business transactions that were once fairly innocuous, leading to the creation of safe harbors. (See e.g. 42 CFR 411.355). The safe harbors are now complex and detailed. The third federal statute...

Regulatory Compliance: It’s the Little Things…

At some point, nearly every regulatory client has asked me, in a tone of incredulity, why “such a little thing” mattered to a regulating agency. Often the client also asks why a government regulator focuses on the “little guy” when big business appears to skate through regulatory compliance with no issues. The second answer is far simpler but answering it first leads us to part of the answer for the first question. Table of ContentsHow Big Businesses Treat Regulatory ComplianceWhat Small Businesses Do DifferentlyWhy Regulators RegulateHow Small Businesses Can Find Themselves in the Regulator’s SpotlightThe Cost of Compliance FailuresShare this: How Big Businesses Treat Regulatory Compliance Big businesses appear to skate through regulatory matters without issues, in a sense, because they are big. Being big, they hire regulatory compliance experts to eliminate issues and quickly correct any problems that do come up. They have support personnel to do the actual work. The proactively address most problems before they get to the point of administrative sanctions or lawsuits. This is not to say big businesses don’t have regulatory problems: many do. Some businesses simply don’t bother to comply and have problems as a result. But most big businesses place an emphasis on regulatory compliance. They recognize that compliance failure can be a business-ending proposition. They place a priority on regulatory compliance. Simply making regulatory errors can put a company under heightened scrutiny, causing more frequent examinations and other disruptive and costly consequences. A series of errors, or repeated errors, may also raise questions that lead to more serious investigations or prosecutions. Each situation drags at a company’s bottom line and...

Fair Chance – Washington

 Ban-the Box Legislation Fair Chance – Washington h-3695.1-fair-chance-act New legislation beginning to emerge around the country may initially seem counter-intuitive to CFEs. The new laws prohibits employers from asking an applicant about his/her criminal history on a job application or during initial screening and delays that inquiry until after an applicant is determined to be otherwise qualified for the job. There is something in us CFEs that wants to know all but it is becoming clear that many of those caught up in the criminal system have little chance of becoming contributing citizens once they are  branded as a criminal. On November 3, 2015, President Obama signed a ban-the-box (aka “Fair Chance”) executive order addressed to federal agencies (referring to the box to check on an employment application affirming a criminal conviction). According to the National Employment Law Project there are more than 100 cities and counties around the country that have adopted ban-the box rules. Effective October 27, 2015, the New York City Human Right Law was amended by The Fair Chance Act.1N.Y.C. Administrative Code §8-107(11-a) . Guidance which promises vigorous enforcement was published. 2 http://www.nyc.gov/html/cchr/html/coverage/fair-chance-legalguidance.shtml In December of 2015, Portland, Oregon adopted a Fair Chance Law. Under their version of the law, employers are prohibited from inquiring about or even accessing an applicant’s criminal history from any other source before making a “conditional offer of employment.” This is defined as being any offer that is conditioned solely on the results of the criminal background inquiry or some other contingency that is expressly communicated to the applicant at the time of the offer. There currently is a Ban-the-Box bill...

WA Consumer Protection Law applies extraterritorially

SANDRA C. THORNELL, on behalf of herself and an others similarly situated, Plaintiff, v  SEATTLE SERVICE BUREAU, INC. d/b/a) NATIONAL SERVICE BUREAU, INC.,  and STATE FARM MUTUAL  AUTOMOBILE INSURANCE COMPANY,) Defendants. copy of decision: 151210 Thornell v Seattle Service Bureau “This case involves two certified questions from the United States District Court for the Western District of Washington. First, we are asked to determine whether the Washington Consumer Protection Act (CPA), chapter 19.86 RCW allows a cause of action for a plaintiff residing outside Washington to sue a Washington corporate defendant for allegedly deceptive acts. Second, we are asked to determine whether the CPA supports a cause of action for an out-of-state plaintiff to sue an out-of-state defendant for the allegedly deceptive acts of its instate agent. The United States District Court noted an absence of Washington case law providing guidance on these issues. We answer both certified questions in the affirmative.” “We first focus on the definition of “commerce” – “any commerce directly or indirectly affecting the people of the state of Washington.” RCW 19.86.010(2) (emphasis added). The definition of “commerce” does not describe who may sue under the CPA but rather the scope of the acts and practices the CPA is designed to prevent. Defendants argue that the definition of “commerce” should not be  understood to allow a claim for an unfair or deceptive practice on behalf of people not “of the state of Washington.” Such a reading, however, would require us to give no effect to the words “indirectly affecting.” In order to give effect to the phrase “indirectly affecting,” claims are not limited to those only having...

Collapse of building for insurance purposes

QUEEN ANNE PARK HOMEOWNERS  ASSOCIATION, a Washington non-profit corporation,  v.   STATE FARM FIRE AND CASUALTY  COMPANY, a foreign insurance company, June 18 2015 Copy of Case 2015-Queen-Anne-Park-v-State-Farm The Washington Supreme Court held that collapse means substantial impairment of structural integrity. The dissent argued collapse means “collapse”. Part or all of the building fell down. The Ninth Circuit Court of Appeals asked the court to decide this question: What does “collapse” mean under Washington law in an insurance policy that insures “accidental direct physical loss involving collapse,” subject to the policy’s terms, conditions, exclusions, and other provisions, but does not define “collapse,” except to state that “collapse does not include settling, cracking, shrinking, bulging or expansion?” The insured building was found to have “hidden decay” that  had substantially impaired the walls’ ability to resist lateral loads according to the owner’s inspector. Hidden decay that caused a collapse was expressly covered by the policy. “Construction of an insurance policy is a question of law for the courts, the policy is construed as a whole, and the policy ‘should be given a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.”‘1Queen City Farms, Inc. v. Cent. Nat’l Ins. Co. of Omaha, 126 Wn.2d 50, 65, 882 P.2d 703 (1994) (internal quotation marks omitted) (quoting Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 95,776 P.2d 123 (1989) ). The court held that “collapse” is ambiguous because it is subject to more than one reasonable interpretation. In this case there were two conflicting rules of interpretation: 1) plain meaning versus 2) favor the insured if...