The Cost of Retaliation Against Whistleblowers is Increasing for Business

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100 Us Dollar Banknotes, representing False Claims Act

Firing whistleblowers for informing the government about corporate activities has been standard practice at many businesses for a long time. That practice may be changing quickly if the government continues to pursue enforcement actions against companies engaged in retaliation and juries continue to provide multi-million dollar verdicts to whistleblowers.

This week, the media reported an $11 million verdict in the whistleblower retaliation lawsuit against Biorad. The jury verdict included $2.96 million in economic losses and $5 million in punitive damage. The back pay award will be doubled by the retaliation provisions set forth in the whistleblower protections of the Dodd-Frank Act. The whistleblower’s attorneys are also expected to file to recoup their costs and fees from the pursuit of the lawsuit.

The lawsuit involved an internal whistleblower report made by their General Counsel concerning potential bribery in their China operations. In 2014, the life science company paid $55 million to the DOJ and SEC to settle the allegations of violations of the Foreign Corrupt Practices Act (FCPA).

The whistleblower lawsuit was not based on information provided to the SEC. Instead, the case was based on the SEC regulations that allow an internal whistleblower to successfully bring a case of retaliation under the Dodd-Frank Act.  The SEC has successfully argued for this interpretation of its power several times when challenged by defendants.

The high jury verdict is not an aberration. A few months ago, we covered the news of a $20 million jury verdict in California in favor of a whistleblower. These verdicts suggest that the public is more willing to see whistleblowers as a boon to society rather than a snitch.

Independently, the SEC has also pursued a number of enforcement actions for whistleblower retaliation and attempting to impede communications with the SEC over the past few years. These actions have definitely picked up, with four resolving over the past two months.

Dodd-Frank has been the subject of a great deal of media and government attention recently as President Trump has vowed to rollback its regulations. He has already signed an executive order instructing the Treasury Secretary to identify changes to it. His press secretary called it a “disastrous policy”.

But the whistleblower provisions have been highly effective, resulting in the recovery of hundreds of millions of dollars for violations of the federal securities laws. It also resulted in more protections for whistleblowers, which should be applauded. We urge them to keep these provisions as they look to cut portions from Dodd-Frank to ease the regulatory burden.