The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

To many, the Supreme Court's recent decisions in AT&T vs. Concepcion and Wal-Mart v. Dukes suggest the bell has tolled for the class action mechanism as a tool for consumer protection. This comes at a time when consumers already feel beleaguered by the growing ascent of corporate America and the rise of Wall Street.  My new article takes a hopeful view of the future viability of the consumer class action practice.  To support my confidence I draw from the practice's long and rich history dating back to medieval England, and encourages class action practitioners to learn from the Qui Tam bar, which has enjoyed growing success as an increasing number of statutes provide whistleblowers with legal protections and financial rewards.

Please read the full article here.  Feel free to download and share, and comments are welcomed, as always.

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This year’s team saved lives and contributed billions to our national treasury. We honor their courage, dignity and willingness to stand for justice.

1. Franz Gayl

A consensus pick.  While not big on saving money, he made up for it by saving the lives and limbs of our Marines in combat.  For that he is the Whistleblower of the Year and earns our number one spot.  Mr. Gayl spotted unreasonable delays in the shipping of armored vehicles to protect soldiers on the ground in Iraq.  Thanks to Gayl, our soldiers can now expect to receive supplies – notably protective armor – in a more timely manner.

2. Cheryl Eckard

Her courage unfortunately has been clouded by her award, $96 million for providing information about Glaxo-SmithKline’s deficient drug production standards.  But she likely saved lives.  Ms. Eckard lost her job and risked disdain from her colleagues all for the sake of what she knew was right.

3. Michael Winston

He wouldn’t just go with the flow.  To keep his job all he had to do was “hold his nose” and say Countrywide’s corporate governance practices were appropriate.  Nope.  Enough was enough. Winston had already expressed concern over the corporate culture at BoA (perhaps accurately portrayed by this sign from our friends at Occupy DC) and its prioritization of profits over quality portfolios for customers.  Winston was fired following his refusal to lie.  His story is a classic David vs. Goliath tale – a lesson to Bank of America and an incentive for future potential whistleblowers to step forward.

4. Bunny Greenhouse

Bunny Greenhouse was awarded $970,000 in restitution, lost wages, compensatory damages, and attorney's fees by the US District Court for the District of Columbia in July of this year.  Ms. Greenhouse had suffered poor performance reviews and demotion in retaliation for her speaking up about contract abuse during the Iraq War.  Specifically, Ms. Greenhouse pointed out abusive, secret, no-bid contracts awarded to Halliburton subsidiaries.  For her courage to speak up and tenacity in defending herself against unlawful retaliation, we commend Ms. Greenhouse’s service as a whistleblower.  Though this ordeal began nearly a decade ago, we are happy that 2011 brought Ms. Greenhouse some closure and relief.

5. Harry Markopolos and Friends

This guy is everywhere. He is an independent wicked smart analyst. Mr. Markopolos was well known before 2011 for attempting – in vain – to warn the SEC of Bernie Madoff’s massive fraud. Recently, in August 2011, two whistleblower suits were filed in California and Virginia accusing State Street and Bank of New York Mellon of defrauding pension funds by charging higher fees than they should have. Read our original blog on the story here.  It has since become clear that Markopolos spearheaded the investigation, which has also resulted in at least two actions by the Attorneys General of Virginia and New York against the banks.  Our hats are off to Mr. Markopolos for his diligent and tenacious work on behalf of the American public.  He is surely a future hall of famer.

Think we left someone out?  Are others more deserving?  Comments on our "selections" are welcomed.

Assisted by Zachary A. Kady

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A Great American: Deserves a Congressional Medal Of Honor

With the help of the new, revived, robust and thoughtful Office of Special Counsel (more on that later), Franz Gayl will get his job back. 

You say, "Who is Franz Gayl?"  First, he is a true American hero.  Mr. Gayl, a civilian advisor to the Marines, had the guts to harshly criticize his bosses in the military for their failure to deploy heavily armed vehicles known as MRAPs in Iraq.  Through his persistent advocacy (a lone voice really) he prodded the military into finally making sure that our troops in harm’s way would be driving through war-torn Iraq protected to the best extent possible.  MRAPs protect soldiers from IADs, mines and other forms of attack that cost the lives of too many Americans and leave even more scarred and maimed for life.

What did Mr. Gayl get for his courage?  Not a medal.  Nope.  He effectively got fired; he was stripped of his security clearance, placed on leave, and told if he didn’t shut up he would lose his job permanently.  So much for standing up for the safety of our troops.

But thanks to Carolyn Lerner, the new Special Counsel, who has revived a moribund and corrupt federal agency charged with protecting government whistleblowers, Mr. Gayl will obtain his job back.

Thank you Mr. Gayl for likely saving the lives and limbs (literally) of hundreds if not thousands of troops deployed in Iraq during that difficult and very expensive war.  We can’t give you a Congressional Medal of Honor, but we can make you our Person of the Week.

And kudos to Carolyn Lerner and her staff for righting an important wrong.

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TCO is pleased to once again feature our Partner in Austin, Texas, Gouri Bhat.  Please enjoy.

Here in Austin, Lance Armstrong is more than a world-renowned cyclist and one of the greatest athletes who ever lived—he’s a hometown hero.  Armstrong lives and trains in the hills outside the city, and the headquarters of the Lance Armstrong Foundation and its Livestrong brand, which has raised more than $325 million for cancer research, is in downtown Austin.  So it pains me to put this prediction on the record, but here goes: Armstrong’s growing legal problems, stemming from accusations that he participated in systematic doping while riding to seven consecutive Tour de France titles, are going to overtake him in the end.  He’s going down.   

As reported yesterday in the Austin American-Statesman, in response to a recent 60 Minutes interview with his former U.S. Postal teammate Tyler Hamilton, Armstrong lawyered up and fired off a four-page letter to CBS, accusing the network of shoddy reporting and demanding an on-air apology.  60 Minutes stands by its story.  Hamilton, who testified before a federal grand jury, said he saw Armstrong use performance-enhancing drugs on many occasions.  Hamilton’s statements echo similar accusations by Floyd Landis, another U.S. Postal teammate who was stripped of his 2006 Tour de France title for doping, and by George Hincapie, a long-time and loyal teammate whose grand jury testimony is also reported to implicate Armstrong in doping.  Armstrong has always denied using performance-enhancing drugs.       

Watching Hamilton come clean about routine doping in the upper echelons of competitive cycling on 60 Minutes, I was struck by two pieces of information that I did not fully appreciate before.  First, CBS reporter Scott Pelley noted that all the second and third place finishers in each of the seven years that Armstrong won the Tour de France (1999-2005) were at some point implicated in doping, except for one.  That’s an astounding statistic that illustrates the degree to which doping pervaded the sport and, indeed, became a virtual necessity to compete and win. 

Second, the U.S. Postal Service, which sponsored Armstrong and his teammates for so many years, is a government agency, and its sponsorship contract included a “moral turpitude” clause and likely required various representations that U.S. Postal riders were drug-free and not engaged in illegal activities.  Receiving money from a U.S. agency based on statements that are false is called fraud on the government. 

The U.S. Postal Service invested about $40 million in Armstrong’s team from 1998-2004.  Government sponsorship of U.S. Postal makes a federal doping investigation of Armstrong more complicated and potentially much more consequential than the cases against Barry Bonds, Roger Clemens, Marion Jones and other athletes, who have mainly been indicted or convicted on perjury or obstruction of justice charges – essentially lying to federal investigators or Congress.  If the accusations of illegal doping on U.S. Postal are proven, Armstrong and team management are potentially vulnerable to many more serious charges, including fraud, conspiracy, money laundering, racketeering, and drug trafficking.  Not surprisingly, Floyd Landis has already filed a federal whistleblower lawsuit claiming that U.S. Postal defrauded the U.S. government.  Filed last September, the lawsuit remains under seal while the U.S. Justice Department decides whether to intervene.                   

One of Armstrong’s new lawyers, John Keker of Keker & Van Nest LLP, who previously won a major Ninth Circuit victory against federal investigators in a doping case involving Major League Baseball players, has called the whole doping investigation of U.S. Postal a waste of time and money: “That the government is spending tax money investigating long ago bike races in Europe is an outrage.”  But investigating $40 million of fraudulently obtained funds does not seem like a waste of resources to me – it is, in fact, something the federal government should be doing a lot more of. 

Maybe with his peloton of high-powered lawyers, Armstrong will somehow win this race.  But regardless, his yellow jersey won't be looking so sunny anymore.

Guest post by Gouri Bhat

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If the Rottweiler guarding your property is anything like the SEC, I hope you set your house alarm.

As the WSJ Law Blog pointed out today, the SEC’s deadline to finalize Dodd-Frank Whistleblower rules has come and gone without a peep from the Commission.  So much for its bite being worse than its bark.  If the Rottweiler guarding your property is anything like the SEC, I hope you set your house alarm.

The SEC’s website has subtly shifted its schedule to allow an extra three months for rulemaking—and there is no reason to trust that adjustment either.  Commission defenders will point to the extensive rulemaking required and the tight government budget; I would point to the nine months originally allotted and immense importance of the rule finalization.

The Journal quotes SEC spokesman John Nester, who defends the Commission’s desire to emphasize “getting the rules right.” Thanks, John. “Right” entails “on time”; otherwise even more doubt as to the Commission’s commitment to the rules will arise.  Main Street has seen decades of supposed third-party regulators bow at the feet of well-paid lobbyists and executives.  The SEC was supposed to champion a major step forward this week; instead, they have amplified the doubt many have in their ability to effectively regulate and enforce.

I may be the only one, but I believe the SEC will get things together soon and finalize a robust and clear set of rules for Dodd-Frank’s whistleblower provisions.  However, delays like this undermine the bill and allow the Wall Street-centric status quo to continue.  As each day passes, Americans forget the reasons for the economic catastrophe—some of which were corporate corruption and lack of business oversight.  Dodd-Frank’s whistleblowers have a chance to cheaply and efficiently remedy this problem from the inside.

As is true of too many government regulations, the conclusion is yet to be written on this one. Let’s just hope the humid DC summer doesn’t pass without seeing these rules finalized.

Assisted by David Martin

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Mr. Rajaratnam and his legal team sure have their work cut out for them. These audio tapes are devastating. They have, as we prosecutors and former prosecutors have often said, "the ring of truth to them". Of course people are going to be nervous about trading on insider information. Remember, for the most part this gang of co-conspirators were law abiding citizens. Indeed, they were highly successful members of the business community. They saw what happened to Martha Stewart. You trade stock around a merger or other material event and those boys from the SEC or worse yet the FBI will come knocking and you better have a good story to tell.

Raj understood that anxiety so he was there with advice and comfort. Coaxing his contacts along, making sure everyone stayed on the reservation. Mr. Dowd, Raj's defense attorney and his large team of partners and associates and paralegals will have to pull a rabbit out of their hats to rebut this testimony. I sure hope for their sake they received a large retainer, Because in Federal Prison, Mr. Rajaratnam will be making far less than minimum wage.

But it ain't over till the fat lady sings -- plenty more tapes -- witnesses and then the defense. Stay tuned, although highly unlikely, I think Raj takes the stand. He'll have no other choice.

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Most of all, it’s fair.  A tax increase to lower the deficit forces everyone to pay more – even those who have already paid their fair share.  The whistleblower targets those that tried to cut corners.

We commend the recent article on the “Tax Whistleblower Report” by Scott Knott of the Ferraro Law Firm.  After years of analysis and rulemaking, the IRS, according to the article, will “imminently” be releasing its first awards and determinations to whistleblowers who have provided information to the IRS over several years.  Indeed, since the program’s inception, no monies have been paid out.  This is of course good news to whistleblowers, but more importantly it’s good news to all taxpayers.

Our government has a huge budget deficit.  Every year we are sending hundreds of billions abroad in interest payments alone.  Losing those monies threatens to choke economic growth and certainly they are missed when it comes to finding money to fund various government programs.  The problem is so serious that a bi-partisan (not often heard from) group of senators led by Saxby Chambliss (R) and Mark Warner (D) are floating plans to cut the deficit even it if means – are you ready for this – raising taxes.  Arch-conservatives including Tom Coburn (R) are ready to sign on – acknowledging that lowering the deficit will require an increase in taxes.

The IRS Whistleblower program will surely not generate funds sufficient to erase the budget deficit – a large portion will remain – but it’s not an insignificant effort.  A billion here and a billion there and we are talking about some real money.  And most of all, it’s fair.  A tax increase to lower the deficit forces everyone to pay more – even those who have already paid their fair share.  The whistleblower targets those that tried to cut corners.  So charge on whistleblowers and thank goodness the IRS is finally responding.

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Where exactly does the term whistleblower come from? The idea seems quite simple, you see wrong, you blow a whistle, others are alerted of the wrong. As it turns out, this is almost definitely the origin of the term “whistleblower”.

You see, back in the days before telephones, cell phones, and long before “apps”, people still committed crimes. In Victorian England a police officer who spotted a crime in progress would (you guessed it) blow his whistle while chasing a criminal in order to alert the public of the crime. Much like these officers, modern whistleblowers spot crime and seek to alert the public. If you saw a theft on the street – a man running with an obviously stolen computer – you might not be able to stop him, but surely you’d want to alert a police officer or authority figure. If only you had a whistle.

Whistleblower provisions are ever-available whistles for informed, concerned citizens to blow when the authorities need to be alerted: “There’s a crime going on!” However, unlike the man stealing a computer, the crimes modern whistleblowers can prevent involve the theft of billions of dollars. Wall Street fat cats steal billions from Main Street by short-changing the government or violating financial regulations. Thanks to modern whistleblower incentives and protections, we can hope that a few brave souls who witness securities violations will have the courage to chase these criminals down the street yelling, “Stop, thief.”

So, with a bit of history thrown in the mix, I will help further yesterday’s contest searching for more appropriate word for whistleblowers:

“Citizen Police”

Assisted by Zachary Kady

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With that I announce: The Corporate Observer ‘Whistleblower’ Renaming Contest.

My familiarity with whistleblower law and actions have led me to realize an unfortunate but undeniable truth: the term “whistleblower” has a reputation that is broken beyond repair.  In actuality, whistleblowers are essential public servants, bravely risking their jobs and professional reputations to protect Main Street from illicit activity.  Every one of us has benefitted—knowingly or not—from multiple brave folks who came forward and shed light on illegal practices.  We call these people whistleblowers in that they are drawing attention to the behavior and passing it along to the appropriate authorities to remedy.

The problem is many people hear “whistleblower” and do not picture a well-meaning public servant.  They picture a self-interested snitch, or worse—a liar.  I have tried extolling the virtues of whistleblowers, and Dodd-Frank has some folks reevaluating their whistleblower bias.  But I suggest a new, perhaps radical idea: rebranding. And the beauty of it is, I want to leave it open to the readers to do so.  With that I announce: The Corporate Observer ‘Whistleblower’ Renaming Contest.

I can get the pot stirring, but I hope and suspect the best suggestions will come from those more creative than myself.  Do we call them ‘citizen informants’ or ‘inside information contributors’. Or for the more cynical, maybe ‘snitches’ does suffice.  As you can see, my creativity is waning.  I can’t wait to hear what some of the readers think.

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PSSSSSSSSSSSSTTTTT. Quiet. “You know that insider trading case against Galleon Group and Raj Rajaratnam?” (say that ten times fast) Drum roll please: a whistleblower is behind it. Yep. Shocked I bet. Rajaratnam who had a bevy of connections, likely thought he had everyone fooled. Nope, he missed someone – someone he underestimated. Someone now who, as they say, may have the best chance of leaving the court that one final time through the front door. To the glare of sunlight, the warmth of the expanse and a stone’s throw to a martini awaiting at the Capital Grill around the corner. Beats the back door, and an odyssey of sorts with 35 others in matching jump suits – I believe orange these days – to a waiting school-like bus that ain’t goin' to school.

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The story has a happy ending.  In a jury trial against Countrywide and Bank of America, Michael Winston prevails and the jury awards him $3.8 million.  For Mr. Winston, surely a man of principle, it likely not just about the money.

We applaud Michael G. Winston for his courage and tenacity; and our old friend Gretchen Morgenson for continuing to shine a light on practices in American business that - while not pretty - must be exposed.  Mr. Winston was hired during Countrywide’s heyday as the king of the no-document, sub-prime mortgage.  They did not create the industry, but through their uber aggressive CEO Angelo R. Mozilo, they took full advantage of a milieu that not only allowed for but incentivized funding mortgages at any cost: worry about the consequences later.

The hiring of Mr. Winston was a rather strange choice for this culture of high rollers.  He was a grown up.  A veteran of Motorola, Lockheed and McDonnell Douglas, as reported by Ms. Morgenson, he was tasked with “grooming better managers”.  As he became exposed to this culture from the inside, he began asking questions and more questions, and after thoughtful analysis recommended Countrywide “focus on customer satisfaction, on the quality of the loan portfolio and on building leaders who would focus their people on that.”

Well it turns out that Mozilo and his crew wanted a yes man, a cover from critics; not Jimmy Stewart as Mr. Smith goes to Washington.  Mr. Winston rolled up his sleeves and issued a report concluding Countrywide needed to shift its culture away from short term greed and move to a model of measured sustainability.

But Mozilo and his crew ignored him, froze him out of meetings, and may—in a bizarre scene straight out of the movies—have even been behind an effort to poison Mr. Winston’s team.  These Countrywide guys played hard ball.

And then the moment of truth.  Mr. Winston was asked (perhaps told) to rebut a rating agency analysis of Countrywide’s corporate governance practices.  Here he is 50+ years old.  While he has exemplary credentials, he may not have many more opportunities, particularly if he crosses Bank of America.

Good news, honesty and courage defeat intimidation and fear.  Mr. Winston says no!  For that he is almost immediately fired.

But the story has a happy ending.  In a jury trial against Countrywide and Bank of America, Michael Winston prevails and the jury awards him $3.8 million.  For Mr. Winston, surely a man of principle, it likely not just about the money.  He has followed his moral compass and prevailed.

We thank him for his service, courage and the example he creates for others.  (And of course Gretchen Morgenson for highlighting the story.)

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Harry Markopolos has done it again.  Only this time, the world is listening.  Mr. Markopolos, a Boston-based investor, tried repeatedly and for years to warn the SEC and financial world of Bernie Madoff’s fraud.  He is now being reported as a central figure behind the filing of two whistleblower suits in California and Virginia.  The banks (Bank of New York Mellon and State Street Bank) were responsible for managing state pension funds.  The suits allege that the banks fraudulently charged the pension accounts the highest price available on the trading day rather than the actual price of the trade.

Translation: the banks overcharged state pension funds, effectively taking money from the hands of retired state employees.  Shameless conduct indeed.

The lawsuits in California and Virginia were initiated by anonymous whistleblowers working through Delaware shell companies believed to be connected to Mr. Markopolos.  The companies filed suit on behalf of the state.  And, in a sign the cases are being taken seriously, the Virginia Attorney General, Kenneth Cuccinelli, has intervened.  Whistleblowers may receive between 15% and 30% of any government recovery.  Considering the Virginia suit alone seeks $150 million in damage, that’s not a bad chunk of change.

What actually happened?

When a bank buys stock on a foreign exchange, it must first convert dollars to the currency of that country.  For example, stocks in Japan must be bought with yen.  When buying or selling foreign currency, there is always a difference in the “ask” price and the “bid” price.  Essentially, a bank can’t buy and sell dollars at the same price.  This means that there is a built-in fee to exchanging currencies and this fee changes throughout the day as the markets fluctuate.  What New York Bank Mellon and State Street Bank have done (allegedly) is make trades at their own convenience without regard for the cost of currency exchange.  Then, at the end of the day, when it’s time to bill their clients (the state pension funds of Virginia and California), the banks bill at the day’s highest rate – often higher than what the bank actually paid.

Three cheers for Harry Markopolos and his whistleblowers.

As mentioned, Mr. Markopolos is a Boston based investor whose warnings of the Madoff fraud fell on deaf ears.  Three cheers to Mr. Markopolos for continuing the fight for honesty on Wall Street.  Thanks to tips by employees of these banks and others familiar with the situation, Mr. Markopolos was able to put information to action and hopefully is on the path to right yet another wrong on Wall Street

The states deserve praise as well.  Whistleblower provisions are essential to monitoring fraud in our financial system.  This case is a perfect example.  Whistleblower provisions offer incentives for informed citizens to come forward.  Without these provisions it is likely that the states of California and Virginia would still find themselves in the dark concerning this fraud while Wall Street bankers quietly sweep millions from public pension funds into their own back pockets.

Assisted by Zachary Kady

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If she just saves one life, her payment is appropriate.  If she incentivizes just one whistleblower to come forward with similar information, her payment is appropriate.  And finally if compliance is tightened at Glaxo and other major pharmaceutical companies, her payment is appropriate.

In the last two days there has been substantial public backlash toward Cheryl Eckard.  Why?  Ms. Eckard recently earned a $96 million whistleblower award for providing information about Glaxo-SmithKline’s deficient drug production standards.  The backlash was undeserved.  This was not like winning the powerball lottery; she risked her career.  What she did was noble, courageous and likely will save lives.

Ms. Eckard worked for Glaxo-SmithKline in 2002 as a quality checker.  She traveled to different plants around the world checking for compliance with safety and manufacturing standards.  At a company that mass-produces pharmaceuticals for international use, Ms. Eckard had a job of vital importance.  It’s one thing if Nike uses low-grade leather in its shoes; it’s another if a drug company circumvents or ignores safety laws while mass-producing drugs.

When visiting Glaxo-SmithKline’s Puerto Rico plant that’s exactly what Ms. Eckard found and reported — different types and strengths of drugs were frequently bottled together without any corrective action taken by management.  Think about the consequences.

Regrettably, though, and perhaps to the astonishment of Ms. Eckard, her superiors, despite her detailed reports, simply ignored her.  Finally, likely after much soul searching, she risked her job in order to do the right thing.  She reported Glaxo’s transgressions to the FDA and later filed suit under the False Claims Act.  She didn’t do it for the money.  She did it because in good conscience, she could not turn a blind eye to major safety violations.

Many will think Ms. Eckard’s receipt of $96 million is out of line and unnecessary.  All she did was tell the FDA what she witnessed as part of her job.  But her value should be judged against the impact she made.  If she just saves one life, her payment is appropriate.  If she incentivizes just one whistleblower to come forward with similar information, her payment is appropriate.  And finally if compliance is tightened at Glaxo and other major pharmaceutical companies, her payment is appropriate. 

Carol Eckhard is our person of the week because of the example she sets.  She went to management repeatedly.  Only after being rejected and ignored did she risk her job and professional reputation to report Glaxo.  She did the right thing for the right reasons.

I hope that her conduct and character, not the $96 million, inspire others to follow in her footsteps.

Assisted by David Martin

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Today I sat down with Steve Berk to discuss whistleblowers. Mr. Berk's knowledge in the field is undeniable. In this short introduction, Mr. Berk briefly explains the history of whistleblower actions, their current state, and how to file a whistleblower claim.

Enjoy:

Assisted by Zach Kady

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Steve Berk Explains the Role of Whistleblowers in Maintaining Corporate Integrity

Published 8/27/2010

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Last Thursday I posted an entry discussing DOJ’s investigation of Big Pharma and the possibility that this probe is the result of a whistleblower.  Since posting, we have been contacted by Mike Koehler at the FCPA Professor Blog who advised that parts of the Big Pharma investigation have been ongoing for years and are likely not the result of a Dodd-Frank whistleblower. Mr. Koehler’s blog offers considerable insight on the FCPA and his opinions are greatly appreciated.

 Despite the fact that DOJ’s current Big Pharma investigation was not spurred by whistleblowers, it may very well receive help along the way from informed citizens. We at the Corporate Observer remain vigilant in our watch for new Dodd-Frank era whistleblowers. Be sure to check in for more whistleblower updates as they occur.

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These companies are not just risking their reputations; they are risking lives. 

The world’s largest pharmaceutical companies including GlaxoSmithKline, AstraZeneca, Eli Lilly, Bristol-Meyers Squibb, Merck and more will be subject to an ongoing probe by DOJ.

The basis for these probes: the Foreign Corrupt Practices Act. The act bars any American company from offering items of value to foreign officials for profit. Because of this restriction, pharmaceutical companies operating abroad are constantly walking a narrow line.  Most hospitals and healthcare centers in foreign countries are state-run – making all employees (doctors included) foreign officials as defined under the FCPA. This means dinners, gifts, and any other special treatment for foreign doctors or healthcare professionals could land Big Pharma in some deep water for offering bribes to foreign officials.

Technically:

As the Financial Times reports, DOJ is investigating all acts that could be in violation of the Foreign Corrupt Practices Act. Violations of the FCPA resulting from over-gracious dinners, all-expense-paid travel, and many other standard Big Pharma practices will be scrutinized.

The real issue:

Investigating lavish dinners and hospitality is far from the extent of the probe. The DOJ will be investigating more serious, more egregious violations of American law by looking into Big Pharma’s relationships with physicians who work on clinical trials, but also serve on regulatory boards.

In international healthcare, getting a drug approved in certain markets can net a pharmaceutical company billions of dollars. Unfortunately, this means that a drug’s approval might reflect the intense lobbying efforts of the pharmaceutical companies, not the best science. For this reason, the FCPA must be ardently enforced to ensure protection of the health and safety of consumers everywhere. Violations of American laws whose effect is to push drugs through foreign approval programs are inexcusable. These transgressions put the legitimacy of the global healthcare industry at risk and also jeopardize the safety of thousands of patients in Big Pharma’s quest to make a buck.

Potential whistleblower?

This DOJ investigation could very well be among the first spurred by a whistleblower under the new Dodd-Frank financial reform act. The act, passed just weeks ago, allows concerned, informed citizens to speak up about corporate securities violations by filing complaints with DOJ or the SEC. (Click here and here to read our posts about the Dodd-Frank Financial Reform Act) The Dodd-Frank act historically opened up new avenues for whistleblowers to bring claims related to the FCPA. We at the Corporate Observer are watching the developments closely, and the internet is abuzz (see here) with conjecture as to whether or not this investigation is a result of a new type of corporate whistleblower. Of course there will be no proof until we move farther down the road, but the prospect of an average citizen inspiring such a massive investigation to protect consumers and healthcare patients around the world is inspiring.

Assisted by Zach Kady

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Today, consumers are paying the price for corporate America’s greed. Tomorrow, with some help from the SEC, whistleblowers will ensure that we do not make the same mistake twice.

On Wednesday I detailed for our readers what you need to know about the Dodd-Frank Wall Street Reform and Consumer Protection Act. An important question has arisen regarding the effectiveness of the whistleblower provisions within the Bill. Sources like Daily Finance are concerned that the Bill will generate little more than unsubstantiated claims from people grasping at straws in an attempt to take advantage of the enhanced benefits afforded to whistleblowers.

To supporters of the bill: these concerns cannot be dismissed out of hand. For example, employees with a poor performance record may abuse the whistleblower provision by wrapping themselves around the protections afforded legitimate whistleblowers by filing a frivolous claim. Once that claim is filed they have, at a minimum, made it more difficult to be fired based on their poor employment record.  Similarly, people seeing dollar signs will inevitably submit unsupported or frivolous allegations of fraud in an attempt to collect on the enhanced whistleblower’s reward. 

Despite this potential for mischief and abuse, my support for the whistleblower provisions remains unchecked:

First: I firmly believe that 99.9% of Americans are honest people who will not exploit this Bill. 

Second: The SEC must step in and create rules for those bringing baseless claims under the whistleblower statute. This will weed out the dishonest whistleblowers but allow those with legitimate information to rightfully benefit from the Dodd-Frank Bill’s provisions.

Third, and most importantly: On balance, the whistleblower incentives will help solve a far bigger problem than they will create. Unchecked, gambling financial executives helped bring our economy to the brink of collapse.  As former Treasury Secretary Hank Paulson re-tells in his recent memoir On the Brink, this titan of the financial world vomited under the stress of the crisis after addressing the press and Congress.  And what better watchdogs to dissuade corporate corruption than the employees that work with the executives on a daily basis?

The Sarbanes Oxley Act of 2002 was the initial attempt at protecting and promoting whistleblowers; the toothless Act has yielded hundreds of fruitless complaints from whistleblowers. One after another they have been withdrawn or dismissed. Dodd-Frank enhances Sarbanes-Oxley in the following key ways:

•           Extending whistleblower protection to employees of privately owned companies; 
•           Steepening fines for non-compliant companies;
•           Offering contingent cash rewards; and
•           Allowing complaints to be immediately filed in court.

In sum, the Bill rewards those who are diligent and more importantly, serves as a real deterrent to would-be-transgressors. This is the ultimate goal of any regulation—not to punish those who are out of line but to prevent future wrongdoing.

The categorical condemnation of the Bill’s whistleblower provisions is the equivalent of emptying out a bottle of wine to retrieve the broken cork. The Bill is not a flawless solution, but it will drastically diminish the unchecked corporate malfeasance that brought our economy to the brink of collapse; with a little regulation it can do this at a minimal public cost. Today, consumers are paying the price for corporate America’s greed. Tomorrow, with some help from the SEC, whistleblowers will ensure that we do not make the same mistake twice.

If you have suggestions for how the SEC should effectively regulate the whistleblower provisions, or if you oppose the regulation entirely, we are interested in carrying potential rules to the SEC as well as hearing other solutions.

Assisted by David Martin

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The American economy will be strengthened by the new whistleblower provision in the Dodd-Frank financial reform bill. Reporting securities violations and other corporate misconduct will both strengthen the world’s confidence in American companies and limit fraudulent schemes before they metastasize. Whistleblowers – ranging from high-powered executives to entry level employees to average citizens can be among our most useful tools in combating fraud. For this reason, The Corporate Observer applauds the Dodd-Frank bill.

Under the new bill, whistleblowers will be eligible to receive:

(1)                           10% to 30% of any monetary penalty in excess of $1 million imposed as a direct result of their assistance, cooperation, and knowledge; and

(2)                           Statutory protection from employment discrimination.

Who are whistleblowers?

Conscientious and ethical citizens who become aware of corporate misconduct; and have the courage to stick their necks out to report that conduct to the appropriate governmental authority. A Whistleblower is not a snitch or a tattle tale. Rather they are vigilant citizens who speak up to protect others from becoming victims of corporate misconduct and securities fraud.

What is a whistleblower claim?

A whistleblower claim is a formal notice to the government, in this case the SEC, of wrongdoing. For example, if you become aware of illegal conduct such as:

(1)   Maintaining improper accounting practices;

(2)   Systematically misappropriating investor monies; or

(3)   Violating any other securities law;

you should consider submitting a whistleblower claim. Claims will be reviewed by the SEC and delegated to the appropriate regulatory department. From this point, the SEC will investigate the validity of the claim, the value in pursuing the accused party, and the proper penalty to assess.

To be clear, the Dodd-Frank Financial Reform bill allows whistleblowers to report any violation of securities laws to the SEC. Specific rules will be issued by the SEC in approximately 250 days.

Why file a whistleblower claim?

Individuals across America and across the globe invest in American businesses based on their reliability and integrity. Specifically, foreign governments purchase U.S. treasury bonds because they believe in the soundness of the American system. Violators of securities laws threaten the credibility and reliability of the American economy.

Those who invest in securities deserve your vigilance. Most securities are not held by wealthy individuals, but rather by average American investors who have 401K retirement accounts, college savings funds, and pension assets in stocks of public companies. Millions of American investors – thousands of people’s futures – depend on the credibility of the securities market for financial planning.

Acting as a whistleblower for securities fraud violations is every citizen’s opportunity to right corporate wrongs and protect consumers by limiting fraud.

How?

The Dodd-Frank Financial Reform Bill allows the SEC up to 270 days from July 21, 2010 to formulate rules and regulations for submitting a whistleblower claim to the SEC. Until these rules are finalized, the SEC has requested that complaints be submitted through its online forum (http://www.sec.gov/complaint.shtml) or by mail to the SEC’s complaint center at

SEC Complaint Center.

100 F Street NE

Washington, DC

20549-0213

Check back here for updates to the SEC’s claim submission guidelines and policies.

Legal Representation

Whistleblowers submitting claims anonymously are required to retain legal representation before submitting a claim. All other whistleblowers have the option to retain an attorney, but are not required to do so. At Berk Law we are experienced in whistleblower actions. Steven Berk has served in the General Counsel’s Office of the SEC and as an Assistant United States Attorney. If you’re interested in filing, or have any questions about a whistleblower claim please contact us at info@berklawdc.com   or visit our website, www.berklawdc.com for more information.

Assisted by Zach Kady

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