Tag Archives: whistleblower protection law

In the Excitement of the New, Let’s Not Neglect the Tried and True

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In my two posts last week (here and here), I attempted to go through all of the 41 country statements submitted by the participants in the London Anticorruption Summit held earlier this month, to see what those statements had to say about four specific issue areas highlighted by the Summit’s joint Communique: (1) accessibility (and possibly transparency) of beneficial ownership information for companies and other legal entities, (2) public procurement transparency, (3) independence, effectiveness, and transparency of national audit institutions, and (4) whistleblower protection (and encouragement). I didn’t originally intend to say much more about this, other than putting the information out there for others to examine, but on writing up the summaries, I was struck by the following observation:

Of the four issue areas I picked out–all of which, again, were prominently featured in the Communique–I would characterize two (beneficial ownership and, to a somewhat lesser extent, procurement transparency) as relatively “new” topics that have generated a lot of excitement. (This is clearly the case for beneficial ownership; public procurement transparency has been on the agenda for much longer, though I put it in this category because a lot of the focus of discussion in this area has been on relatively new initiatives like e-procurement and the Open Contracting Data Standard.) The other two issues I chose to highlight–independent and competent audits of government programs, and adequate protection of (and, preferably, affirmative encouragement for) whistleblowers–have been part of the conversation for considerably longer, though that doesn’t mean we’ve yet seen anywhere near as much movement on either of those issues as we’d like. And, compared to the newness and (relative) sexiness of topics like beneficial ownership registries and e-procurement initiatives, whistleblower protection and audits seem a bit humdrum. (Audits especially. Even I get bored when I hear the word “audit,” and I happen to think they’re really important.)

The thing that struck me, when going through the country statements, was the dramatic lopsidedness of the attention lavished on beneficial ownership and procurement transparency (to say nothing of other topics I didn’t cover, like corruption in sports and improved asset recovery mechanisms), compared to the relative neglect of country commitments in the areas of improving national audit institutions and whistleblower protections. Continue reading →

London Anticorruption Summit–Country Commitment Scorecard, Part 2

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This post is the second half of my attempt to summarize the commitments (or lack thereof) in the country statements of the 41 countries that attended last week’s London Anticorruption Summit, in four areas highlighted by the Summit’s final Communique:

  1. Increasing access to information on the true beneficial owners of companies, and possibly other legal entities, perhaps through central registers;
  2. Increasing transparency in public procurement;
  3. Strengthening the independence and capacity of national audit institutions, and publicizing audit results (and, more generally, increasing fiscal transparency in other ways); and
  4. Encouraging whistleblowers, strengthening their protection from various forms or retaliation, and developing systems to ensure that law enforcement takes prompt action in response to whistleblower complaints.

These are not the only subjects covered by the Communique and discussed in the country statements. (Other topics include improving asset recovery mechanisms, facilitating more international cooperation and information sharing, joining new initiatives to fight corruption in sports, improving transparency in the extractive sector through initiatives like the Extractive Industries Transparency Initiative, additional measures to fight tax evasion, and several others.) I chose these four partly because they seemed to me of particular importance, and partly because the Communique’s discussion of these four areas seemed particularly focused on prompting substantive legal changes, rather than general improvements in existing mechanisms.

Plenty of others have already provided useful comprehensive assessments of what the country commitments did and did not achieve. My hope is that presenting the results of the rather tedious exercise of going through each country statement one by one for the language on these four issues, and presenting the results in summary form, will be helpful to others out there who want to try to get a sense of how the individual country commitments do or don’t match up against the recommendations in the Communique. My last post covered Afghanistan–Malta; today’s post covers the remaining country statements, Mexico–United States: Continue reading →

Welcome (Back) to The Jungle: Why Privatization of Meat Inspections Will Increase Corruption and Threaten Food Safety

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Over a century ago, the tales of squalid meat production in Upton Sinclair’s famous novel The Jungle shocked the United States, contributing to a public outcry that ultimately led to regulations requiring a government inspector to examine every single meat carcass intended for human consumption. The U.S. Department of Agriculture’s FSIS (Food Safety Inspection Service) is responsible for the inspection regime. The established assessment program requires multiple FSIS inspectors to be on-site, performing a process of continual, carcass-by-carcass inspection during slaughter. The system is far from perfect and has never been a stranger to scandal (see here, here, and here). Yet it has been seen as vital to safeguarding public health from foodborne illnesses, including e.coli and salmonella outbreaks. It is also backed by a robust legal regime designed to insulate the inspectors from bribery and other forms of improper influence.

Unfortunately, throughout its history, FSIS has faced pressure to favor in-house inspectors over government inspectors in the name of creating a “flexible, more efficient” system. The most recent experiment with limiting the role of FSIS inspectors is HIMP (Hazard Analysis and Critical Control Point-Based Inspection Management Program), a program being piloted in a handful of pork plants and set to be proposed as a final regulation soon. (The related New Poultry Inspection System is being phased in now despite legal challenges.) HIMP uses in-house staff to conduct most of the inspections, particularly early on. A limited number of FSIS personnel do paperwork oversight and spot checks at particular points on the line.

However one chooses to balance competing calls for efficiency and safety, this is a short-sighted idea. Government inspectors and regulatory personnel are not perfect, but they are covered by anti-bribery laws and whistleblower protections that in-house inspectors are not, making them a safer bet for the safety of the meat supply. Filth and disease garner headlines, but civil society should continue to fight for an active role for government inspectors for another reason—public corruption is easier to fight than private influence. Even if one agrees that government inspectors are less efficient (a questionable proposition, despite how often it’s repeated), there are a number of laws and regulations in place designed to prevent (or expose) the corruption of these inspectors by the meat industry; there is no comparable regulatory regime in place to prevent equivalent corruption, or other forms of more subtle improper influence, from distorting the decisions of in-house private inspectors. Consider a few key areas of separation:

Continue reading →

#Ley3de3 and the Power of Mexican Civil Society

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As I discussed in an earlier post, Mexico enacted a series of constitutional anticorruption reforms last spring. I praised those reforms for their comprehensiveness and their potential to resolve problems of corruption at the state and local levels. However, I also noted that they required secondary enabling laws to actually go into effect. Until recently, the likelihood of enacting those laws on time looked slim, as the late-May deadline approached with considerable foot-dragging by the legislature. But Mexican civil society has risen to the challenge in an exciting way. Thanks to a 2012 constitutional reform that allows citizens to introduce bills to the legislature with 120,000 signatures (or 1.3 percent the voter rolls), an anticorruption bill has now been delivered to and is being debated by the Mexican Senate.

Called Ley 3de3, the initiative is an extraordinary example of civic engagement. Leading civil society groups have spearheaded the campaign, and universities and even for-profit businesses have gotten involved (see here and here). When the law was first delivered to the Mexican Senate on March 17th, it had over 300,000 signatures. A second installment of almost 325,000 more signatures was delivered nineteen days later. The legislation works to fill a number of important holes in the Mexican anticorruption landscape. For example, it requires public servants to disclose their assets, private interests, and tax returns (the 3-out-of-3 which gives the law its title) and proposes protection for whistleblowers who report corruption. The law faces a number of obstacles before it is passed, and other laws will be necessary to fully enact the National Anticorruption System promised by the constitutional reforms. However, the Ley 3de3 effort should be cause for, at least tempered, optimism. Continue reading →

Whistle While You Work: Protections for Internal Whistleblowers under Dodd-Frank

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One of the many objectives of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was to encourage whistleblowers to report securities violations—including violations of the Foreign Corrupt Practices Act (FCPA)—to the Securities and Exchange Commission (SEC). Among other things, Dodd-Frank created new remedies for whistleblowers who suffer retaliation by their employers, including allowing whistleblowers to sue their (former) employers on more favorable terms than existing anti-retaliation laws. But what if an employee doesn’t report a possible violation to the SEC, but only told her boss? If that “internal whistleblower” is subsequently terminated, can she avail herself of Dodd-Frank’s anti-retaliation provisions?  Because of the way the law was drafted, this turns out to be a difficult legal question, one on which courts across the U.S. have divided.

Nevertheless, there are strong practical reasons—above and beyond the basic reasons that could be advanced in any context—why Dodd-Frank should cover internal whistleblowers. Unless the courts resolve their division in favor of internal whistleblowers soon (most likely through a Supreme Court decision), Congress should step in and rewrite the law to remove any doubt that internal whistleblowers are protected.

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Is Dodd-Frank Coming to Kenya?

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Being a whistleblower in Kenya is a risky business. John Githongo and David Munyakei might be exhibits 1 and 1a in supporting that assertion. More recently, blogger David Mutai was arrested and had his blogs and Twitter account shutdown after exposing corruption at a public agency and in some county governments. More generally, according to Transparency International’s 2014 East Africa Bribery Index, Kenyans reported just 6% of the bribes they were aware of, and a common reason (noted by 10% of respondents) was fear of adverse consequences.

Against this backdrop, earlier this year Kenyan Attorney General Githu Muigai formed the Task Force on Review of Legal, Policy and Institutional Framework for Fighting Corruption. It is not clear how much work the Task Force has done or is doing (you can read the opening address from the June 2015 “Technical Retreat for Development of a Draft Report” here), but it was reported over the summer that the Task Force plans to propose a whistleblower reward system similar to Dodd-Frank’s whistleblower incentive provisions (which have been discussed previously on this blog here, here, and here). Specifically, the reported Kenyan proposal would reward “a person who reports corruption [with] at least 10 per cent of the value of any property recovered after investigations and conclusion of the matter through judicial or other dispute-resolution mechanisms.”

If the Task Force is still looking for ideas (as far as I can tell it has not released any draft legislation or white papers, and the latest news story I could find that mentioned the Task Force is this one from August), I have a few for how to make sure its whistleblower reward program is effective. Continue reading →

A Problematic Proposed Whistleblowing Law in Switzerland

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Switzerland is currently not a particularly hospitable country for whistleblowers.  The anti-retaliation protections provided to potential whistleblowers are relatively sparse – individuals fired from their jobs can, at best, hope to receive up to the equivalent of six months of their salary rather than reinstatement – and there are few legislative incentives in place to encourage individuals to report corruption or other forms of corporate wrongdoing.  Moreover, not only are the country’s laws rather harsh when it comes to encouraging and protecting whistleblowers in the private sector, commentators have noted the “brutally hard line” that the Swiss government has taken in a number of high-profile whistleblower prosecutions.

Unfortunately, a proposed law which has passed the country’s Council of States and will be considered by its National Council, initially billed as an attempt to address ambiguities within the current whistleblower system, appears likely, if enacted, to make an already hostile climate for whistleblowers even worse.

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Whistling in the Dark: The Potential Benefits of Withdrawing Anti-Retaliation Protection from Foreign Whistleblowers

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When the US Congress enacted the Dodd-Frank Act in 2010, it provided the Securities and Exchange Commission (SEC) with two powerful tools to encourage whistleblowers to report violations of the Foreign Corrupt Practices Act (FCPA) and other federal securities laws. First, whistleblowers can potentially receive a “bounty” of 10-30% of the monetary damages assessed against a company. Second, whistleblowers are shielded from their employers’ ire via an “anti-retaliation” provision, which affords whistleblowers a private cause of action for wrongful termination, harassment, or other discrimination associated with their report.

While many observers initially believed that these measures applied equally to all whistleblowers, the U.S. Court of Appeals for the Second Circuit recently held in Liu v. Siemens AG that the Dodd-Frank Act’s anti-retaliation provision does not have extraterritorial effect–it cannot be invoked by a foreign whistleblower against a foreign corporation (even though the corporation is listed on a US exchange), if none of the relevant conduct took place in the United States. The Second Circuit is the first Court of Appeals to adopt this position and, as some commentators have noted, this ruling creates an odd imbalance in the Dodd-Frank Act’s whistleblower provisions: in certain cases involving foreign whistleblowers and foreign companies, although whistleblowers might be eligible to receive significant monetary rewards under the Dodd-Frank Act’s bounty provision, they will nonetheless not be able to invoke the Act’s anti-retaliation provisions if their employer takes action against them.

Putting aside the question of whether the Second Circuit’s legal analysis was sound, as a matter of policy this may, at first glance, seem like a perverse result. Yet this seeming disconnect between the reach and scope of the Dodd-Frank Act’s bounty and anti-retaliation provisions may result, paradoxically, in an improvement in both the volume and content of whistleblower reports.  Continue reading →

Sunlight and Secrecy: Whistleblowing, Corruption, and the NSA

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While press coverage of the US National Security Agency (NSA) has been dominated by revelations, and concerns, regarding the scope of the NSA’s surveillance programs, recently this organization has been in the news for an altogether different reason. A number of recent articles have highlighted the remarkably porous nature of the relationship between the NSA and the private sector as well as potentially improper conduct on the part of a number of NSA officials. In October alone, several stories emerged regarding the fact that: (1) the husband of a high-ranking NSA official was registered as the resident agent of a private signals intelligence consulting firm located at the pair’s residence while the official herself served as the resident agent for an office and electronics business, also headquartered at her home; (2) the NSA’s Chief Technical Officer had been permitted to work for up to 20 hours a week for a private cybersecurity firm while still holding his post; and (3) the former head of the NSA had founded a private consulting company shortly after his retirement in spite of the fact that many commentators have questioned the degree to which he will be able to set aside confidential information he learned during the course of his time as the head of this organization.

To be clear, while a few commentators have thrown around the term “corruption” when discussing the apparent impropriety of some of these arrangements, there have been no allegations that the officials involved broke any laws or otherwise acted in a manner that can be deemed “corrupt” in any formal sense. Nonetheless, this cluster of incidents provides an opportunity to pause and reflect upon the inherent difficulties of identifying and addressing instances of corruption within the context of an organization which is extremely insular and unavoidably secretive. More specifically, the crucial part that whistleblowers and the media have played in bringing these incidents to light raises the question of what role, if any, we believe that greater transparency may play in exposing instances of corruption within the NSA. Sunlight may be the best disinfectant, as Justice Brandeis famously noted, but can or should it play a role when the organization in question is, by necessity, shrouded in secrecy?

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UN, Heal Thyself: The UN’s Embarrassing Failure to Protect Whistleblowers

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The United Nations has positioned itself as one of the leading global voices against corruption, principally through the UN Convention Against Corruption (UNCAC). Among the many vital topics covered by UNCAC is the protection of whistleblowers. UNCAC Article 33 provides:

Each State Party shall consider incorporating into its domestic legal system appropriate measures to provide protection against any unjustified treatment for any person who reports in good faith and on reasonable grounds to the competent authorities any facts concerning offences established in accordance with this Convention.

Though this provision is framed in non-mandatory terms, the UN and associated advocacy bodies clearly treat whistleblower protection as critical, both for countries and for the private businesses that the UN has pushed to join the UN Global Compact.

But what about the United Nations itself? Secretary General Ban-Ki Moon has declared that the UN has “developed a strict system of internal controls” and that the UN will “continue to remain vigilant and work hard to set an example.” And the UN’s Ethics Office promises to “protect[] staff from being punished for reporting misconduct or for cooperating with an official audit or investigation.” Providing protection to staff, the Ethics Office explains, “strengthens accountability and maintains the integrity of [the UN’s] operations and programmes.”

Sounds good.  But the actual UN practice is much more troubling–indeed, it should be downright embarrassing.  This was driven home most clearly in a decision that the United Nations Appeals Tribunal handed down this past September concerning the whistleblower James Wasserstrom, but the issue goes beyond any one individual case to the entire UN system–or lack thereof–for protecting internal whistleblowers from retaliation. I’m frankly surprised that this issue hasn’t gotten more press in the anticorruption community. Continue reading →