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Monday, October, 5, 2009

Dinah Hears Louder Whistle — Will He Get Bigger, Better Horn? ARRA Whistleblower Protections

As the CC has noted before, the U.S. admires whistleblowers, especially after the fact. Often, we ignore them and then, after a preventable horror (the Moody's rating kerfuffle and the Madoff Ponzi scheme being the latest that come to mind), we laud the formerly ignored whistleblower and wonder why nobody listened. Hence, after such horrors, and especially when they coincide with some kind of economic meltdown (Enron/tech bubble; Madoff/financial crisis), we pass laws that contain stringent protections for the whistleblowers who come after those to whom we should have been listening in the first place.

The American Recovery and Investment Act of 2009 (ARRA) is no exception. It contains a strong whistleblower provision protecting those employees of companies that receive "covered funds" who complain about a variety of malfeasance, and it provides employee-friendly procedures in the event of alleged retaliation. Indeed, the whistleblowing need only be a "contributing factor" to reprisal. So an employer can have some good reasons for dumping a whistleblower, but if the employer knew about the employee's disclosures or there was temporal proximity between disclosure and reprisal, the employer has to blow a pretty good tune to prove it would have fired, demoted or done whatever to the employee anyway. So how can you ensure your clients never hear that whistle blowing?

New Whistleblower Protections Under the ARRA is Michael Delikat's (Orrick, Herrington & Sutcliffe LLP) PowerPoint blueprint to the subject at hand — a blueprint that accompanied his presentation at the most recent installment of PLI's Stimulus Package Briefing Series, Compliance with Expanded Whistleblower Protections. It lays out ARRA's whistleblower provisions and compares them to those of Sarbanes-Oxley's to give you a good sense of their strength, and as Delikat points out, they are "broader" in a number of respects, so you'll need to be familiar with the differences. You can find the new whistleblower provision in section 1553 of ARRA, and it covers all non-Federal employers who receive covered funds who complain of:

Gross mismanagement of an agency contract or grant relating to covered funds
Gross waste of covered funds
Substantial and specific danger to public health or safety related to the implementation or use of covered funds
Abuse of authority related to implementation of covered funds
Violation of a law, rule or regulation related to an agency contract (including competition for or negotiation of a contract) or grant relating to covered funds

From there, Delikat summarizes the complaint procedure under ARRA and the employee-friendly burdens of proof under ARRA. Delikat also notes that the newfound power of whistleblowers may not stop with ARRA. There is a move afoot to encourage the SEC to expand its whistleblower protections. At the rate the government is going, we may have a whistle symphony soon.

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