When Congress passes a law with various provisions which apply generically to any securities law violations without thinking through, on a micro level, the intersection of such provisions, odd dynamics can result.
That was my observation in this 2012 post concerning Khaled Asadi v. GE Energy, a whistleblower case brought under Dodd-Frank’s Anti-Retaliation Provision alleging underlying conduct that could implicate the Foreign Corrupt Practices Act. The trial court held (subsequently affirmed on appeal – see 720 F.3d 620) that a foreign national could not avail themselves of protection under the Anti-Retaliation Provision because the provision does not apply extraterritorially. I noted it was an odd result, because that same foreign national could be awarded a whistleblower bounty under Dodd-Frank.
As highlighted in this previous post, a similar case was brought in early 2013 by Meng-Lin Liu, a former compliance officer for Siemens AG in China.
Yesterday, Judge William Pauley (S.D.N.Y.) dimissed the complaint brought under the Anti-Retaliation Provision of Dodd-Frank. Adopting the reasoning in the Asadi case, Judge Pauley concluded that “there is simply no indication that Congress intended the Anti-Retaliation Provision to apply extraterritorially.” Judge Pauley noted that Liu’s complaint (brought by a Taiwanese resident against a German corporation for acts concerning its Chinese subsidiary relating to alleged corruption in China and North Korea), “must be dismissed” “because the Anti-Retaliation Provision does not apply overseas.”
For more on the decision, see here from Reuters, here from Wall Street Journal Risk and Compliance.
As to the odd dynamic framed above, Judge Pauley stated:
“The issue is not whether persons located abroad can be ‘whistleblowers’ and thus eligible for whistleblower awards, but whether the Anti-Retailiation Provision’s protections extend to overseas whistleblowers. The fact that a person outside the United States may be a “whistleblower” under Dodd-Frank does not compel the conclusion that he is protected by the Anti-Retaliation Provision.”
In short, the odd dynamic persists.
Assuming the truth of Liu’s factual allegations, the DOJ and/or SEC could bring an FCPA action (at least books and records and internal controls charges) against Siemens regardless of whether the payment scheme had a U.S. neuxs, Liu could qualify for a Dodd-Frank whistleblower bounty if an SEC enforcement action was brought, but Liu can not qualify for protection under the Anti-Retaliation Provision for blowing the whistle on the allegations.
