retaliation risk management: getting ahead of the problem · the arrest highlights the unusual...

Copyright © 2017 NAVEX Global, Inc. All Rights Reserved. | Page 0

Retaliation Risk Management:

Getting Ahead of the Problem

Presented byIngrid Fredeen | NAVEX Global

Greg Keating | Choate

Copyright © 2017 NAVEX Global, Inc. All Rights Reserved. | Page 1www.navexglobal.com

Presenters

Ingrid Fredeen Vice President and Senior Product Manager

NAVEX Global Partner

Choate, Hall & Stewart

Greg Keating


• Framing the Problem of Retaliation

• The Retaliation Risk

• Predictive Analytics, Preventative Practices

• Q&A

Agenda


Part I: Framing the Problem of Retaliation


Ethics & Compliance in the Headlines

• 2017 was a busy year for very public compliance missteps

− Sexual harassment – a failure of culture and of internal reporting process

− Gender stereotypes and biases – expression of offensive views

− Internal business metrics driving unethical and illegal behavior

− Bribery and corruption scandals

• Companies respond by explaining their culture and commitment to their values

• Public commentary offers an insight into what others truly think about the situation

• Employees who report and speak up are very sensitive about retaliation


What Is Driving This Trend?

• Culture failures and lack of process integrity

− Manager behaviors that are counter to an ethical culture

− Employee dissatisfaction with the status-quo and their employer’s failure to listen

− Frustration about how organizations respond

− Real or perceived retaliation for speaking up

• Employee cynicism about “empty words” and check-the-box compliance activities

• Employees have greater control over information and telling their own story

• Greater external options for sharing experiences and seeking redress

Source: NAVEX Global's 2017 Ethics & Compliance Training Benchmark Report


Whistleblower Seeks Investor on Craigslist

6


Attorney Arrested Attempting to Sell False Claims Act Complaint

Wertkin, who worked in Washington for Akin Gump Strauss Hauer & Feld LLP, believed he would hand a copy of a complaint to an employee of the company, which was accused in the complaint by a whistleblower of falsely billing the government. Wertkin, who was wearing a wig and using the name of Dan, was met instead by an FBI agent, according to arrest documents unsealed on Feb. 6.

“My life is over,” Wertkin told the agent.

The arrest highlights the unusual process involving lawsuits under the False Claims Act, which allows whistleblowers to sue companies on behalf of the U.S. government. The lawsuits, which are filed under court seal and given to the Justice Department, typically claim a company cheated taxpayers. The U.S. may investigate for months or years before notifying the company of the claims. Whistleblowers can share in any recovery, and some have collected tens of millions of dollars.

““

“Akin Gump Lawyer Charged With Trying to Sell Sealed Suit”By Jef Feeley, David Voreacos, and Joel Rosenblatt, Bloomberg Technology, February 8, 2017, 12:00 AM EST


Part II: The Retaliation Risk


Countries Expanding Whistleblower Protection Around the World

In the UK, The Serious Fraud Office (SFO) focuses on

mandating effective internal control and compliance

protections, especially as applied to listening to, and protecting, whistleblowing.

The Council of Europe’s 2014 Recommendations on

Whistleblower Protection incentivizes companies to

develop internal complaint report systems, and stronger

protections for whistleblowers.

Ireland’s Protected Disclosures Act in 2014 which provides

strong legal protections for whistleblowers who have a “reasonable belief” that

wrongdoing occurs at their workplace.

Ontario Securities Commission recently opened whistleblower

program designed along the lines of Dodd-Frank. Alberta just

announced plans to introduce anti-retaliation legislation.

In 2016, the German government amended the German Act on Financial

Services Supervision to bring Germany into closer alignment with SOX-style whistleblower

protection policies.

In 2006, Japan enacted its Financial Instruments and

Exchange Law which applies to certification of internal financial controls, in addition to an ethics

hotline and other reporting mechanisms crucial to internal

financial controls.

In France, hotlines must comply with specific criteria outlined by the government privacy agency,

Commission nationale de l’informatique et des libertés (CNIL). CNIL guidelines also

stipulate that anonymous calls are not to be encouraged.

Nigeria launched whistleblowing policy in

2016 which provides bounty of 5% to whistleblowers.


Main Drivers of Whistleblower & Retaliation Expansion

• Legislative Expansion of Rights and Remedies

• Judicial Expansion of Rights & Remedies

• Increased Government Enforcement Efforts


Whistleblower Legislative Expansion

• Fraud Enforcement & Recovery Act

• Revised False Claims Act

• American Recovery & Reinvestment Act 2009

• Consumer Product Safety Act

• 20+ Federal Whistleblower Protection Statuses

• Strengthened State Whistleblower Laws


Anti-Retaliation Protections Are Everywhere

• OSHA

• ADEA

• ADA

• False Claims Act

• Equal Pay Act (FLSA)

• Immigration Reform and Control Act (IRCA)

• NLRA

• Workers Compensation Acts

• The Rehabilitation Act

• USERRA


Available Remedies Provide Incentive to Seek External Help

Office of Whistleblower

• Office has received over 14,000 “tips” from whistleblowers in every state in the U.S. and over 95 foreign countries

• Areas of particular focus based on September 2016 speech by Andrew Ceresny are 1) FCPA bribery; 2) financial fraud; and 3) financial reporting and disclosure

• Largest bounty award to date ($30 million) to foreign citizen

• Almost half of award recipients to date were current or former employees

- Approximately 80 percent raised their concerns internally to their supervisors or compliance personnel, or understood that their supervisors or compliance personnel knew of the violations before reporting to the SEC

Dodd-Frank Awards

• Dodd-Frank provides right to “bounty award” to individuals who alert SEC to violation of the 1934 Securities Exchange Act (if >$1M)

• Employee can file claim directly in federal court

• Time in which to sue very long: six years after violation; or three years after learns/should have learned; 10 year max

• Remedies: Reinstatement, 2X’s back pay, attorney’s fees


Retaliation Claims Are #1 in America

• According to new EEOC enforcement guidance dated August 25, 2016, “Retaliation is now the most frequently alleged basis of discrimination in all sectors”

• Retaliation claims account for nearly 50 percent of all claims filed at the EEOC

• EEOC strongly urges employers in the “Promising Practices” section of the enforcement guidance to conduct training of HR and managers


Could the Tide Be Turning?

• Trump administration has indicated an intention to scale back Dodd-Frank

• On Feb. 10, 2017, House GOP circulated a memorandum outlining changes to Financial CHOICE Act which would impact the SEC and its enforcement program

1. Prohibit SEC rulemaking by enforcement

2. Would bar wrongdoers from collecting a bounty award under Dodd-Frank


Recent Cases & Verdicts Fueling Rise in Claims

• September 2017: Neurosurgeon awarded $17.5 million for alleged retaliation after he reported concerns about another top surgeon

• September 2017: Idaho jury awards $1.5 million to detective in whistleblower retaliation case

• Spring of 2017: $12 million jury verdict in whistleblower retaliation case in California


Enforcement Action Is not Going Away

1. SEC has taken the strong position that it has independent right to prosecute retaliation claims

2. In 2015-16, SEC repeatedly prosecuted employers for overly broad agreements, which they viewed as “muzzling” would-be whistleblowers


Part II: Predictive Analytics, Preventative Practices


Goal must Be to Prevent RetaliationCompliance Best Practices

• Ensure leadership commitment – tone from top and through the middle

• Create and widely disseminate protection policies

• Foster an anti-retaliation culture

• Have multiple avenues for reporting

• Conduct training for managers on complaint handling and retaliation

• Reward good-faith whistleblowers

• Break down corporate silos

• Promptly appoint a liaison to the whistleblower

• Monitor for potential retaliation

• Continuous program improvement (learn from experience)


“Investigate Every Time

[T]he only way to deal with a whistleblower’s accusations – again, every single time and often against your own instincts – is with a hyper-bias toward believing that the informant is onto something big. Such a bias must impel you to investigate every claim ferociously. You may think it’s a waste of time and money, and will go nowhere; you should be so lucky. And for goodness’ sake, don’t let the investigation be conducted by the boss who’s been accused of wrongdoing! Bring in an outside agency to do the sleuthing, or at the very least, executives outside the scope of the alleged problem, with no relationship to the people involved. Yes, you may hate the whole mishegaas and so might everyone it touches. But it’s the only way to overcompensate for the propensity to wish whistleblowers away with the perfunctory spot check or the “Everything O.K.?” kind of look-see that usually occurs.

— Jack and Suzy Welch, Reuters (May 1, 2012)

“


Train on Whistleblowing & Retaliation Now

• Required by law in California for all managers in wake of recent amendment to FEHA

• Training should be from the top down with critical emphasis on managers

• Training should cover what constitutes protected activity (whistleblowing), what is an adverse action and what a manager should and should not do once an individual engages in protected activity

• 43 percent of organizations plan to conduct training on the importance of speaking up and retaliation prevention over next 2-3 years

• 73 percent of these employers will train yearly on this topic

Source: NAVEX Global's 2017 Ethics & Compliance Training Benchmark Report


Monitoring for Retaliation

• Predictive/Preventive: Utilize data to identify hot spots and trends

− Ensure your organization has a hotline and incident management software

• Critical if you want to do any kind of data analysis

• Ensure that all complaints (not just those made via hotline/intake) are entered into your system

− Regularly monitor your hotline and web intake data

• Look for trends in work groups or areas such as call spikes or specific issues

• Ensure that managers know that you are monitoring

• Where there is smoke, there is often fire

• Consider whether you want to monitor social media

− Benefit vs. risk

− How will you address issues that surface?

− Are you staffed properly?


Monitoring for Retaliation

• Preventive: Work closely with HR

- Train all employees and managers about speaking up and retaliation

- Train all managers about how to handle complaints and how to prevent retaliation

- Monitor key employment actions (discipline, promotions, pay increases, termination)

- Check in with employees who have made a report

- Be a positive resource for managers who have been accused of wrongdoing

retaliation risk management: getting ahead of the problem · the arrest highlights the unusual...

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