Q&A with Joe E. Edwards
Dodd-Frank whistle-blower ruling may benefit employers
Q: The U. S. Court of Appeals for the 5th Circuit recently found the Dodd-Frank Act's anti-retaliation provision doesn't protect employees who report alleged fraud internally to their employers. Such protection requires the employee to disclose the allegedly fraudulent conduct to the Securities and Exchange Commission (SEC). What are the specifics of this case?
A: In Asadi v. GE Energy USA LLC, Khaled Asadi, a former GE Energy USA LLC executive, reported allegedly fraudulent conduct involving a possible securities law violation to his employer. Asadi was fired thereafter and filed suit in February 2012. Asadi, who'd served as GE's Iraq executive from 2006 to 2011 and helped GE coordinate with Iraq's central government, learned that GE had hired an individual who was “closely associated” with Iraq's senior deputy minister of electricity. Asadi alleged that the hiring had occurred to provide GE with a competitive advantage in its talks to secure a contract with Iraq's electricity agency. Asadi reported his concerns to his immediate supervisor and to GE's ombudsman for the region. Asadi subsequently received a negative performance review and was fired in 2011.
The trial court dismissed Asadi's complaint because U.S. whistle-blower legislation didn't apply overseas. On appeal, the 5th Circuit questioned whether Asadi could even count as a whistle-blower, because he had limited his reporting to internal channels instead of reporting to the SEC. Under Dodd-Frank, a whistle-blower is any individual who discloses potential wrongdoing to the SEC. A separate anti-retaliation provision in Dodd-Frank allows whistle-blowers to sue their employers for retaliation in several situations, including if their activity is protected by the Sarbanes-Oxley Act. However, the Sarbanes-Oxley Act contains a much shorter period of time within which potential wrongdoing must be disclosed to the Department of Labor to qualify for whistle-blower protections.