The Bipartisan Budget Act of 2018, passed overnight and signed this morning by President Trump to end the second federal government shutdown of this year, includes two key provisions for whistleblowers previously introduced by Senator Charles Grassley but removed from the January budget deal.
The Wall Street Journal reported yesterday that the reconciliation of the tax legislation has dropped the definition of collected proceeds for the IRS whistleblower program introduced into the Senate version that passed. The amendment was added by Senator Chuck Grassley, an advocate for whistleblowers and responsible for introducing the legislative provision in 2007 that created the IRS whistleblower program.
The Justice Department has appealed a decision by the U.S. Tax Court last year to provide an IRS whistleblower reward based upon a criminal fine and civil forfeitures. The Government’s appeal to the D.C. Circuit attempts to reverse a favorable decision for whistleblowers on the definition of collected proceeds used in the terms of the IRS whistleblower program.
Senator Grassley has proposed 15 amendments to the Senate bill for the Tax Cuts and Jobs Act. Two of those amendments are important to whistleblowers, so we are going to examine them in more detail here.
The bipartisan bill promoting whistleblower protections for individuals reporting antitrust violations, the Criminal Antitrust Anti-Retaliation Act (“CAARA”), is back in the Senate.
Last week, Representative Elijah E. Cummings and Senator Tammy Baldwin proposed a bill to modify several financial industry laws including the Dodd-Frank Act and Sarbanes Oxley Act to enhance and extend whistleblower rewards and anti-retaliation protections for bank and Wall Street whistleblowers. For those looking to follow the legislation in the House of Representatives, the Whistleblower Augmented Reward and Non-Retaliation Act of 2016 (WARN Act) is H.R. 4619.
The Trump Administration’s budget proposal for 2018 includes another attempt to pass tort reform for medical malpractice lawsuits. We strongly oppose this effort to weaken compensation for injury victims and urge you to inform your elected representatives that you do not support it.
Senators Chuck Grassley and Patrick Leahy reintroduced the Criminal Antitrust Anti-Retaliation Act into the Senate. CAARA prohibits employer retaliation against employees providing information to the Department of Justice about conduct violating criminal antitrust law.
The legislation as currently written does not provide for rewards for antitrust whistleblowers. The Government has expressed concern that it will be more difficult to make their case under the criminal law with a higher burden of proof than civil cases if their star witness of the conspiracy will receive a reward. The United States already provides limited immunity to certain individuals or companies that come forward first with evidence of their participation in an antitrust conspiracy.
Internationally, several countries do provide monetary awards in this area. The United Kingdom, South Korea, Hungary and Pakistan all pay for information about price fixing cartels. A Government Acountability Office report in July 2011 found support for rewards in the United States mixed.
The bill is one of a number under consideration by Congress and the States. The Motor Vehicle Safety Whistleblower Act sponsored by Senators Thune and Nelson to incentivize auto whistleblowers has already passed the Senate. New York’s Attorney General Eric Schneiderman has also announced a proposal for the Financial Frauds Whistleblower Act to compensate whistleblowers in the banking, insurance and financial services industries.
The U.S. House of Representatives on Thursday approved banking reforms in the Financial CHOICE Act of 2017 that would, if adopted, “gut many of the key banking reforms implemented after the financial crisis” according to a CNBC article. Apart from the overall impact on the Dodd-Frank Act, the law makes an important change to the SEC whistleblower program which would impact employees reporting violations of the federal securities laws.
Senators John Thune (R-S.D.) and Bill Nelson (D-Fla) are expected to introduce a bill to provide auto industry whistleblowers with up to 30% of monetary penalties resulting from enforcement actions by the Department of Transportation or Justice Department. Called the Thune-Nelson Motor Vehicle Safety Whistleblower Act, it will provide for the Secretary of the Treasury to issue auto industry employees and contractors discretionary rewards for voluntary information about problems at motor vehicle manufacturers, parts suppliers and dealerships. The legislation is modeled after the Internal Revenue Service and Securities and Exchange Commission whistleblower programs, including confidentiality protections.
It is co-sponsored by Claire McCaskill (D-Mo.) and Dean Heller (R-Nevada), the leaders of the Commerce Committee’s subcommittee on consumer protection. The subcommittee is investigating delayed recalls of ignition switches at General Motors. The bipartisan sponsors of the bill suggest that the issue may cross party lines even though corporations have in the past vehemently opposed past efforts to strengthen rewards.
The Detroit News called out the bill as “the first significant auto safety proposal to receive backing of a top Republican.” The chairman of the House Energy and Commerce Committee, Representative Fred Upton (R-MI) said he is still considering proposing a bill for auto reform.
Democrats in the House and Senate proposed sweeping reforms earlier this year. In September, the Vehicle Safety Improvement Act was introduced to reform the industry. Senate Democrats proposed the Early Warning Reporting System Improvement Act in March followed by the Motor Vehicle and Highway Safety Enhancement Act in August.
The introduction of the whistleblower bill comes at a time when several companies in the auto industry are being investigated for defective products. The introduction of the bill coincides with a hearing today in the Senate Commerce Committee regarding the recall of 7.8 million vehicles by 10 major automakers because of defective Takata air bags.
In June, news broke about a GM whistleblower who had been silenced and fired by the company for accusing it of dragging its feet to fix safety issues. The company had known about the problematic ignition switches for years before it finally issued a recall.
Toyota paid a $1.2 billion fine earlier this year for misleading the government and consumers about unintended acceleration complaints. U.S. Attorney Preet Bharara said, “Even while giving unequivocal assurances that it had fully addressed a grave safety problem, Toyota knew full well that the problem of unwanted acceleration persisted.” Toyota initially blamed the problem on the accelerator being stuck under the floor mat while hiding the potential for “sticky pedals”. The company recall didn’t cover all of the cars in danger and they continued to manufacture problematic vehicles.
Earlier this month, Hyundai Motor and Kia Motors were also fined $300 million for overstating vehicle fuel-economy standards. We haven’t been able to track down the bill yet to determine whether information about this time of fine for a violation of the Clean Air Act will also be covered.
This bill is not the only area where the U.S. Government is considering expanding rewards.
Representative Maxine Walters (D-CA) introduced the Holding Individuals Accountable and Deterring Money Laundering Act (H.R. 3317) into the House of Representatives last October. It provides for an increase in the potential payment for FinCEN whistleblowers from the current maximum payment of $150,000. The new law would offer a minimum of 10 percent and maximum of 30 percent on eligible recoveries over $1 million.
The Centers for Medicare and Medicaid Services proposed an increase last year in the maximum reward for its own Medicare Incentive Reward Program to $9.9 million from $1,000. The U.S. Government Accountability Office also published a report on reform of the criminal cartel enforcement laws in 2011 which considered, among other things, adding incentives for reports of antitrust violations.
New York is also considering rewards for information provided to its Department of Financial Services. The agency, run by Benjamin Lawsky, has issued several large fines against financial institutions this year, including this week’s $315 million settlement with Bank of Tokyo Mitsubishi UFJ. It also will reportedly pursue penalties against Barclay’s for forex manipulation similar to the conduct involved in settlements between five banks and the CFTC last week.