The anti-retaliation provisions of the Dodd-Frank Act do not protect whistleblowers outside the United States, a federal appeals court ruled last week, upholding the decision of a lower court that struck down a lawsuit filed by a Taiwanese national against Siemens AG.
Liu Meng-Lin, a former compliance officer at Siemens China, sought the whistleblower protections afforded by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibit companies from retaliating against employees who call out fraud and other wrongdoing to federal regulators.
Mr. Liu alleged that he was fired after he took his concerns over an alleged kickback scheme to superiors within Siemens China Ltd. The scheme, he said, involved Siemens making improper payments to Chinese and North Korean officials for hospital equipment in violation of U.S. anti-corruption laws.
According to court documents, Mr. Liu submitted a tip to the Securities and Exchange Commission (SEC) after leaving Siemens China and filed his lawsuit.
Last October, a federal judge in New York ruled against Mr. Liu, who then appealed the decision. The second circuit court of appeals upheld that ruling last week – a decision that could potentially discourage thousands of non-U.S. whistleblowers from reporting corruption.
“We conclude that that provision does not apply extraterritorially,” the opinion says, citing a 2010 U.S. Supreme Court decision that said Congress didn’t fashion the Dodd-Frank legislation to work overseas.
“The whistleblower, his employer, and the other entities involved in the alleged wrongdoing are all foreigners based abroad, and the whistleblowing, the alleged corrupt activity, and the retaliation all occurred abroad,” the court said.
According to the Securities and Exchange Commission, the agency received tips from whistleblowers in 55 countries in fiscal year 2013, making up 12 percent of the total number of tips. Most of the tips came from the U.K., Canada, and China.
According to the Wall Street Journal, the SEC “filed an amicus brief in support of Mr. Liu, saying that individuals who report suspected wrongdoing internally at a company or to the SEC can both be protected from retaliation.”