Category Archives: Reuben Guttman Articles

Whistleblowers have bagged US federal authorities a pile of recovered cash this year – and themselves some big reward money.  But Reuben Guttman’s hero is a man who received not a penny of bounty.

Depending on how you count it, the US government recovered more than $6 billion in 2012 as a result of whistleblowers crying foul.  Enticing them to pucker up are laws paying bounties to those who report wrongdoing that cheats the government out of tax dollars, violates federal securities laws, or leads to the wrongful payment of monies that in whole or in part came from the government.

In an age of statistics and superlatives, pundits will debate who should take the title of whistleblower of the year for 2012.

Was it the person whose efforts resulted in the highest recovery ever in the US?  Or, was it those individuals who brought the cases that resulted in blockbuster settlements with global pharmaceutical companies?  Was it the person – whose name remains anonymous – who received the first Dodd-Frank bounty for reporting securities fraud to the Securities and Exchange Commission?  Or, what about that fellow who reported tax fraud and bagged a $100 million bounty from the Internal Revenue Service but was in no position to run out to the mall and blow it because he was a guest of the US Bureau of Prisons?

Radiation leaks

Regardless of who bags the unofficial title this year, I vote to recognize Pat Tucker, a soft-spoken welding inspector who lived and worked in Tennessee.  Mr. Tucker died this year; he was just 63.

Mr. Tucker worked for a contractor producing equipment for US Department of Energy nuclear weapons facilities and was in charge of inspecting welds holding joints together.  He understood that errors in his work could lead to radiation leaks.

One day Mr. Tucker arrived at work and noticed that employees were using his inspection stamp to approve welds that had not been inspected.  He reported his concerns to the department and two nuclear weapons contractors were cited for fines totaling about $100,000, the details of which are included in a government statement on October 31, 2003.

Mr. Tucker did not receive a bounty for his efforts.  He did what he did because he thought it was right.  Over the years, Mr. Tucker worked zealously to make sure that the products he inspected met specifications and he was never afraid to share concerns with government investigators.

 Moral compasses

The US bounty system is a hot topic of discussion and mystery, especially in Europe.  It surely encourages individuals to come forward and report fraud and in 2012 it is a system that has shown some success.  But not everyone who blows the whistle is motivated by a bounty.  Some people step forward because it is just the right thing to do.

When it comes time to vote for whistleblower of the year, my vote goes to the countless Pat Tuckers who are hard wired with an unwavering moral compass, and are compelled to step forward because it is the only thing they know to do when confronted with wrongdoing.

Mr. Tucker — we will remember you for your persistence, integrity, and dignity in the face of adversity.

By Reuben

Marvin Miller, the one-time Steelworkers Union economist and the man behind the modern baseball player’s union — and perhaps indirectly all North American professional athletes’ unions — died last month aged 95.

In 1966, Mr. Miller went to work as the executive director of a fledgling Major League Baseball players’ association, which, over the course of two decades, he transformed into a powerhouse of a real labour union.

Sometime ago, I was at a dinner with Dick Moss, the association’s general counsel that Martin Miller brought with him from the Steelworkers Union. He told me the story of Mr. Miller’s initial retention by the players. Out of concern for the prospect of placing the players in the hands of a traditional trade unionist, there was a discussion of offering Mr. Miller the job of executive director if he accepted as general counsel a New York-based lawyer named Richard Nixon. The two men met but Mr. Miller told the association he wanted Mr. Moss for the job. Of course, two years later, Richard Nixon secured the Republican Party’s nomination for president and the rest is history.

When Mr. Miller was campaigning for the baseball association job in 1966, he traveled to spring training venues to arrange meetings with players. Once appointed as executive director, one of his first tasks was to negotiate an agreement with Topps — the baseball card company — which paid players modest sums for the right to use their pictures. Revenue from that deal helped to fund the association.

Over the years, through a series of strikes that led to labor agreements with arbitration clauses, Mr. Miller exponentially enhanced player remuneration and benefits. And it was the arbitration clauses that lead to the undoing of the famous ‘reserve clause’, which precluded players — once their personal contracts were over — from offering their services to the highest bidder. An arbitrator’s decision — which freed players from the restraints of that clause — changed the fortunes of teams such as the New York Yankees, which were willing to bid with big dollars. Players became multi-millionaires and newspaper sport pages turned into financial reports.

A few years back when I joined the board of the Peggy Browning Fund, an organization named after a union member of the National Labor Relations Board, which held a reception honoring Marvin Miller. Many of the players that Mr. Miller had first met during his early spring training tours attended. Brooks Robinson, the great third baseman for the Baltimore Orioles, whose glove sucked baseballs with the efficiency of a vacuum cleaner, and Jim Bouton, the former Yankee pitcher who exposed the allegedly drunken and drug-fuelled exploits of fellow players in his seminal 1970 book, “Ball Four”, were among the notable.

In his speech, Mr. Miller talked about preparing for his remarks by researching Peggy Browning, who was appointed by President Clinton to the labor relations board in 1994. He said he was surprised to learn that since the passage of the National Labor Relations Act in 1935, Peggy Browning was the first trade union lawyer appointed to the board. (Of course since 1994 there have been several more, including Sara Fox, Wilma Liebman, Craig Becker, and the board’s current chairman, Mark Pearce.)

Mr. Miller opined that this was a signal that in the political sphere, labor really was not being adequately recognized as an entity to be reckoned with. And for him, the answer was that labor would not have complete political strength without there being a labor party. While strong labor parties exist in other countries, there is no strong labor party in the US.  The late Tony Mazzochi, a great labor leader with the Oil, Chemical & Atomic Workers Union, tried to start one, but his efforts fizzled after two conventions.  Both Mr. Miller and Tony Mazzochi understood the importance of organizing workers at the grassroots. In some respects, while the idea of a labour party is a grand idea, it is more of a metaphor for a need to go back to basics and generate grassroots support for collective employee action.

After President Obama was first elected in 2008, organized labor pinned its future on passage of a proposed Employee Free Choice Act, which it hoped would enable the expeditious organization of workers. But those efforts were fruitless, as the legislation died in congress. This was no surprise. The truth is that the US Congress, as it did in 1935, has historically passed legislation to curtail the power of labour, not to enhance it. Indeed, as Marvin Miller understood, workers only secure benefits — including contracts with arbitration clauses — if they are organized at the grassroots.

While American labor unions have, for some time, contemplated legislation that would enable them to organise and increase their ranks and market share, there is less talk these days of that strategy as a means of securing enhanced worker empowerment. As leaders like Marvin Miller and Tony Mazzochi understood, power comes from the floor of the workplace, or in Mr. Miller’s case, the playing field. Whether that will ever happen again in the US as it did in the spring of 1966 is another story.

Individuals blowing the whistle can receive millions of dollars for their information but is this the motivation?

2012 can be looked upon as the year of the whistleblower as the US government was on a trajectory to collect more than US$5 billion from cases that were initiated by private citizens. “With the growth of multi-nationals, cross-border enforcement, complex financial products and the recent economic crisis, whistleblowing has become an integral part of compliance enforcement in the US,” said Jerry Martin, the US Attorney for the Middle District of Tennessee. As a federal prosecutor, Martin works closely with counsel for private citizens who can, in some cases, initiate litigation on behalf of the government.

A protected species in the US

In the US, a myriad of laws protect whistleblowers from retaliation and some laws even reward whistleblowers with bounties where their efforts result in monetary recovery. False Claims Acts at the Federal and State levels pay bounties as high as 30 per cent of the recovery, with an average payment of between 15 per cent and 20 per cent.

While the federal False Claims Act dates back to 1863, in 2010, the US Congress, through the Dodd-Frank Wall Street Reform and Consumer Protection Act, expanded the role of whistleblowers. Now, whistleblowers providing information to the Securities and Exchange Commission or the Commodity Futures Trading Commission may be awarded a bounty. The US Internal Revenue Service has its own whistleblower program and that agency recently paid out a bounty of US$104 million to a private citizen whose efforts led to the recovery of taxes from UBS.

What is the motivation for whistleblowing?

The decision to blow the whistle is fraught with emotion and complex legal and factual analysis. Who are these whistleblowers and why do they do it?
Meredith McCoyd was an Atlanta, Georgia sales representative for Abbott Laboratories before she filed her False Claims Act lawsuit against Abbott in 2007. Her recovery led to a 2012 settlement between the government and Abbott totaling US$1.6 billion to resolve allegations that the company illegally marketed its antiepileptic drug Depakote. For her part, Ms. McCoyd will receive a bounty which will pay her well into the millions of dollars. Ms. McCoyd says she was “concerned about the widespread use of the drug to treat patients with Alzheimer’s and other psychological disorders that were not studied or approved by the FDA.” She also realized that “the training we received from the company convinced many sales representatives, including me for a time, that marketing to these patients and paying doctors to prescribe was legal when it was not.”

Whistleblowers don’t have to work for the company

Not all whistleblowers are employees. Lynn Szymoniak, a Florida attorney, whose original research and persistence led to exposure of the US mortgage robo-signing scandal, provided information to the government in 2010 and filed a suit under the False Claims Act. Information generated from her case was a catalyst for portions of the government’s $25 billion bank settlement with five banks, including Bank of America and JPMorgan Chase. Ms. Szymoniak, who herself had been a defendant in a foreclosure case, will reap a multi-million dollar bounty.

Whistleblowers often face the question of whether their concerns can be addressed by a company’s internal compliance programme. Glenn Demott was one of the six whistleblowers whose litigation culminated in the government’s 2009 US$2.3 billion settlement with Pfizer. And, as Mr. Demott will attest, not all whistleblowers have a smooth ride. Mr. Demott initially resorted to internal compliance channels to raise concerns about the company’s marketing practices. Only after he was met with a deaf ear, did he seek redress in court under the False Claims Act. He alleged that the company’s unlawful marketing practices caused the government to spend precious healthcare dollars to pay for unnecessary prescriptions. “I would blow the whistle again for a good cause if needed,” said Demott.

A global model?

“The citizens of the United States are well served by an efficient government, and whistleblowers play an important role in eliminating fraud, abuse, and conduct that causes harm to the government and the public,” said William Nettles, the US Attorney for the District of South Carolina who was the chief lawyer for the government in Lynn Szymoniak’s case. Demott, Szymoniak and McCoyd, in varying degrees, illustrate the role that whistleblowers play in the US legal system as the economy and the products that are produced become more complex. While they are US citizens, US laws, including the False Claims Act, allow for non-citizens, even those living outside US borders, to blow the whistle and benefit from bounties. Now, it will be interesting to see whether the US whistleblower model will be a recipe for compliance enforcement all over the world.

Are global corporations under just a moral obligation rather than a legal duty to behave responsibly around the world?  See Reuben Guttman’s October 5, 2012 blog in The European Lawyer.

DUBLIN – As the annual conference of the International Bar Association moved into its final stages, lawyers wrestled with the vexed issue of whether being environmentally conscious and treating workers fairly are not just matters of moral responsibility, but also a legal obligation.
For multi-nationals incorporated in the US, at least some aspects of corporate responsibility may be mandated by the laws of a foreign nation under the sometimes forgotten doctrine of ultra vires. Examine the articles of incorporation for numerous multi-nationals and there will be language restricting the company to endeavours that are legal.

Governing language

For instance, General Electric’s articles state that the purposes of the corporation are, in part, ‘to engage in any activity which may promote the interests of the corporation, or enhance the value of its property, to the fullest extent permitted by law…’ Multi-nationals operate in many jurisdictions, and this type of governing language could mean that they have to abide by the laws of the jurisdictions where they set up shop.
‘Application of the ultra vires doctrine to overseas conduct might most readily be extended to violations of international law — at a minimum where it has been incorporated into US law,’ noted Professor Robert Ahdieh, the vice-dean at Atlanta’s Emory University law school and director for its Center on Federalism and Intersystemic Governance. He continued: ‘The reference to lawful business in most state codes might also be read more broadly to reach even conduct illegal merely under some applicable body of foreign law. The scope of such an application, however, would require careful parsing.’
Although some nations struggle to enforce compliance with their laws, foreign regulations should not be considered irrelevant and compliance by large corporations should not be optional. One can feasibly argue that corporate directors have a duty to ensure that their companies comply with local and foreign laws. Accordingly, enforcement of these duties can improve the impact that corporations have on stakeholders worldwide, including consumers, workers, and the local environment.

Economic power

In his book, The Failure of Corporate Law, Boston College law professor Kent Greenfield observes that ‘corporate law is a big deal’ and argues that it ‘determines the rules governing the organisation, purposes, and limitations of some of the largest and most powerful institutions in the world. The largest corporations in the world have the economic power of nations. By establishing the obligations and priorities of companies and their management, corporate law affects everything from employees’ wage rate (whether in Silicon Valley or Bangladesh), to whether companies will try to skirt environmental law…’
At the IBA conference, where lawyers from across the globe struggle to understand how the myriad of laws governing multiple lands meld together, the ultra vires doctrine may be another piece in the puzzle.

http://www.globallegalpost.com/blogs/commentary/doing-the-right-thing-89556786/

DUBLIN — At the old Jameson Distillery, lawyers from across the globe danced into the night listening to a band from Long Island pumping out the music of the Irish rockers U2.

The International Bar Association — which is meeting in the Irish capital — is a melting pot of nationalities, languages, styles, and legal systems. The record turnout of more than 5,000 international delegates is perhaps, more than anything, a reflection of the global economy and the financial crisis — a reminder that the impact of regulatory dereliction does not confine itself to geographic boundaries.

International crimes

Even on the way to the conference centre, a taxi driver pointed out the headquarters of the agency charged with picking up the pieces of the country’s property crash and dealing with troubled real estate assets.
At a meeting of the IBA’s Anti-corruption Section, money laundering, the US Foreign Corrupt Practices Act, UK anti-bribery legislation and compliance enforcement with anti-corruption laws in Africa were all discussed. Those who came late were turned away at the door to a session that left some delegates standing.
‘The crimes are international, the victims are international, the float money is international, but the laws are not,’ argued UK lawyer Brian Spiro of London-based law firm BCL Burton Copeland.

Uniformity calls

The melding of different legal systems or calls for uniformity of laws are constant topics. At a meeting of the Antitrust Section, lawyers on a panel clashed over the application of US laws and the jurisdiction’s contingency fee system, whereby lawyers can be paid based on the level of damages recovered. Stephen Susman from US national law firm Susman Godfrey, probed European colleagues over whether they can take a contingency interest in cases they refer to US lawyers who file suit in America. There was no clear response from a panel of lawyers from UK, Ireland and Poland.
At a meeting sponsored by the Banking and Securities Law Sections, lawyers from Asia, North America and Europe chatted over lunch. ‘I don’t know any other organisation where you can have the opportunity to meet lawyers from all over the world,’ said Michael Bulach from Luxembourg firm Wilgden Partners. ‘It’s an opportunity to network and learn about systems of law that could come to our country.’

http://www.globallegalpost.com/blogs/commentary/professional-melting-pot-87309557/