As noted in this prior post, in February Khaled Asadi (previously employed by G.E. Energy (USA) LLC (“GE Energy”) as its Country Executive for Iraq, located in Amman, Jordan) filed a civil complaint (here) in the Southern District of Texas against G.E. Energy. GE Energy is a wholly-owned subsidiary of General Electric Company (“GE”).
The complaint alleged that G.E. harassed and pressured Asadi to vacate his position, and ultimately terminated him after he informed his supervisor and G.E.’s Ombudsperson “regarding potential violations of the Foreign Corrupt Practices Act committed by G.E. during negotiations for a lucrative, multi-year deal with the Iraqi Ministry of Electricity.” The substance of Asadi’s complaint was that “on or about June of 2010 Mr. Asadi was alerted by a source in the Iraqi Government that GE had hired a woman closely associated with the Senior Deputy Minister of Electricity (Iraq) to curry favor with the Ministry while in negotiation for a Sole Source Joint Venture Contract with the Ministry of Electricity. (According to the complaint, the Joint Venture Agreement between GE and the Ministry of Electricity was signed in Baghdad on December 30, 2010 and the exclusive materials and repairs provision was estimated to be valued at $250,000,000 for the seven year agreement.)
Asaid asserted a claim for whistleblower retaliation under Dodd-Frank which created a private cause of action for whistleblowers subject to retaliatory discharge and permits relief including reinstatement and back pay for a whistleblower who prevails in federal court.
Recently, U.S. District Court Judge Nancy Atlas granted GE’s motion to dismiss Asadi’s amended complaint (see here for the memorandum and order). In short, Judge Atlas noted that the definition of “whistleblower” under Dodd-Frank is an individual who provides information “to the SEC” and that because Asadi did not claim to report GE’s alleged FCPA violations to the SEC, but rather to his supervisor and to GE’s ombudsperson, Asadi ”does not fit within Dodd-Frank’s definition of a whistleblower.”
As to Asadi’s claim that he could still qualify as a whistleblower ”even if he did not make a report directly to the SEC … because his disclosures were ‘required’ or ‘protected’ under SOX and the FCPA,” Judge Atlas did not reach the issue of whether he could qualify as a whistleblower on these grounds because his “claims fails on other grounds.” Specifically, Judge Atlas found, relying on the Supreme Court’s 2010 decision in Morrison v. National Australia Bank Ltd., that “the language of the Dodd-Frank Anti-Retaliation Provision is silent regarding whether it applies extraterritorially” and that therefore there is a “presumption that the Provision does not govern conduct outside the United States.” Judge Atlas then concluded that Dodd-Frank’s Anti-Retaliation Provision does not extend to or protect Asadi’s extraterritorial whistleblowing activity.
In dicta, Judge Atlas noted that Asadi argued that because the FCPA ”is clearly intended to apply extraterritorially, the [Anti-Retaliation] Provision also must extraterritorially.” However, Judge Atlas stated that “because the facts alleged by Asadi do not fit within the Anti-Retailation Provision, the Court need not, and does not, address Asadi’s argument that the FCPA extends the territorial reach of the Provision.” Nevertheless, Judge Atlas did note that “although Asadi has alleged that his internal disclosures at GE pertained to bribery of foreign officials, he has cited the Court to no provision of the FCPA that ‘protects’ or ‘requires’ his internal report of the alleged bribery.”
For more on Judge Atlas’s decision, see here from Reuters.
Although not a case of precedent, if the reasoning of Asadi is followed by other courts, the odd result could be that Dodd-Frank’s Anti-Retailiation Provisions do not apply extraterritorially, even though foreign nationals can potentially be awarded whistleblower bounties under the law. I guess this is what can happen when Congress passes provisions which apply generically to any securities law violations without thinking through, on a micro level, the intersection of such provisions.
The Asadi decision is believed to be just the second judicial decision concerning the intersection between D0dd-Frank’s whistleblower provisions and the FCPA. See this prior post for the decision in Nollner v. Southern Baptist Convention, Inc. (M.D. Tenn., April 3, 2012).