Asadi V. G.E. Energy (USA) L.L.C.: A Case Study of the Limits of Dodd-Frank Anti-Retaliation Protections and the Impact on Corporate Compliance Objectives

By Sprinzen, Nicole H. | American Criminal Law Review, Winter 2014 | Go to article overview

Asadi V. G.E. Energy (USA) L.L.C.: A Case Study of the Limits of Dodd-Frank Anti-Retaliation Protections and the Impact on Corporate Compliance Objectives


Sprinzen, Nicole H., American Criminal Law Review


I. INTRODUCTION

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (1) ("Dodd-Frank," "Dodd-Frank Act," or "the Act") was enacted in the wake of the financial crisis of 2007 and 2008. Among numerous other undertakings, Dodd-Frank provided whistleblower protections and so-called "bounty provisions" for company employees who report securities law violations to the U.S. Securities and Exchange Commission ("SEC"), and sometimes to employers. Under some circumstances, Dodd-Frank also protects employees who report violations of other laws enforceable by the SEC. The whistleblower protections were meant to encourage company employees to report violations of law by protecting them from employment retaliation that may arise as a result of reporting violations. However, a paradox has developed in the application of Dodd-Frank's whistleblower protections. We pose a hypothetical to illustrate:

   A U.S. citizen, who has dual citizenship in Iraq, is employed by a
   U.S. company as a United States-based employee. He is "temporarily
   relocated" to Amman, Jordan, where, for five years, he has
   maintained an office. In Jordan, the employee serves as a liaison
   to the government of Iraq and coordinates with the Iraqi government
   to secure and maintain energy service contracts for his employer.
   The employee learns that his employer has hired someone in country
   for the alleged purpose of currying favor with Iraq government
   officials with whom the employee is responsible for negotiating
   service contracts. The employee becomes concerned that the hiring
   violates the U.S. Foreign Corrupt Practices Act's ("FCPA")
   prohibition of bribery of foreign government officials, to which
   law he believes his company is subject. The employee reports his
   concerns to his supervisor and the company ombudsman. He is
   unexpectedly terminated soon thereafter by an e-mail from his
   employer's human resources office in the United States, which says
   that he is being terminated under U.S. law.

   Does this employee have a private right of action under Dodd-Frank
   for retaliatory termination in violation of the whistleblower
   protections of that Act for reporting possible FCPA violations to
   his employer?

The U.S. District Court for the Southern District of Texas answered that question in the negative in Asadi v. G.E. Energy (USA), L.L.C. (2) The district court's ruling was affirmed on appeal to the Fifth Circuit. (3)

The courts' rulings--that the employee was not protected by Dodd-Frank's whistleblower protections following his disclosures of potential violations of the FCPA--may surprise the reader from a common-sense perspective and from a factual perspective. In addition, from a legal perspective the courts' decisions may be surprising because of the extent to which the extraterritorial application of the FCPA itself has been discussed by commentators and courts alike. Should not the law protect an employee of a U.S. company who reports potential FCPA violations? The federal courts have said sometimes the answer is "no." In the early district court cases, the courts found that limitations on the extraterritorial application of U.S. laws left unprotected an employee reporting potential violations of U.S. criminal laws where the employee was living and working abroad, with foreign duties and responsibilities, and had only perfunctory connections with the U.S. operations of the company. (4) At the appellate level, this reasoning has not been rejected, but it has not been adopted either; rather, the Asadi case was decided on other grounds. (5) However, the reasoning that resulted in the denial of the extraterritorial application of the Dodd-Frank anti-retaliation provisions was grounded in U.S. Supreme Court precedent and therefore could be a possible basis for decision in future cases.

Dodd-Frank's objective to encourage company employees to report violations of U. …

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