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The word “whistleblower” [FOOTNOTE 1] usually connotes an individual who simply “can’t bear” to let a perceived wrong continue, either in government or private industry. The conscience-driven whistleblower, typically in a unique position to know, is viewed as coming forward to protect society, as in the cases of FBI Special Agent Coleen Rowley, who reported on laxity in terrorism enforcement, [FOOTNOTE 2] and Jeffrey Wigand, who disclosed big tobacco’s conspiracy of cover-up [FOOTNOTE 3] : no hidden motives. That purist brand of whistleblower surely deserves every protection society can offer: protection against physical retaliation [FOOTNOTE 4] and against retaliation in employment. Indeed, Congress has declared that the (publicly motivated) whistleblower who, risking personal disdain from friends and colleagues, provides information for the public good, should be protected by not only the civil law, but now also by the criminal law. [FOOTNOTE 5] Strong protective measures are required, indeed, to encourage the well-motivated whistleblower to air his story and prevent future public harm. OTHER MOTIVATIONS However, though the public interest may be equally served, not all whistleblowers are so well motivated. Prosecutors and agents will tell you that their most valuable informers are, typically, motivated by basic revenge or greed. High-ranking organized criminals have been known to inform against opposing crime family members in order to eventually take over their illegal operations. Jilted wives inform on their husbands impelled by simple vengeance. Businesses lodge complaints of wrongdoing by their competitors for competitive advantage. And disgruntled employees inform simply to make the prior employer suffer. From the government’s perspective, there is nothing wrong with that: Prosecutors rightfully take information where they find it and, if truthful, use it as appropriate. Still, how much protection for the whistleblower/informer is warranted where the motivation for the disclosures is disturbing? A brand new provision passed in the Sarbanes-Oxley Act of 2002, now contained in Title 18 U.S. Code, � 1513(e), raises serious concerns in this regard. Indeed, despite the conventional wisdom that “it’s illegal to pay extortion,” it apparently isn’t always. Assume the following: Abe, the principal owner of a mid-sized, privately held corporation, finds it advisable to cut staff, and determines to conduct year-end interviews to decide who goes and who stays. One employee, Jane, an inveterate conniver, complainer and overall mediocre performer, arrives at her interview, wrongly concluding she’s on the year-end hit list. No issues of race, gender, age, or other forms of discrimination exist. Responding defensively to the inquiries of “Honest Abe,” as labeled by his friends and colleagues, she adds gratuitously: “Maybe you didn’t know about it, boss, but there’s a history of double billing on our government contracts. I’ve gotta feed my family. I’m not going to take a termination lying down. I’ll e-mail the inspector general today, if I have to.” Jane is hardly Coleen Rowley! As it turns out, Jane is telling the truth about the double billing, although Abe didn’t know anything about it when Jane “threatened” him. Nor did his principal executives whom he promptly consulted about her claim. Abe, however, is an honest businessman who simply won’t succumb to Jane’s blackmail — even if she’s got the goods on the company and will, indeed, pull the trigger. When Abe is told later that day by another staffer that Jane had, in fact, e-mailed the inspector general, he tells Jane to clean out by the close of business that day. He doesn’t want Jane hanging around the water cooler spreading her disturbing (albeit truthful) message of corporate corruption, or being able to further invade the corporation’s computer system — where she picked up her damning information in the first place — to sabotage the business. Honest man that he is, however, Abe immediately turns to (1) cleaning house of the wrongdoers, (2) correcting the offending systems, (3) contacting the Inspector General’s Office to facilitate an audit, and (4) arranging for prompt restitution or set-off against future government contracts. TITLE 18 U.S.C., � 1513(4) Abe unquestionably had good intentions when he decided to fire the perceived extortionist. And, indeed, Jane’s “threat” to expose the company by reporting actual criminal conduct to law enforcement may, indeed, constitute extortion under New York’s Penal Law, even if the accusation is truthful. [FOOTNOTE 6] Despite his good intentions, Abe’s conduct seems to fall squarely within the scope of the new Title 18, � 1513(e): Whoever, knowingly, with intent to retaliate, takes any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense, shall be fined under this title or imprisoned not more than 10 years, or both. As a practical matter, given the integrity of Abe’s responses to the problem — aside, of course, from his decision to exercise what might be viewed as a “retaliatory” termination — a prosecutor is likely to decline prosecution of him for violating � 1513, especially given Jane’s vulnerability as a “victim” witness in light of her own act of extortion in trying to maintain her job by using a threat. However, Abe’s strategy to make a prompt and full disclosure, depending on the nature of the underlying wrongdoing, may leave the company, and possibly high-level employees, vulnerable to criminal prosecution — even after full, prompt restitution. What’s more, even without a serious risk of criminal prosecution for retaliatory termination under the right facts, Abe may expose himself and his company to civil liability for a wrongful termination under a whistleblower’s statute. [FOOTNOTE 7] And, if Abe’s company is a publicly traded entity, a brand new statute under Sarbanes-Oxley provides a potent weapon for the employee far beyond the protections afforded under state and federal statutory and case law. Once an employee covered by Sarbanes-Oxley demonstrates that protected activity contributed to action taken against her in an enforcement action, the burden shifts to the employer to establish that the company would have taken the same action even if the employee had not engaged in the protected activity. [FOOTNOTE 8] EMPLOYMENT CHALLENGES Not every employer is willing to make the disclosure, particularly if the allegation of wrongdoing hits closer to home, i.e., the employer himself is involved in the wrongdoing, especially if the employer has the opportunity to head off the whistleblowing in the first place. Given a decision to not, at least for now, admit the wrongdoing, how, in the face of a criminal, or at least regulatory investigation, may or should the company and its principals deal with the whistleblower who states her intention to go the authorities, or has already done so? The employer facing an employee who threatens to rat out his company (even if the employer is not personally implicated) may find it simpler to “pay the dime,” that is, give in to extortion and abide the insufferable employee. In doing so, he avoids risking criminal prosecution for retaliatory termination and/or a whistleblower’s suit, not to mention the more onerous problem of an investigation and possible prosecution for the underlying conduct. It’s one thing not to fire an employee you fear will go to the authorities and “tell all.” It’s quite another, especially once you know that they have truthful, inculpatory information to provide, to offer “something of value” to an individual to discourage him from providing information to the authorities. At that point, an offer of payment or continued employment in exchange for silence may actually result in a criminal obstruction of justice charge, [FOOTNOTE 9] whether or not a prosecutor is ultimately able to indict on the underlying criminal conduct. And United States v. Martha Stewart teaches that the coverup may be worse than the crime. The challenge, then, for the employer is whether to simply allow the potential saboteur to remain employed, even in the same status and salary of employment. Obviously, if an employer knuckles under to extortion in this instance, the employee will “own” the employer thereafter. There is a substantial risk there. On the other hand, calling the employee’s bluff by a termination in the face of a provably aggressive and extortionate threat has its own risks, as the hypothetical above demonstrates. The answer to the quandary is not taught at law school; it comes from experience. LAWYER’S STRATEGY Ultimately, the strategy for a lawyer consulted by a corporate client facing this predicament comes down to “judgment.” Lawyers should not encourage clients to pay extortion. And, they certainly cannot, as a matter of criminal law or legal ethics, encourage them to offer things of value to discourage an informer from making a complaint to the authorities. Still, a lawyer, in presenting options to a client, may and should, especially now given the criminal statute in place, properly explain to the client all the risks involved, including the risks of firing an employee who threatens to go to the authorities. So, if an employee tells a corporate official that he is making a criminal complaint, unless the official actually “knows” it to be false, as a matter of criminal law he is probably obliged to maintain the employee in his current status, even if the employee is tactically using the complaint as a weapon to ensure his continued employment. This article does not question the wisdom of � 1513; it is what it is and is certainly valuable in the context of a whistleblower motivated by public interest. Nevertheless, it’s a sad state of affairs when the law can also be used to protect employees who harbor incriminating information for their own interests in case their employer ever wants to fire or demote them on the merits. POSSIBLE PROTECTION The principal defense to a potential � 1513 criminal charge probably lies in maintaining a solid written record establishing the legitimate grounds for termination whenever there is even a whiff that the employee may be considering a strategically timed complaint to the authorities as a means of ensuring job security. Even then, there still may be risk in firing an employee who should be fired on the merits. But it may be more risky to a business to retain a disgruntled extortionist who may sabotage the company far beyond what his “truthful” whistleblowing can do. Part of the lawyer’s job is assessing whether the complaint will actually result in prosecution. If the careful lawyer concludes that the prosecution is unlikely, the wise course of action may actually be to go to the prosecutor first — frankly stating that you recommend that the employee be terminated — ideally toting persuasive proof that the employee knows that he should be fired and is using the criminal complaint extortionately. While it will not always happen, a fair prosecutor will not guarantee non-prosecution for a � 1513 violation, but may give you a reassuring wink and nod that discharging a bad apple who uses the coercive power of a criminal statute to keep his job will “probably” not be viewed adversely. Especially since the substantive investigation may already be in the hands of the prosecutor, there will probably not be much to lose in trying. Joel Cohen, a former federal prosecutor, is a partner at Stroock & Stroock & Lavan (www.stroock.com). Michele L. Pahmer is an associate at the firm. If you are interested in submitting an article to law.com, please click here for our submission guidelines. ::::FOOTNOTES:::: FN 1 28 CFR Part 27; 29 CFR Part 24. FN 2 “Traces of Terror: The Congressional Hearings; Whistle-Blower Recounts Faults Inside the F.B.I.,” Johnston, David and Lewis, Neil A., New York Times, 6/7/02, � A, p. 1, col. 5. FN 3 “Former Tobacco Executive to Begin Telling Secrets to Grand Jury,” Feder, Barnaby J., New York Times, 12/13/95, � A, p. 21, col. 1. FN 4 Title 18, U.S. Code � 1512. FN 5 Title 18, U.S. Code � 1513(e). FN 6 New York Penal Law �155.05(e)(iv). FN 7 McKinney’s Cons. Laws of NY, vol. 30, Article 20-C (“Retaliatory Action by Employers”), is limited in scope and does not apply to this hypothetical. State whistleblower statutes in other jurisdictions may be far more wide-ranging. FN 8 Title 18, U.S. Code � 1514(A)(b)(2)(C). FN 9 Title 18, U.S. Code � 1510(a).

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