Whistleblowing is a critical component of corporate integrity and economic stability in the United States. It is unsurprising, then, that policy makers and observers have directed considerable attention to the improvement of whistleblower laws. This article assesses potential improvements to the most visible recent addition to the federal whistleblower regime—the Dodd-Frank Act, passed in the wake of the Great Recession to combat securities fraud. The article makes two overarching claims. First, the Securities and Exchange Commission’s (SEC) recently adopted changes to the administrative rules governing the Dodd-Frank whistleblower program (WBP) are incomplete since they were formulated without reference to the experiences of whistleblowers and their counsel. Moreover, at least three of the SEC’s adopted changes will undermine the WBP and should be repealed. Second, the time is right to experiment with improvements to the WBP. If the SEC’s new rules are not the optimal path forward, the question remains what alternative changes should be adopted. To that end, the article utilizes an original qualitative data set consisting of in-depth interviews with two dozen whistleblower counsel, two whistleblowers, a former SEC commissioner, and a former chief of the SEC’s Office of the Whistleblower to propose its own set of changes. Congress and the SEC should embrace these changes to reform Dodd-Frank from the whistleblower’s vantage and to move the WBP closer to its full potential as a deterrent and remedy for securities fraud.

INTRODUCTION

When Darren Sewell died nearly destitute in 2014, he had been a whistleblower and plaintiff in a False Claims Act (FCA) qui tam action for more than five years.1 The E.R. doctor turned health insurance executive had worked extensively with the FBI as it investigated his employer for Medicare fraud. Company executives became aware of the investigation two and a half years after Sewell had filed a complaint under seal, and he soon thereafter submitted his “involuntary resignation.”2 He then found it impossible to obtain work in the Medicare insurance industry and heard that his former employer was telling others to avoid him.3 In desperation, Sewell began to tap his retirement accounts; when he died, little was left for his daughter.4 His lawsuit continued only when the executor of his estate agreed to stand in.5 Seven years after Sewell filed suit and two years after he passed, the U.S. Department of Justice joined the claim; only then did his former employer settle.6 Sewell’s protracted struggle suggests that fraudsters can wield even the passage of time to the decided detriment of whistleblowers and the public alike.

Yet Sewell’s case also illustrates the promise of whistleblowing as an integral element of corporate accountability in the United States and abroad. In recognition of its significance, numerous federal and state statutes have been enacted to protect and encourage those who report corporate misdeeds. Perhaps the most prominent recent addition to the federal whistleblower regime is the program directed by the Securities and Exchange Commission (SEC), created by the Dodd-Frank Act8 to combat securities fraud following the Great Recession—the whistleblower program, or WBP.9 Whistleblowing is especially crucial in the securities context since “[i]n the absence of a whistleblower or luck, most fraud would go undetected.” Despite the law’s development, however, perpetrators continue to commit fraud, and stories of hardship and ruin for whistleblowers like Darren Sewell continue to multiply.

Melissa Nelson was 20 years old when she was hired to work as a dental assistant for James Knight. Nelson had worked in his Fort Dodge, Iowa, office for more than a decade before he fired her in 2010. The problems began a year and a half earlier. On several occasions, Knight complained to Nelson that her clothing was too tight, too revealing and “distracting.” To mollify Knight, Nelson occasionally wore a lab coat over her clothes, which he viewed as necessary because, he said, “I don’t think it’s good for me to see her wearing things that accentuate her body.” According to Nelson, her clothes were not tight or in any way inappropriate for the workplace.

. . .

Sexual-harassment law reinforces our cultural fixation on women who invite their abuse. The leading case on “unwelcomeness” is Meritor Savings Bank v. Vinson, which the U.S. Supreme Court decided in 1986. The story begins more than a decade earlier, when 19-year-old Mechelle Vinson was hired to work as a teller trainee at a small bank in Washington, D.C. Vinson had grown up poor and surrounded by violence. Her previous employment experience was limited to temporary work in an exercise club, a grocery and a shoe store, which made the steady bank job even more appealing.

. . .

Vinson’s case eventually made its way to the Supreme Court, posing the question whether sexual harassment in the workplace violates federal antidiscrimination law. In a landmark victory for victims, the Court held for the first time that sexual advances constitute a form of unlawful discrimination when they create a “hostile work environment.” The Court wrote: “The gravamen of any sexual harassment claim is that the alleged sexual advances were ‘unwelcome,’” instructing that the “correct inquiry” is whether Vinson “by her conduct indicated that the alleged sexual advances were unwelcome.”

The creation of the unwelcomeness test tempered Vinson’s win. The focus would now be trained on her and on all accusers going forward. What mattered was how Vinson showed Taylor that his sexual overtures were not welcome. To this end, the Court blessed a searching inquiry into the victim’s conduct and appearance. Vinson’s “sexually provocative speech or dress” was said to be “obviously relevant” to whether she found the sexual advances unwelcome. This legal framework—which the Supreme Court handed down to the lower court resolving Vinson’s claim—remains in place today.

Joseph Sellers is the D.C. lawyer who represented Vinson after the Supreme Court remanded her case and before the parties ultimately settled in 1991, 13 years after Vinson sued. This final phase of the litigation was shaped by the Court’s newly announced unwelcomeness standard, which Sellers immediately realized would impose an unfair burden on Vinson and countless victims going forward. Vinson was a young “single mom and terrified at the prospect of disappointing or upsetting Taylor,” who had enormous control over her ability to make a living. But in that motel room, “Nobody locked the door. Nobody put a gun to her head,” Sellers says. This could have been held against his client, who submitted to intercourse with Taylor that day. “The question was whether she had shown—and it was viewed as a burden on her to show—that the conduct was unwelcome.” If Vinson didn’t do enough in this regard, the blame was on her.

Since handling Vinson’s case, Sellers has spent many decades representing victims of sex discrimination. He views the unwelcomeness test as a poor fit for the workplace with its myriad power imbalances. “In my experience,” Sellers relates, “it’s very rare that, where an overture is made by somebody with considerable power over the woman’s future, the person says something as direct as, ‘Please don’t do that. That makes me uncomfortable.’ Instead, they make excuses. ‘Well, I’m sorry, I’m busy tonight. I’m busy tomorrow night.’”

The question at trial, if a case makes it that far, is whether the victim’s conduct is sufficient to demonstrate unwelcomeness. This inquiry readily lends itself to blame-shifting. Particularly when the relationship between the harasser and his target is hierarchical, an accuser may not be positioned to do enough to be seen as a victim rather than an enabler. When victims are especially vulnerable, they are unlikely to satisfy the legal burden imposed on them. Without power in the workplace, a woman will find it difficult to directly confront her abuser about the unwelcomeness of his behaviors, leaving her a prime target for whatever comes her way.

Blame-shifting gives a gigantic pass to abusers—and it’s a dominant feature of our culture and our law. A primary function of what I call the credibility complex is to hold accusers responsible for their abuse while absolving the offender of responsibility. This preserves familiar structures—however hierarchical—in which the collective, particularly its most powerful members, is deeply invested.

Three companies accused of colluding to inflate the cost of calls made from inside U.S. prisons will still face antitrust claims after a Maryland federal judge decided that the racketeering claims of prisoners’ families fell apart.

U.S. District Judge Lydia Kay Griggsby dismissed the Racketeer Influenced and Corrupt Organizations Act — better known as RICO — claims Thursday in an 18-page opinion that ultimately found the suit’s antitrust claims were strong enough to proceed.

“In sum, when read in the light most favorable to plaintiffs, the court is satisfied that the complaint contains plausible Sherman Antitrust Act claims that plaintiffs should be allowed to further develop through the discovery process,” Judge Griggsby said.

The judge said she wasn’t going to be dismissing the antitrust claims because the proposed class — which seeks to represent friends and family members of incarcerated people who pay for collect calls from prisons across the country — does properly and plausibly allege an agreement between the companies it’s suing to fix the price of calls.

. . .

The family members of prisoners and the proposed class are represented by Handley Farah & Anderson PLLC, Cohen Milstein Sellers & Toll PLLC, Justice Catalyst Law Inc., the Human Rights Defense Center and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs.

Centene Corp. has agreed to pay more than $71 million to resolve investigations in two states into the health insurer’s billing practices.

The settlements, announced on Thursday in statements from the attorneys general in Illinois and Arkansas, are related to claims that Centene’s pharmacy-benefit management business inflated drug costs. The company has resolved similar disputes with Ohio and Mississippi and has reserved $1.1 billion to cover the claims, it said in June.

Centene is the largest provider of Medicaid managed-care health plans in the U.S. It contracted with Illinois and Arkansas to manage pharmacy benefits for state programs.

“This no-fault agreement reflects the significance we place on addressing their concerns and our ongoing commitment to making the delivery of health care local, simple and transparent,” Centene said in a statement provided by a spokesperson.

Shares of the St. Louis-based company declined 1.5% on Thursday in New York.

Pharmacy-benefit managers, or PBMs, negotiate discounts with drug suppliers on behalf of health plans and process prescriptions. The business has come under greater scrutiny in recent years because of the complexity of the arrangements and the potential for PBMs to pocket a share of the discounts or fees they receive.

Some states including Ohio have restructured how they contract for pharmacy benefits in programs like Medicaid, the safety net insurance for low-income Americans, to add more transparency.

Illinois Attorney General Kwame Raoul’s office said that Centene “allegedly submitted inaccurate pharmaceutical reimbursement requests that failed to accurately disclose the cost of pharmacy services,” and inflated other fees. He said in a statement that his office is still looking into PBMs operating in Illinois. Centene will pay more than $56 million to resolve the Illinois claims, Raoul said.

Arkansas Attorney General Leslie Rutledge said “this settlement with Centene is a big step in repairing the damage it did by taking advantage of Arkansans” in a statement. The company will pay more than $15 million to resolve the Arkansas claims, which covered conduct by Centene subsidiary Envolve in 2017 and 2018, Rutledge’s office said.

The U.S. Environmental Protection Agency’s pending requirement that companies report their use of so-called forever chemicals could impose a tough burden on businesses across many industry sectors, and environmental attorneys say it’s crucial that companies act now to prepare.

The proposed new rule, currently being finalized by the Biden administration, would require businesses that have manufactured, processed or imported per- and polyfluoroalkyl substances, or PFAS, to submit a comprehensive report detailing all of those uses for a 10-year period. It contains few exceptions like those often found in other chemical data reporting requirements under the Toxic Substances Control Act and will apply to both major corporations and small businesses.

The broad scope of the proposed rule is intended to help the agency better understand the potential risks and scope of the chemicals. The rule would be a one-time requirement, but the reporting could pose significant challenges for clients that haven’t kept detailed records of their past decade of using PFAS, experts say.

Thousands of businesses that may have never interacted with the TSCA may now suddenly find themselves needing to navigate its complex reporting framework. Attorneys are counseling their clients to prepare now to submit the required documentation or be able to establish they deployed their best efforts to pull it together.

…

And as PFAS-related litigation becomes more commonplace, reporting rules for the chemicals could provide an important tool for plaintiffs, especially in communities impacted by industrial processes, said Ted Leopold of Cohen Milstein Sellers & Toll PLLC.

Leopold is a co-lead counsel in one of the most prominent PFAS-related suits to date, targeting the alleged failure of DuPont Co. and Chemours Co. to stop toxic chemicals like PFAS from being dumped into the Cape Fear River in North Carolina. He said the transparency of the reporting requirement will help everyone from affected communities to regulators to better understand what the impacts of PFAS are.

“These chemicals are so highly toxic and dangerous for surrounding communities. Whoever is using these chemicals needs to act appropriately, put into place proper safeguards and document it appropriately,” he said. “That’s whether it’s DuPont, Chemours or a local company.”

A federal judge on Thursday rejected Wells Fargo & Co’s (WFC.N) bid to dismiss a lawsuit claiming it defrauded shareholders about its ability to rebound from five years of scandals over its treatment of customers.

The fourth-largest U.S. bank has operated since 2018 under consent orders from the Federal Reserve and two other U.S. financial regulators to improve governance and oversight, with the Fed also capping Wells Fargo’s assets.

Shareholders said bank officials falsely claimed in TV interviews, analyst calls and congressional testimony that the bank was mending its ways, when regulators actually viewed its progress as “deficient” and “unacceptable.”

U.S. District Judge Gregory Woods in Manhattan said the shareholders plausibly alleged that some statements by various bank officials, including former Chief Executive Tim Sloan, were “deliberately or recklessly false or misleading.”

According to shareholders, San Francisco-based Wells Fargo lost more than $54 billion of market value as the truth was gradually revealed over a two-year period ending in March 2020.

. . .

The shareholders are led by the state of Rhode Island, and pension funds in Louisiana, Mississippi and Sweden.

Their lawyer Steven Toll said he was pleased they can sue over the “vast majority of the alleged fraudulent statements.”

Read Wells Fargo Must Face Shareholder Fraud Claims over Its Recovery from Scandals.

The Seventh Circuit rejected a St. Louis manufacturing company’s push to send a would-be class action from workers who say they were overcharged for company stock to individual arbitration, saying a “rare” exception to federal law applied.

The three-judge panel issued a unanimous opinion Friday backing a district court’s decision not to send the Triad Manufacturing Co. workers’ suit into arbitration, citing an exception to the Federal Arbitration Act that permits a court to overrule an arbitration agreement if it blocks a party from being able to bring claims under federal law.

. . .

The proposed class of current and former Triad workers led by James Smith had accused the company’s board of directors and three board members in April 2020 of violating the Employee Retirement Income Security Act by selling Triad stock to the company’s employee stock ownership plan, or ESOP, at an inflated price, giving board members “a hefty profit at their employees’ expense.”

In Friday’s decision, the Seventh Circuit cited the 1985 Supreme Court case Mitsubishi v. Soler Chrysler-Plymouth  , which first presented the “effective vindication” exception in the opinion as a side observation, as well as the 2013 high court case American Express Co. v. Italian Colors Restaurant  .

While the Supreme Court decided against invalidating the arbitration agreements at the heart of both cases, the Seventh Circuit panel noted that the court in Italian Colors left the door open for the exception in cases where an arbitration provision prevented a party from exercising a statutory right.

The appeals court judges concluded Friday that ERISA suits in general could be sent to arbitration, but the arbitration provision in question was not valid under the effective vindication doctrine because it prevents plan participants from being able to seek relief and obtain remedies under ERISA.

. . .

Counsel for the proposed class told Law360 on Monday that they are “thrilled with the 7th Circuit decision recognizing that ERISA allows our client to seek remedies on behalf of all participants in his retirement plan.”

“The decision confirmed that certain plan-wide remedies cannot be taken away through an arbitration clause. We look forward to prosecuting this case in district court,” the statement continued.

. . .

The proposed class is represented by Karen L. Handorf, Michelle C. Yau and Jamie L. Bowers of Cohen Milstein Sellers & Toll PLLC and Peter K. Stris, Radha A. Pathak, Douglas D. Geyser and John Stokes of Stris & Maher LLP.

The survey’s launch comes days after the city filed lawsuits against DoorDash and Grubhub

Last week, the city of Chicago made headlines by filing twin lawsuits against Grubhub and DoorDash in accusing the food delivery companies of deceptive business practices. Now, the city is looking for anecdotes about restaurants and third-party couriers. The city has launched an online survey that asks hospitality workers “about your experiences with meal delivery companies, including but not limited to: DoorDash, Grubhub, Uber Eats, Postmates, and their affiliates.”

Last week, the city filed lawsuits against Grubhub and DoorDash claiming the third-party couriers employed a variety of deceptive practice to bilk restaurants out of money. The allegations include inaccurate menus, being deceptive about fees, and in DoorDash’s case, not properly paying driver tips. Both companies denied all allegations.

While the city has singled out Grubhub and DoorDash, attorneys continue to explore lawsuits against other companies, including Uber Eats and the others listed in the survey. The survey asks respondents for complaints and suggestions on how the companies could improve service. Uber Eats did not respond to a request for comment.

Imagine that you own a neighborhood restaurant with a loyal base of customers.

It’s likely that you started offering delivery during the pandemic, when the state of Illinois required indoor dining to close, but maybe you chose to maintain your own website and hire your own trusted drivers so you could control the quality of the food arriving at your customers’ doors.

Fair enough, surely? Is not the right of a small-business owner to choose with whom to partner, and whom to avoid, a fundamental tenet of a free American marketplace?

Not in the dining and takeout business, apparently.

The notorious dining apps Grubhub and DoorDash, which also owns Caviar, not only sucked globs of revenue from struggling local restaurateurs during the pandemic, but they also targeted those who chose not to work with them by creating their own facsimiles of their menus and websites and delivering food from those restaurants anyway, raising the prices along the way for their own benefit.

Guess who got hurt if the order was wrong or the food was cold and diners complained?

Here’s a hint. Not the apps. The victims were the restaurants that had been slowly building their reputations for years, only for Big Tech to come in and ruin them in an instant.

History teaches us that Big Tech quickly moves on to the next fun thing to disrupt. Local businesses tend to stick with their communities.

Here in Chicago, we have long experience with protection rackets.

Take away the Silicon Valley-speak, and this one smells like a high-tech version of what the mobsters did here during the lucrative Prohibition era, when they created a whole variety of unsavory ways to ensure that everyone with whom they wanted to do business was willing to return the favor. On suitable terms. Suitable for one party.

The dining apps need ethical reform. For that reason alone, the city of Chicago was right to sue DoorDash and Grubhub on Friday in Cook County Circuit Court, with two separate lawsuits seeking “greater transparency and other key conduct modifications, restitution for restaurants and consumers hurt by these predatory tactics, and civil penalties for violations of the law.”

Mayor Lori Lightfoot was reportedly incensed at their behavior. We say, for good reason. And it’s right that a well-fed city that famously loves its takeout and delivery is leading the charge, especially since federal authorities have been slow to understand what has transpired.

The forced cooperation tactic is but one example of egregious behavior. The suit alleges that another novel scam — and let’s be frank here — involves Grubhub creating a fake phone number for a restaurant, manipulating search results so that the bogus phone number ranks higher than the eatery’s actual phone number, tempting people to call that number instead. Oh, they got through, since the line actually was forwarded on to the real McCoy. But when they did? The restaurant got dinged for fees, even though the customer likely intended to deal directly with their local business. They thought they were avoiding the apps, but the apps got them anyway.

We could go on. Anyone who has used DoorDash has seen that shameless “City of Chicago fee” on their bills. It was designed to look like a tax. In fact, it was the company’s response to the city’s attempt to limit fees. It simply thumbed its nose at the effort and made the impact on the customer even worse.

We’re well aware that this pernicious fee creep is not limited to dining apps. Anyone who has rented a car recently has marveled at the difference between the quoted daily rate and the final total, where many of those revenue-padding fees pretend to be mandatory charges. And, of course, the same usually applies to tickets for concerts and sporting events. Sometimes, this is a way to circumvent taxation, but mostly it’s all designed to make it harder for consumers to compare apples to apples in a free marketplace.

This issue of fee creep might not be new, but it’s gotten much worse over the last few months, especially as businesses under inflationary pressure look to raise prices without killing demand. It’s a consequence of the ever-increasing ease of comparative digital searching, and it’s designed to confound transparency.

San Francisco Superior Court Judge Anne-Christine Massullo granted final approval of Sutter Health’s $575 million antitrust settlement Aug. 27.

Four things to know:

1. The settlement was initially reached in December 2019 by Sutter and the parties that sued the Sacramento, Calif.-based system, including then-California Attorney General Xavier Becerra, unions and other employers. Ms. Massullo granted preliminary approval of the settlement March 9.

2. The settlement resolves allegations that Sutter Health violated state antitrust laws by using its market dominance in Northern California to overcharge patients and employer-funded health plans. The lawsuit claimed that Sutter Health’s higher prices led to $756 million in overcharges.

3. In addition to the payment, the settlement requires Sutter to have its business operations monitored for a decade and mandates that the health system provide pricing, quality and cost information previously kept secret to insurers, employers and self-funded plans. The health system must also limit what it charges patients for out-of-network services to ensure those visiting out-of-network facilities don’t face surprise medical bills, among other requirements.

4. This is a groundbreaking settlement and a win for Californians,” said California Attorney General Robert Andres. “Sutter will no longer have free rein to engage in anticompetitive practices that force patients to pay more for health services. Under the terms of our agreement, Sutter’s transparency must increase, and practices that decrease the accessibility and affordability of healthcare must end. A competitive healthcare market is essential to ensuring patients and families aren’t bearing the brunt of healthcare costs while one company dominates the market.”