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REIT Goes And Ruins In-House Whistleblowing For Everyone

The only way to be one and keep your job now is to take it to the SEC, thanks to the selfish a-holes at Digital Realty Trust.
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Quit hiding behind the bench. By Phil Roeder (Flickr: Supreme Court of the United States) [CC BY 2.0], via Wikimedia Commons

(Flickr: Supreme Court of the United States) [CC BY 2.0], via Wikimedia Commons

In spite of their job title, lawmakers are not especially good at making laws. Given that they are for the most part smarmy professional fundraisers and glad-handers, and not, for example, experts on game theoretical consequences, this is both not surprising and especially true of large, complicated pieces of legislation. Take, for instance, the bipartisan examples of Obamacare and the Trump tax heist, the latter of which most (all?) lawmakers didn’t even bother reading before saying, “Aye.” Or, you know, Dodd-Frank, which does many things, some poorly and others less poorly, and which includes the following definition of “whistleblower”:

Any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission....

Do you see anything in there that indicates the you’re a whistleblower, and thus un-fire-able, if you bring up your concerns to your employer instead of bringing the wrath of the Securities and Exchange Commission’s enforcement division upon it? No, you don’t. Neither did Digital Realty Trust. And neither does the Supreme Court.

The 2010 Wall Street reform law known as the Dodd-Frank Act is unambiguous in offering no protection from retaliation such as firing or demotion to employees who report claims of securities law violations only in-house, the court ruled.

“The plain-text reading of the statute undoubtedly shields fewer individuals from retaliation than the alternative,” said Justice Ruth Bader Ginsburg, writing for the court.

That the decision was unanimous, and written by Ruth Bader Ginsburg, should tell you that this is not just the most business-friendly High Court in American history screwing over the little guy once again. And that’s in no small part because, whatever the benefits to this particular San Francisco-based REIT may be, the game theoretical consequences for its fellow SEC-regulated business is rather less-than-great. Specifically, in addition to the riches promised bona-fide whistleblowers for reporting to the SEC, there’s now a job-security element as well.

“I think for businesses, for companies, it’s a matter of ‘be careful what you wish for,’” said Thomas A. Zaccaro, vice chairman of the white-collar and investigations group at law firm Paul Hastings LLP and a former chief trial attorney at the SEC’s Los Angeles office.

“I think the consequence of the decision is whistleblowers are now made more likely to report to the SEC, and I think most companies would prefer that employees would report internally,” he said….

Corporate America “has now litigated itself into a box,” said Sean McKessy, who served as the first chief of the SEC’s Whistleblower Office when it opened in 2011.

“I do expect that our business is going to pick up because of the way the Supreme Court decision came down,” said Mr. McKessy, who now works for the whistleblower law firm Phillips & Cohen LLP.

Digital Realty Trust, Inc. v. Somers [Supreme Court]
Supreme Court declines to broaden whistleblower protections [Reuters]
Whistleblower Ruling Adds a Risk for Companies [WSJ]


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