Whistleblower lawsuits are widespread and especially problematic in highly regulated industries such as financial services. Congress and the courts have consistently expanded the scope of protected activity and made retaliation claims more difficult to defend. Making things even more complicated, the Department of Justice has looked towards whistleblowers as a compliance tool, offering employees who report illegal activity the opportunity to share in the financial recovery even if they were not themselves harmed.
The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) has increasingly been used as a weapon in the government's arsenal. Although it had been rarely used, it was revived in 2010 as part of the Obama Administration's efforts to prevent mortgage fraud. FIRREA actions, either alone or in conjunction with other claims such as claims under the False Claims Act, have been used to prosecute financial institutions for misconduct. Like other statutes, FIRREA includes a whistleblower provision that makes it illegal to retaliate against an employee that has in good faith made a report of fraud under FIRREA.
Virtually any complaint of illegal activity will fall under some whistleblower protection under federal or state law. Employers must be careful on how they address and investigate such complaints. What may seem like a disgruntled employee blowing off steam can later be re-characterized by a lawyer as a brave employee "blowing the whistle" to protect the public good. Employers should review and update their whistleblower policies if necessary. The best way to avoid your next whistleblower lawsuit is to treat employees that make reports of alleged wrongdoing seriously, and to ensure that any subsequent employment actions are separate from and supportable by independent justifications.
For further information visit Waller's Banking Law Blog
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
