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Law Offices of Elizabeth “Booka” Smith, LLC Blog

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August 23, 2016: In-House/General Counsel as Whistleblower

Sean McKessy, the former chief of the U.S. Securities and Exchange Commission’s Office of the Whistleblower, recently acknowledged that in-house/general counsel have a unique perspective that often make them effective whistleblowers. This unique perspective is a by-product of deep insight into both the company’s affairs and the bounds of the law. More than any other employee of the company, it is often the in-house/general counsel that is best poised to blow the whistle on corporate malfeasance. However, more often than not, in-house/general counsel who blow the whistle on corporate wrongdoing become victims of workplace retaliation. In the past few years, there have been several notable cases where in-house/general counsel have been terminated in retaliation for engaging in whistleblowing activities. Howard Dorfman, former GC of Turing Pharmaceuticals, was fired less than a month after internally objecting to the company hiking the price of the drug Daraprim from $13.50 per pill to $750. David Cohen, former GC of DHB (now Point Blank Solutions, Inc.), faced retaliation after he blew the whistle on a proposed settlement of a shareholder derivative suit which released the company’s upper level executives from liability, in violation of the Sarbanes-Oxley Act (SOX). Sanford Wadler, former GC of Bio-Rad Laboratories, Inc., was summarily terminated after he internally raised complaints about rampant bribery of public officials in China (i.e. multiple violations of the Foreign Corrupt Practices Act (FCPA)). Once terminated, in-house/general counsel have to be very cautious in deciding whether and how to pursue a claim for wrongful termination against the company. Because the company is considered a former client of the terminated in-house/general counsel, the terminated lawyer has ethical obligations arising under their state’s Ethical Code of Professional Liability for Lawyers to protect client confidences. Courts across the country are divided in deciding whether in-house/general counsel can use evidence of client confidences to prove their case for wrongful termination. Because it is nearly impossible for a whistleblower lawyer to prove a case of wrongful discharge without disclosing client confidences, understanding these court opinions is critical. Courts throughout the US have largely rejected a per se bar on retaliation claims by in-house attorney whistleblowers. The growing trend is for courts to look to American Bar Association Model Rule of Professional Conduct 1.6, which permits disclosure of client information if the disclosure is necessary “to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client,” and allow limited disclosure. Given the legal landscape and nuances in how various jurisdictions respond to cases brought by lawyers for wrongful discharge, in-house/general counsel should give careful thought in deciding whether and how to blow the whistle on corporate misconduct. While every case is different, there are some standard precautions that in-house/general counsel can and should take in order to accomplish their goal of correcting the corporation’s behavior, while simultaneously protecting their legal career. The Law Offices of Elizabeth “Booka” Smith, LLC has significant experience advising in-house/general counsel as to whether and how to blow the whistle in the first instance. Ms. Smith also has experience representing in-house/general counsel in wrongful termination litigation. If you are a current or former in-house/general counsel and are either contemplating blowing the whistle on your company, or if you have and have been retaliated against because of your whistleblowing activities, CONTACT US to schedule an appointment for advice on your best course of action.

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