Grassley On the Whistleblower Programs Improvement Act of 2019
Oct 21, 2019
Prepared Floor Remarks by U.S. Senator Chuck Grassley of Iowa
On the Whistleblower Programs Improvement Act of 2019
Monday, October 21, 2019
I recently introduced the Whistleblower Programs Improvement Act of 2019.
This legislation strengthens whistleblower protections for whistleblowers working in a variety of key sectors, including our securities and commodities industries, and the Foreign Service.
There’s been a lot of talk about government whistleblowers lately.
It’s important to remember that many of our whistleblower laws are there to protect average Americans who don’t work in government at all.
Many of the groups helped by this bill work in private industry.
In some cases, they’re investors or businesspeople who have been on the receiving end of financial fraud.
In others, they’re employees – stock brokers, traders, investment advisers, administrative professionals and other support staff – who see activities in the course of their work that they know are wrong and decide to speak out.
Among these brave whistleblowers are people like the three employees at Merrill Lynch who had evidence that between 2009 and 2015, their company was misusing customer cash.
Those whistleblowers told the SEC what they knew, and, in doing so, provided information critical to an investigation of the company’s practices.
That investigation uncovered multiple violations of federal rules.
Among other things, the SEC found the company was not depositing cash in reserve accounts as required.
Instead, it was using tricky accounting maneuvers to free up billions of dollars per week and finance its own trading activities.
And in the process, it was putting its customers’ cash at risk.
The SEC said that, “had Merrill Lynch failed in the midst of these trades, the firm’s customers would have been exposed to a massive shortfall in the reserve account.”
The information provided by whistleblowers led to a successful enforcement action, which involved an admission of wrongdoing by the company and a $415 million dollar settlement.
If the whistleblowers hadn’t stepped forward, then who knows, those shady accounting practices might still be going on today, instead of having been stopped cold.
Investors might still be facing the same unnecessary risks.
There are plenty of examples from the commodities industry as well.
People like Edward Siedle, a whistleblower who informed the CFTC that JP Morgan Chase was failing to disclose conflicts of interest with some of its clients.
Because Mr. Siedle decided to speak out about what he knew, the government collected hundreds of millions of dollars in settlements.
Whistleblowers like Mr. Siedle and the employees at Merrill Lynch deserve our gratitude, and they deserve our support.
They help the SEC and CFTC do their job, and they help to promote transparency and accountability in our financial system.
I’ll tell you something else they deserve.
They deserve assurance that when they put their jobs and their reputations on the line, they won’t be fired just for trying to do the right thing.
They deserve to know that if the government recovers money because of their disclosures, they’ll be able to get a decision on their award application in timely fashion.
Currently, whistleblowers don’t have these assurances.
Last year, despite strong objections that I raised in a brief to the Supreme Court in the case Digital Realty v. Somers, the Court ruled that a whistleblower who reports violations of our nation’s securities laws is protected from retaliation only when he or she discloses wrongdoing directly to the SEC.
Because of this ruling, if a whistleblower in the securities industry reports a concern to a supervisor at their place of work without also going to the SEC, they can be fired without any recourse.
They have no legal protection or means of getting their job back.
That’s not what Congress intended when it created the current SEC whistleblower program in 2010.
It’s not what I intended when I voted for it.
That law was supposed to protect whistleblowers who report wrongdoing.
It was supposed to prevent them from being fired without just cause.
This decision has far-reaching implications that potentially affect others beyond those working in the securities industry.
Because the commodities whistleblower program was established through the same public law as the SEC program, that program incorporates many of the same provisions, including language similar to that which the Supreme Court ruled on during the Digital Realty case.
That means whistleblowers in yet another program face the prospect of having anti-retaliation provisions Congress put in place a decade ago suddenly yanked away from them.
That’s unacceptable to me.
It’s a scenario that should be unacceptable to every member of this body who cares about keeping our financial system strong.
My bill prevents the Supreme Court’s ruling from becoming the status quo.
It makes it clear that whistleblowers who report concerns about possible violations of our federal securities and commodities laws are fully protected, whether they take their concerns to the SEC or CFTC, or to anyone else in their company who they reasonably believe has the ability to address their concerns.
That’s what companies should want, anyway. It’s also common sense.
When an employee tells his or her company about a concern, it gives the company a chance to investigate and address the concern, and, if necessary, to self-report any problems to federal regulators.
Companies that come clean and self-report almost always receive reduced penalties.
That’s an outcome that’s better for the company and better for investors.
My bill addresses another concern for securities and commodities whistleblowers.
I said before that if the government recovers money as a result of a whistleblower’s disclosure, the whistleblower deserves at least an initial decision concerning their award application in a timely fashion.
Unfortunately, my office has heard of far too many cases where whistleblowers have had to wait years to get a decision from the SEC after they apply for an award.
A year should be more than enough time for regulators to reach an initial determination regarding an award application.
My bill makes the one year standard law for both the SEC and CFTC whistleblowers.
And if the agency takes longer than a year to reach an initial decision, the whistleblower office must notify the Chairman and the whistleblower of the delay.
Recently, I had the chance to sit down with Chairman Clayton to discuss these changes.
My staff worked closely with the SEC and CFTC to craft the language.
Now, I urge all of my colleagues to support change, as well.
In addition to these changes, my bill irons out other differences between the SEC and CFTC whistleblower programs and ensures that whistleblowers reporting to both of these bodies have access to the same judicial remedies.
It also enables the CFTC to hold more in the consumer protection fund that it uses to pay out its awards, and it allows the CFTC to use money from the fund to teach stakeholders about the opportunities that are available to them through the whistleblower program.
Finally, my bill addresses a critical gap in protections provided to Foreign Service employees through the Whistleblower Protection Act.
Due to a drafting error in the law, the Office of Special Counsel has stated that it doesn’t have the authority to investigate instances of possible retaliation against Foreign Service workers when the retaliation comes in the form of a poor performance evaluation.
That’s an important task of the Office of Special Counsel and an important protection that Congress has afforded to other government whistleblowers.
My bill closes the gap and makes it clear that Foreign Service workers should receive those same protections.
In closing, this bill contains commonsense changes.
It reinforces and extends protections that Congress already granted in the past and ensures that whistleblowers working in different industries who make similar kinds of disclosures are equally treated and equally protected under the law.
That’s something I’m certain we can all get behind.
The bipartisan coalition of support for this bill is a strong testament to that.
I want to thank my original co-sponsors, Senators Baldwin, Durbin and Ernst, for their enthusiastic support of this legislation.
And when it comes before the Senate for a vote, I urge all of my colleagues to do the same.