Business Ethics and Corporate Culture

Supreme Court Reverses Whistleblower Ruling, Limiting Scope of Claims

In a 5-3 vote, the U.S. Supreme Court ruled that private plaintiffs cannot bring claims under the False Claims Act (FCA) based on information they obtained through a Freedom of Information Act (FOIA) request. The case in question pertained to Daniel Kirk, who had brought forward a claim against Schindler Elevator Corporation. Kirk’s case was based in part on information obtained through a FOIA request. The Supreme Court agreed with a lower court judge who had ruled that a federal agency’s response to a FOIA request constituted a “report” which falls within the confines of a bar on FCA suits based on public reports.
Reuters: Supreme Court narrows scope of whistleblower suits (16 May 2011)
(Source: Reuters)

SEC to Adopt Whistleblower Revisions After Narrow Margin Vote

The Securities and Exchange Commission (SEC) has approved the final rules to create the whistleblower program called for in the Dodd-Frank Act. The rules include several changes from the initial set that the SEC released for comment last year. Among the changes is a potential bonus for whistleblowers who first report wrongdoing through their internal compliance programs. Despite this change, the approved rules still drew criticism for not requiring whistleblowers to report wrongdoings internally before being eligible for any reward. The rules call for whistleblowers to receive payments of between 10%-30% of any sanctions imposed that exceed $1 million. Previously, the SEC had only been able to reward whistleblowers in insider trading cases and the rewards were limited to 10% of the sanctions imposed.
New York Times: S.E.C. Adopts Its Revised Rules for Whistle-Blowers (25 May 2011)
(Source: New York Times)

Bailed-out Bank Angers Shareholders Over Executives’ Pay
Europe, Middle East and Africa

The Guardian reports that Lloyds Banking Group (Lloyds) has faced severe criticism from its shareholders over bonuses and pay deals for top executives at the bailed-out bank. Lloyds’s remuneration report reportedly failed to receive the support of nearly 40% of shareholders at its annual meeting in Glasgow, which includes a potential £13.4 million pay deal for Lloyds chief executive António Horta-Osório. Reportedly, Lloyds chairperson Sir Win Bischoff gave assurances that bonuses to top staff would be reviewed, a promise welcomed by UK Financial Investments, which controls the taxpayer’s 41% stake in the bank.
Guardian: Lloyds blasted by investors over pay (18 May 2011)
(Source: Guardian)

Rio Tinto Faces Shareholder Opposition For Second Straight Year

The Age reports that Rio Tinto’s (Rio) remuneration report has failed to gain endorsements from 25% of shareholders in London and Australia. Reportedly, results from the London shareholder vote were not revealed prior to the Australian meeting so that the meeting could be “conducted without being disturbed”. Standard Life Investments head of corporate governance Guy Jubb reportedly expressed disappointment that “Rio’s remuneration committee did not get to grips with pay policies”, despite the company having experienced similar opposition in 2010 against its pay scheme.
The Age: Investors switch off Rio Tinto pay plan (24 May 2011)
(Source: The Age)

Company Settles False Medicare Claims Case

The US Department of Justice (DoJ) has announced that Areté Sleep, Areté Sleep Therapy and Areté Holdings (collectively Areté) have agreed to pay US$650,000 to settle charges that their Arizona and Texas medical equipment facilities submitted false Medicare claims. According to the DoJ, “Areté made false claims to Medicare for diagnostic sleep tests performed by technicians lacking the licenses or certifications required by Medicare rules and regulations”.
DoJ’s media release (26 May 2011)
(Source: DoJ)