The New Whistleblower's Handbook

by Stephen Kohn

  • The whistleblower “reasonably” believes the safety concern was already reported internally, was the subject of a company investigation or inquiry, or was “already known” to the employer;

  • The Department of Transportation has “good cause to waive” the requirement. This “good cause” will be defined in the rules the Department of Transportation is required to publish.

  Confidentiality

  The reward law has strong confidentiality protections. As a general matter, the Department of Transportation cannot disclose information that would reveal the whistleblower’s identity or that “could reasonably be expected to reveal the identity of a whistleblower.” This statutorily mandated confidentiality requirement has a number of carefully defined exceptions.

  The main exception to the confidentiality requirement is if the whistle-blower’s identity is “required to be disclosed to a defendant” in “connection with a public proceeding instituted” by the Secretary of Transportation. Most enforcement actions are resolved through a settlement. But, if there is a public proceeding, there is a strong chance that the amount of penalty assessed will be large; this could help mitigate the potential negative impact of a whistle-blower being identified in the legal proceedings.

  The law states that the identity of the whistleblower can only be revealed in conformance with the Privacy Act. This helps the whistleblower. The Privacy Act is designed to permit disclosure of government documents to the individual requestor, in this case the whistleblower. The law permits whistleblowers to use this provision to obtain government records about themselves. It does not permit public disclosure of the whistleblower’s identity, and the Department of Transportation could be sued under the Privacy Act for any improper disclosure.

  However, even when such a disclosure may be required under law, the Secretary of Transportation must still take “reasonable measures to not reveal the identity of the whistleblower.” There are a number of legal procedures that can be used to protect a whistleblower’s identity, even in a public proceeding. For example, a protective order can be issued prohibiting parties from publicly disclosing the name of the whistleblower.

  If criminal proceedings are initiated, the statute also permits the Secretary of Transportation to share evidence obtained from the whistleblower with a grand jury or with witnesses or defendants in ongoing criminal investigations. Because of this exception, whistleblowers should consider obtaining “confidential informant” status from the Justice Department if federal prosecutors indicate an interest in using the whistleblower’s information in a criminal case.

  Information may also be shared with other federal agencies. But when information is shared, the agencies obtaining the information must also agree to honor confidentiality consistent with law.

  Appeals

  A whistleblower can appeal a reward decision issued by the Department of Transportation to the U.S. Court of Appeals, pursuant to the Administrative Procedure Act, 5 U.S.C. § 706. Appeals must be filed within thirty days of the denial.

  PRACTICE TIPS

  • The auto worker’s antiretaliation law is codified at 49 U.S.C. § 30171, and its implementing rule are located at 29 C.F.R. § 1988.

  • The rewards law is codified at 49 U.S.C. § 30172.

  • Legislative history of the reward statute: Senate Report 114-13, “Motor Vehicle Safety Whistleblower Act, Report of the Committee on Commerce, Science, and Transportation on S. 304” (April 13, 2015).

  RULE 11Get a Reward! Stop the Pollution of the Oceans

  Panic is spreading among shipowners and their corporate attorneys. There is a new “secret weapon” in the war against shipowners who pollute the oceans: whistleblowers! According to the shipping industry publication Officer of the Watch, shipowners need to establish a “whistleblower prevention program,” to prevent “greedy seamen” and other “liars” from qualifying as whistleblowers.

  Why this near hysteria in the shipowning community? Seamen have been remarkably successful in documenting illegal ocean pollution. Incentivized by a whistleblower reward law, crewmembers are providing documentation to U.S. officials, testifying against shipowners, and obtaining protection and rewards as whistleblowers. Currently, most, if not all Act to Prevent Pollution from Ships (APPS) ocean pollution cases are brought to the government’s attention by whistleblowers, and these sources are now the key to the successful prosecution of ocean polluters. APPS includes a whistleblower reward provision that, over time, has proved vital to enforcing laws preventing pollution on the high seas.

  How can the United States obtain jurisdiction over pollution that is dumped into the high seas, outside U.S. territorial waters? Jurisdiction is based on how the United States implements the International Convention for Prevention of Pollution from Ships, as modified by the protocol of 1978, better known simply as the MARPOL Protocol, the leading international treaty protecting the oceans from pollution. Signed by more than 150 countries including the U.S., the convention prohibits, among other things, dumping oil or garbage on the high seas. Most ships covered under this convention are not U.S.-flag ships, nor are they owned by U.S. companies. Almost all ocean pollution occurs outside U.S. jurisdictional waters. Moreover, most of these vessels have non-U.S. crews. So despite all these impediments, how has the United States become the number-one country enforcing the MARPOL Protocol? The answer is simple: whistleblowers.

  This leads us to a second question: How are seamen, almost all of whom are non-U.S. citizens, able to successfully blow the whistle?

  “The government’s success in detecting the illegal activity and obtaining sufficient evidence to support investigations and prosecutions is dependent upon the willingness of a crew member to step forward.”

  U.S. Department of Justice in USA v. Noble Drilling

  APPS requires every ship entering U.S. territorial waters to have an accurate log of all discharges. If a ship from a foreign country, owned by a foreign company, and staffed by a foreign crew enters U.S. territorial waters, the U.S. Coast Guard can ask to inspect the discharge log. If the log does not record all discharges accurately, the ship is in violation of the APPS. The ship’s owners and captain can be charged with not having an accurate log. The predicate for prosecution is not the dumping of oil or garbage on the high seas but the failure to record that dumping in the oil record book. Most ship captains who violate MARPOL and illegally pollute the oceans do not accurately record their criminal actions in the discharge log because doing so would be an admission of a MARPOL violation. Catching a ship captain’s failure to keep an accurate log is like catching Al Capone on tax evasion.

  To prosecute a case under APPS, the U.S. government needs proof that an illegal discharge was not accurately recorded in the ship’s log. Whistleblowers are the key to unlocking this door. Crewmembers are in a position to witness the discharges and gather evidence to prove that a ship illegally dumped. This evidence often consists of photos taken on crewmembers’ cell phones and the ability of crewmembers to show Coast Guard inspectors where the equipment used to discharge oil is hidden onboard.

  Why would crewmembers who reside outside the United States, and who would have little or no protection in their native lands from retaliation, risk their jobs to report ocean pollution? The answer is simple: large whistleblower rewards, paid by the United States regardless of country of citizenship.

  APPS also has prosecutorial teeth. Sanctions and fines under the law are steep. Once the Coast Guard obtains credible evidence of an APPS violation, the ship can be impounded, the captain arrested, and the shipowners sanctioned millions of dollars. The “knowing violation” of MARPOL is a Class D felony, punishable by a maximum six years in jail and heavy fines for individual violators. For a corporation the maximum fine is $500,000 per day for each day the ship is in violation.

  The prosecution of the Efploia and Aquarosa shipping companies is a case in point. Efploia, a Marshall Islands corporation based in Greece and registered in Malta, operated the ship accused
of polluting. Aquarosa, a Danish company, was the shipowner. The ship sailed from China, with stops in Singapore, Brazil, and the Netherlands, but eventually arrived in a Baltimore, Maryland, harbor. During the ship’s travels, crewmember Salvador Lopez (a Philippine national) took photos of the illegal dumping with his cell phone. When the ship arrived in Baltimore, he handed Coast Guard inspectors a note that stated, “I have something to till (sic) you but secret.” He met with the inspectors, provided more than three hundred photographs depicting the discharges, drew diagrams for the government, showed them the location of tools and equipment used in the discharges, and provided them with a notebook.

  The United States was able to use Mr. Lopez’s information to successfully prosecute the ship’s operator and owner, as well as the ship’s chief engineer (who was sentenced to three months in prison), for having an inaccurate discharge log. A total of $1.85 million in fines and community service payments were awarded. The DOJ, with court approval, earmarked more than $500,000 of the collected penalties for projects to improve the Chesapeake Bay. Salvador Lopez, the whistleblower, was awarded $550,000.

  “The availability of the APPS award aptly reflects the realities of life at sea and the pollution of the oceans. A monetary award both rewards the crew member for taking that risk and may provide an incentive for other crew members on other vessels to alert inspectors and investigators regarding similar crimes.”

  Department of Justice in U.S. v. Odfjell

  When the plea agreement was approved, DOJ reiterated its policy to “vigorously prosecute” APPS cases: “the intentional dumping of oil and plastic from ships and falsification of ship records because they are serious crimes that threaten our precious ocean resources.” In approving the whistleblower reward, the court stated: “[T]he APPS whistleblower provision reflects a congressional intent to encourage seafarers to come forward with information regarding illegal pollution activities, which otherwise would be difficult to detect. . . . The Court finds it appropriate to render a total award that is sufficient to provide incentive for seamen to inform the United States of violations of the MARPOL protocol.”

  APPS permits the U.S. government to ask a court to award whistleblowers up to 50 percent of the criminal penalties obtained by the government for APPS prosecutions. DOJ now regularly asks the courts to pay these international whistleblowers the maximum award, and courts consistently approve the request. The result demonstrates again how whistleblower reward laws can have a transnational impact, both by preventing pollution outside the United States and by rewarding whistleblowers who are non-U.S. citizens. The rewards have incentivized reporting and protected witnesses who otherwise would be at extreme risk of retaliation and resultant economic devastation.

  As reflected in Figure 7, the track record under the APPS speaks for itself:

  • Fines collected. Over the past ten years the U.S. government has collected approximately $279 million in fines and penalties from APPS violators in whistleblower-originated cases.

  • Public interest. From all fines and penalties collected, $65 million was paid directly to environmental organizations as part of “community service” or “restitution” payments. The monies were used directly to benefit the environment and oceans, such as the payments directed to the Chesapeake Bay in the Efploia and Aquarosa prosecution.

  • Incentivizing and protecting whistleblowers. From APPS fines collected, courts approved $34.1 million in compensation to the whistleblowers. In 80 percent of the cases, the court approved a maximum whistleblower reward (50 percent of the fines collected). The largest reward paid to an individual whistleblower was $2,100,000 in USA v. Omi Corporation. The largest total compensation set aside in one case for payment to whistleblowers was $5,250,000, awarded to twelve whistleblowers from the Philippines in USA v. Overseas Shipholding Group. The average reward paid per whistleblower in the seventy most recent identified cases was $455,668.

  When the DOJ Environment and Natural Resources Division (the DOJ unit with jurisdiction over APPS) asks a court to approve rewards at the maximum 50 percent level, the DOJ carefully explains the importance of paying “significant whistleblower awards” as a matter of “routine practice.” DOJ’s rationalization for paying maximum rewards says it all:

  The APPS award provision serves a valuable law enforcement purpose by encouraging those most likely to know of the illegal conduct to report it and cooperate with law enforcement. Because the discharge of oily waste typically takes place in the middle of the ocean in international waters, the only persons likely to know about the conduct and the falsification of the ORB [the discharge log] are the crewmembers. Absent crewmembers with firsthand knowledge of the illegal conduct coming forward, APPS violations are otherwise extremely difficult to uncover. The government’s success in detecting the illegal activity and obtaining sufficient evidence to support investigations and prosecutions is dependent upon the willingness of a crewmember to step forward. In turn, a crewmember must assess the risks associated with coming forward, such as the possibility that the crew member will lose relatively lucrative employment and be blacklisted and barred from working in the marine shipping industry in the future.

  “A substantial monetary award, as provided by APPS, both rewards the crewmember for taking those risks and provides an incentive for other crewmembers to come forward and report illegal conduct on vessels in the future.

  In the above ocean pollution case, the DOJ outlined the essence of why whistleblower reward laws work on an international scale to the district court.

  First, the DOJ recognizes that the reward provides an incentive to those “likely to know” about illegal conduct to both report the criminal activity and cooperate with law enforcement. In other words, because the reward is dependent on the success of the prosecution, the whistleblower has a strong motive to provide the government with the best possible evidence of wrongdoing, and cooperate as a witness throughout the investigatory process and/or at trial.

  Second, the DOJ recognizes that the criminal activity in these cases originates outside U.S. jurisdiction (i.e., in the “middle of the ocean” and in “international waters”). Most of these crimes are initiated outside the United States, so the ability of the U.S. government to obtain evidence of this type of crime is almost completely dependent upon witnesses who reside or work outside the United States.

  Third, the DOJ explains that the whistleblowers have “firsthand knowledge.” This type of witness is key to any successful criminal or civil enforcement action. In order to successfully prosecute, the government needs a witness who can provide competent, non-hearsay testimony.

  Fourth, the DOJ frankly admits that the success of their cases is dependent on whistleblowers. This type of admission is a breath of fresh air, as it gives whistleblowers their fair share of the credit.

  Fifth, the DOJ recognized the stressful and difficult decision whistleblowers face when they decide to step forward. When a whistleblower makes a disclosure, he or she does not know if a reward will be paid. But whistleblowers are fully aware that whenever they disclose illegal activity to law enforcement, they are taking a big risk and may lose “lucrative employment,” face blacklisting, or worse. Thus the DOJ has explained to the court in APPS cases that a reward must be large and that there must be a reasonable guarantee that a reward will be paid if the whistleblower’s information is used successfully.

  Finally, the DOJ acknowledged how paying a reward can serve both to encourage others to come forward and to make boat owners aware that if they decide to break the laws, there is a strong chance they will be caught, heavily fined, and held accountable in a court of law.

  The DOJ’s Environment and Natural Resources Division not only uses the APPS fines to reward whistleblowers; it also uses the monies generated from whistleblower-originated cases for the public good. Under the law, fines and penalties collected in criminal cases can be set aside for restitution or community service payments. These public interest payments can be agreed to by t
he parties to the proceedings and included in the formal plea agreement. That plea agreement must be approved by the court. The DOJ has used the criminal penalties derived from APPS whistleblower cases to address pressing environmental needs, especially in regard to waterways and the oceans. Based on a review of the past seventy APPS whistleblower cases, courts have approved plea agreements that have set aside more than $45 million for beneficial purposes. Figure 8 lists five of the organizations that have obtained monies from court-ordered restitution or community service payments, along with examples of the projects funded with these funds.

  The DOJ used whistleblowers to successfully prosecute ships owned by or registered in Turkey, Jordan, Portugal, South Korea, Denmark, Liberia, Germany, Cyprus, Greece, Panama, Italy, Japan, Bahamas, Malta, Egypt, Bermuda, Singapore, China, Spain, Norway, New Zealand, Sweden, and the Philippines. Court records confirm that whistleblowers from the Philippines, Greece, Honduras, Venezuela, Korea, and the United States have all obtained payments.

  The procedures used to investigate whistleblower tips are unique. Tips are supposed to be filed at the U.S. Coast Guard National Response Center, which offers a toll-free number (800-424-8802) and a web page that contains an online spill report form (www.nrc.uscg.mil). The Coast Guard does not automatically offer whistleblowers confidential informant status, so seamen who wish to proceed confidentially should obtain counsel.

  Once the Coast Guard gets a tip, they have powerful tools to hold shipowners accountable. The Coast Guard can board the ship, investigate the vessel, and interview crewmembers. They can withhold a ship’s departure authority, forcing it to remain in the United States or compel the ship owner to sign a Security Agreement and post a bond, agreeing to pay the hotel costs, wages, and travel expenses of crewmembers who stay in the United States as witnesses or potential criminal defendants.