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In the Courts
The Ninth Circuit affirmed the majority of an $11 million jury verdict brought by a whistleblower who claimed that his company fired him for raising concerns about possible FCPA violations. Sanford Wadler, the former general counsel of Bio-Rad Laboratories, Inc. (Bio-Rad), alleged that he was fired from Bio-Rad after he wrote a memo to a committee of the Board of Directors stating that he believed senior management was “complicit” in Foreign Corrupt Practices Act (FCPA) violations he thought were being carried out by Bio-Rad's employees in China. Though the Ninth Circuit found that a jury instruction was incorrect, and that Dodd-Frank no longer applied to the claims at issue based on intervening Supreme Court precedent, it affirmed Wadler's state claim and roughly $8 million of the jury's original award against Bio-Rad.
Mr. Wadler alleged that an internal investigation at Bio-Rad revealed several red flags about business operations in China, including unexplained payments and missing sales documentation. Mr. Wadler said that Bio-Rad's CEO, Norman Schwartz, was made aware of these issues and told Mr. Wadler that he wasn't going to take any action on the matter. Further investigation at the company revealed that Bio-Rad was mislabeling the number of products it shipped on import and export cover sheets. Instead of reporting accurate data about what was being shipped, Bio-Rad's Chinese employees were using an “under the covers” scheme, where they failed to report a significant portion of extra free products that they were shipping to certain customers. Employees in China had also entered into unauthorized contracts which permitted distributors to receive unapproved incentive payments.
Mr. Wadler submitted this information to the Board's Audit Committee, and in his letter he explained that he had not raised his concerns with senior management because he believed they were aware of these violations. Two days after the CEO heard about Mr. Wadler's letter, he told the human resources department that he was thinking about placing Mr. Wadler on leave for strange behavior. In the meantime, the Audit Committee had authorized Mr. Wadler to hire a law firm to look into his allegations. Three days after the law firm presented its findings to the Board stating they had found no FCPA violations in China, Mr. Schwartz fired Mr. Wadler. Though Bio-Rad never had to pay any fines regarding activities in China, it ultimately paid $55 million for FCPA violations in Russia, Thailand, and Vietnam.
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