New York Proposes New Whistleblower Legislation

New York is considering new legislation which would provide new opportunities and incentives for individuals to act as whistleblowers in the state.  The New York Senate recently introduced Proposal S4362, which would create a whistleblower system at the state level which is modeled after the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The proposed law would apply to anyone, whether acting individually or with others, who provides information pertaining to violations of banking, insurance, or financial service laws, rules, and/or regulations.  This application is broader than that of the Dodd-Frank act, which applies to people providing information about securities and commodities laws only. 

In order to be eligible for a bounty on any information provided, a person has to provide "original" information.  The proposed law defines original information as information derived from the independent knowledge or analysis of the whistleblower, information which is not already known to the regulator, and information which is not entirely derived from common public information such as judicial or administrative proceedings, government reports or investigations, or the news media.

If a person acts as a whistleblower and provides a relevant New York agency with qualifying “original information,” that person would be eligible to receive between 10 and 30% of the amount recovered by the DFS through a judicial or administrative action brought by the DFS or another state or federal agency with concurrent jurisdiction to the DFS.  The actual amount the whistleblower would receive is left to the discretion of the Superintendent of the DFS, who is supposed to consider how useful the information provided actually was in choosing the amount to award the whistleblower.

As with most laws, there are exceptions, and this one is no different.  If the person supplying information was affiliated with the DFS or other regulator or law enforcement agency, then that person cannot qualify for an award.  Similarly, if the person was criminally convicted for actions related to the judicial or administrative action which would have been the source of the bounty, then the person cannot qualify.  Finally, if the information provided is not made in the form required by the DFS, or if it is determined that the person knowingly made fraudulent statements, then the person will not receive the reward.

The proposed legislation also includes anti-retaliation protections similar to those provided in the Dodd-Frank act.  If a former employee, contractor, or agent of a company, whether public or private, could show that he or she was retaliated against for filing the information with the DFS, that employee would be entitled to

  1. a legal injunction (prohibiting the employer from future illegal conduct);
  2. re-hiring to the original position or its equivalent;
  3. replacement of all fringe benefits and rights based upon seniority;
  4. payment of double the pay that was lost due to the retaliation, plus interest; and
  5. additional compensation for any actual damages the employee could prove, as well as costs and attorney fees in showing those losses.

Finally, the proposed law prohibits the DFS from disclosing any information which could reasonably serve to identify the whistleblower without a determination that releasing that information would serve the public and the "ends of justice."

Certainly this legislation is an important step for New York residents and their ability to fight corrupt or other illegal activities that they witness at their workplaces.

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