The US Supreme Court is set to clarify the burden-shifting framework for whistleblowers in a case involving a former UBS Securities research strategist. The case hinges on whether the Sarbanes-Oxley Act requires whistleblowers to show that their former employer fired them with retaliatory intent or if it is sufficient to prove that the protected disclosure was a contributing factor to the decision. Requiring proof of retaliatory intent would make it almost impossible for whistleblowers to pursue Sarbanes-Oxley retaliation claims, and the Supreme Court is expected to undercut the legal safeguards for corporate whistleblowers if it upholds the decision. The Tenth, Ninth, Fifth, and Fourth circuits instead have applied the contributing factor test. The decision could have a domino effect on anti-retaliation protections for corporate whistleblowers in other industries. The case could also impact federal whistleblower protection statutes that have virtually identical legal burdens, and there are concerns that the decision could reduce the number of whistleblower cases that otherwise would’ve survived the summary judgment stage or resulted in a verdict after trial.
UBS Whistleblower Case Creates Avenue to Upend Retaliation Test
Senators Richard Blumenthal and Ron Johnson are investigating KPMG's relationship with three recently failed banks, requesting a wide range of documents as part of their initial inquiry. The senators have requested "all communications," records related to the firm's audits and advisory work, and a complete list of all advisory work between KPMG and Silicon Valley Bank, Signature Bank, and First Republic Bank. The inquiry comes as part of the Homeland Security and Governmental Affairs Committee's Permanent Subcommittee on Investigations. KPMG has faced scrutiny for issuing clean audits of all three banks shortly before they collapsed. The senators have also asked KPMG for "all documentation" detailing the firm's policies and practices for any non-audit services, as well as "a complete list" of the firm's employees, contractors, and subcontractors employed by any of the banks after their affiliation with KPMG. They have requested the firm to send the documents as they become available to expedite the subcommittee's review. KPMG has not yet provided a comment on the investigation.
Big Minimum Competence fans will remember this was a subject I covered in a past column and corresponding Column Tuesday segment. I argued on April 4th that the recent collapses of Silicon Valley Bank, Signature Bank, and the near miss at First Republic Bank, all point to the culpability of the Big Four accounting firms that had signed off on the banks' financial statements. I metaphorized the legal concept in torts called res ipsa loquitur, which means "the thing speaks for itself" in Latin, and suggested that something is amiss in the audit opinions provided by KPMG on these banks' fundamentals. The revolving door of personnel between accounting firms and the banks they purport to audit is also part of the problem. Banks with high average deposits and relatively few depositors are especially at risk, as they may be vulnerable to losing their deposit base if there are potential risks in their books. My conclusion was there needs to be liability placed on the accounting firm tasked with acting on behalf of a regulator when that organization fails to identify indicia of questionable financial health. Moreover, consultants who work for accounting firms should not wear auditor hats. It seems there may be some political will to make one or both of those solutions a reality.Â
Senators Open Probe Into KPMG’s Relationships With Failed Banks
Big Four Auditors and Consultants Need Liability—And a Divorce
And remember when we reported on Lewis Brisbois having a 100+ attorney walk-out? Well, the founding partner the firm, Robert Lewis, has stepped down from his role as chairman after the departure of at least 110 lawyers to a new firm this week. Lewis helped start the Los Angeles-founded firm in 1979, which has grown to around 1,700 lawyers. Lewis Brisbois will dissolve its executive committee effective immediately, and a newly expanded 13-member management committee will oversee the firm. The firm will hold elections on May 9 to add five new members to the management committee, which will then name a managing partner and other top leaders.
Lewis Brisbois chair, executive committee are out after lawyer exodus | Reuters
Four members of the Proud Boys far-right militia group, including its former leader Enrique Tarrio, have been convicted of seditious conspiracy, which is kind of like treason’s little brother and entails a plot to oppose the government with force, under a Civil War-era law. The conviction carries a sentence of up to 20 years in prison. The jury found they had plotted to attack the US Capitol on Jan. 6, 2021, in a failed bid to block Congress from certifying President Joe Biden's election victory. The verdicts after a trial lasting nearly four months in federal court in Washington were another victory for the US Justice Department, which Attorney General Merrick Garland said has secured the convictions of more than 600 people related to the Capitol rampage by supporters of then-President Donald Trump. The rampage occurred on the day when Congress was voting on formally certifying Biden's victory in the November 2020 election, with rioters attacking police with a variety of weapons. Five people including a police officer died during or shortly after the riot. More than 140 police officers were injured.
Jury convicts Proud Boys members of seditious conspiracy in US Capitol attack | Reuters
