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The Morning Risk Report: Facebook Whistleblower Is Another Reminder of Protection Rules, Attorneys Say
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Frances Haugen, a former product manager at Facebook, has sought whistleblower protection from the Securities and Exchange Commission. PHOTO: STEPHEN VOSS FOR THE WALL STREET JOURNAL
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The introduction to today’s newsletter is by Mengqi Sun.
Good morning. Former Facebook Inc. product manager Frances Haugen’s decision to report her concerns about the company's business practices to the Securities and Exchange Commission and to seek whistleblower protection is another reminder that employers need to be mindful of imposing policies that could impede reporting of possible violations of law to regulators, attorneys working on whistleblower issues said.
Ms. Haugen, who gathered documents that formed the basis of The Wall Street Journal’s Facebook Files series, testified before Congress Tuesday. She also reported her concerns to the SEC, the California Attorney General’s office and Congress, according to her lawyer, John Tye, the founder of the nonprofit group Whistleblower Aid. Her confidentiality agreement with Facebook prohibits sharing proprietary information but permits disclosures to regulators, such as the SEC, Congress and law enforcement authorities, Mr. Tye said.
[Continued below…]
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Attorneys said the SEC has made it clear that companies are prohibited from using waivers, including non-disclosure agreements, to prevent people from reporting to the regulator.
The SEC in June charged broker-dealer Guggenheim Securities LLC more than $200,000 for allegedly violating a whistleblower protection rule. The regulator alleged Guggenheim’s core compliance manual between 2016 and 2020 prohibited employees from initiating contact with any regulator, including the SEC, without prior approval from the company’s legal or compliance departments.
“We are pleased to resolve the matter. Guggenheim Securities has always sought to protect whistleblower rights, and we note that the SEC acknowledged in this settlement that there was no evidence that Guggenheim Securities impeded whistleblower communications, if any," a Guggenheim spokesman said in a statement.
“[The SEC has] been vocal about it, and they’ve been pretty consistently clear about it,” Gregory Keating, a whistleblower defense attorney for employers at law firm Epstein Becker & Green PC, said, referring to the whistleblower protection rule.
Also:
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WSJ Risk & Compliance Forum
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Join us on Oct. 12 for the WSJ Risk & Compliance Forum. The virtual program includes sessions on anti-money laundering laws, emerging risks, compliance and cryptocurrencies, lessons from Wirecard and workshops on ESG reporting and responding to ransomware. Register here.
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From Risk & Compliance Journal
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Petrobras was at the center of a corruption scandal that erupted in 2014. PHOTO: SERGIO MORAES/REUTERS
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Brazilian state-controlled oil company Petróleo Brasileiro SA said it had completed overhauls to its compliance program, bringing to a close a settlement agreement with U.S. authorities over a vast bribery and kickback scheme in Brazil.
The company, better known as Petrobras, agreed to pay $853.2 million in settlements with U.S. and Brazilian authorities in 2018. The settlements included a nonprosecution agreement with the U.S. Justice Department under which Petrobras agreed to strengthen its compliance program. Petrobras on Monday said it had complied with the terms of the agreement, including by improving its integrity program and self-reporting to the Justice Department during the agreement’s three-year term.
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PHOTO: NINA RIGGIO/BLOOMBERG NEWS
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Tesla Inc. subjected a Black former worker to a racially hostile work environment and failed to take reasonable steps to prevent him from being racially harassed, a federal jury found Monday. The eight-person jury awarded more than $130 million in damages to Owen Diaz, who worked as an elevator operator at Tesla’s Fremont, Calif., factory in 2015 and 2016.
Tracey Kennedy, an attorney for Tesla, said in her closing argument that there was no evidence that a Tesla employee harassed Mr. Diaz and that the company shouldn’t be held liable for the treatment Mr. Diaz alleged.
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President Biden said he has confidence in Federal Reserve Chairman Jerome Powell after Sen. Elizabeth Warren (D., Mass.) on Tuesday escalated her criticism of the central bank’s leader.
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“Thus far, yes,” Mr. Biden said when asked by a reporter during a trip to Michigan if he had confidence in Mr. Powell. “But I’m just catching up to some of these assertions,” he said, referring to senior officials’ trading activities that sparked Ms. Warren’s most recent volley of disapproval.
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The romantic relationship between Elizabeth Holmes and her top deputy at Theranos Inc., Ramesh “Sunny” Balwani—which spanned more than a decade, growing and fading alongside the rise and fall of Theranos—has taken center stage in Ms. Holmes’s criminal-fraud trial in the federal courthouse in San Jose, Calif. Evidence of the relationship could help her if she decides to mount a mental-health defense.
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A sweeping new plan to restrain the algorithms that power tech platforms has thrust China to the forefront of a growing movement to curb the influence of giant internet companies. The campaign, launched by the Cyberspace Administration of China, aims to establish a comprehensive system to regulate the use of algorithms within three years, part of the ruling Communist Party’s effort to rein in what it sees as unscrupulous business practices and exert more control over online discourse.
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Major U.S. companies are dumping the London interbank offered rate. The shift to the Secured Overnight Financing Rate and other alternatives comes ahead of a year-end deadline to end the use of Libor, which fell into disrepute after a manipulation scandal.
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A federal appeals court ruled a California law that bans private prisons can’t stand because it impedes on federal immigration policy.
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Facebook, Instagram and WhatsApp all suffered outages on Monday. PHOTO: PATRICK VAN KATWIJK/ZUMA PRESS
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A simple technical mistake caused a global outage Monday that left more than 2.9 billion internet users unable to access Facebook, Instagram, WhatsApp and other tools. The roughly six-hour disruption, which was the largest in the company’s history, based on the number of users affected, arose when Facebook was trying to do routine maintenance related to how internet data routes back and forth through its network systems, according to a company blog post Tuesday.
The outage hit users from those waking up in Australia to attendees at a political conference in the U.K., reinforcing how intertwined the company’s services are with people’s lives across the world.
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Consumer-goods companies are logging higher demand from shoppers as the global economy recovers from the initial shocks of the Covid-19 pandemic and restaurants, stadiums and other venues reopen. But the recovery has also been hampered by production and transportation challenges.
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An employee stands on the edge of a Siberian diamond mining pit, where energy giant Alrosa pulls diamonds from the permafrost with the help of explosives. PHOTO: ALEXANDER NEMENOV/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Thawing earth once thought to be permanently frozen is springing to life and threatening a crucial chunk of Russia’s economy. The melting of the thick layer of the earth known as permafrost is a result of climate change, according to scientists and Russia government research. Two-thirds of the country sits on such soil, including much of its oil and gas infrastructure. Since 1976, Russia’s average temperature has risen 0.92 degree Fahrenheit per decade, or 2½ times the global pace, government data shows.
Mines and plants are experiencing increasing corrosion leaks and cracks, stemming in large part from defrosting ground. In the pipeline industry, braces and other mechanisms, previously anchored into permafrost, often corrode, twist and bend when the earth below changes, according to ecologists and other researchers. Companies are pouring millions of dollars into reinforcing buildings, monitoring soil temperatures and installing high-tech cooling systems.
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Fantasia Holdings Group Co., a developer of luxury apartments in China, said it didn’t make a $206 million U.S. dollar bond payment that was due Oct. 4, adding to the malaise surrounding the country’s highly indebted property companies.
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Federal officials identified a 13-inch split in a sea bottom pipeline as the likely source of an oil spill off the Orange County, Calif., coast, but said they aren’t yet sure if it was caused by an anchor dropped in the wrong location.
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A bill would give Singapore’s Home Affairs Ministry new powers over social-media companies and others that host web content. PHOTO: WALLACE WOON/SHUTTERSTOCK
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Singapore’s legislature approved a bill that targets foreign influence campaigns by giving Singapore’s government new powers over internet content, despite criticism that officials could use them to stifle dissent.
Proponents said the bill, which was passed late Monday and awaits the president’s signature, would stop foreigners and their local proxies from using social media and messaging apps to interfere in Singapore’s affairs. Opponents said it just as easily could allow the government of the Southeast Asian nation, ruled since independence by a single party, to block the views of critics, cut their funding and snoop on their online activities.
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