Answers for Federal Whistleblowers

Note from the Digital Editor: In order to highlight the high-level of research and scholarship from the authors who have published in the William & Mary Policy Review’s peer-reviewed print journal, we have reproduced the abstracts from Volume 3, Issue 2 along with a link to an electronic copy of the full form of the piece. 

Whistleblower protection laws have been on the books for over thirty years, encouraging United States Government employees to report fraud, waste, and abuse, while promising to protect them from retaliation. Unfortunately, the laws have become an unexpected minefield for the intrepid Federal employee who unknowingly risks his or her career by taking the promise of protection at face value. This article documents the nearly complete failure of whistleblower legislation either to curb government malfeasance through whistleblowers’ disclosures or to protect workers who act on the false promise of protection from reprisal. Whereas the author provides a brief guide to filing a whistleblower appeal with the Office of Special Counsel (OSC) and the Merit Systems Protection Board (MSPB), he demonstrates that both agencies have essentially nullified the Whistleblower Protection Act (WPA). The article shows that the MSPB has rejected the vast majority of whistleblower appeals that have come before it, as has the Federal Circuit Court of Appeals. The author argues that this ignominious record is a direct result of excessive judicial deference for initial decisions made by a large cadre of hearing examiners employed by the MSPB. The author demonstrates that MSPB’s self-styled “administrative judges” are a deceptive and inadequate substitute for “administrative law judges,” with none of the Congressionally-mandated qualifications and independence of the latter. The article concludes with support for legislative reforms, including a new proposal to eliminate or at least curb the dominant role of biased initial decision-makers.

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Robert McCarthy is a Former General Counsel at U.S. Section, International Boundary and Water Commission (USIBWC)

Economic Regulation and the Presumption Against Extraterritoriality

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In Morrison v. National Australia Bank Ltd., the U.S. Supreme Court reaffirmed the presumption against extraterritoriality in the context of federal securities antifraud regulation. To be sure, the Court made it clear that unless Congress gives clear indication to the contrary, a rather narrow territorial criterion, such as the place of transaction, will limit the scope of unilateral American regulation of not only securities, but also various other economic activities (e.g., intra-corporate maneuvers, competition in product markets, protection of intellectual property). In our “global village,” however, an increasing number of economic activities obviously transcend territorial borders. Thus, the concept of territoriality and any attempt to employ it narrowly seem somewhat archaic. Nonetheless, can the Supreme Court’s approach be justified? This question becomes even more acute if one considers that the Court and Congress are already in the midst of developing alternative criteria—an “effects test” and a “conduct test”—to decide the extraterritorial application of American economic regulation norms. In fact, the Dodd-Frank Act applied the effects test in the context of administrative securities regulation, and the SEC was instructed to consider applying the effects test to the private ordering of securities regulation.

Against this background, this article offers a new justification for the territorial criterion that can explain the anomalies associated with a narrow version of territoriality, justify the Supreme Court’s approach in Morrison, and reflect upon other contexts of economic regulation and future statutory reforms. My main argument is that one needs to appreciate the importance of narrow territoriality by examining the environment in which the extraterritorial scope of economic regulation is designed and later executed. Most importantly, I argue that an economic regulatory norm is formulated under conditions of information asymmetry. Consequently, each jurisdiction does not have sufficient information regarding the manner in which jurisdictions refrain from unjustifiably invading others’ sphere of regulation. Thus, rather than merely declaring their willingness to cooperate—defined as the willingness to tolerate foreign regulation in the cases that mostly affect the foreign jurisdiction—jurisdictions need to signal this willingness to one another. Adopting an arbitrary criterion such as narrow territoriality to limit the scope of an economic regulation serves such a signaling purpose because it is both observable and costly.

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Yaad Rotem is a Visiting Scholar at Center for the Study of Law & Society, University of California, Berkeley, School of Law

A Review of The Collapse of American Criminal Justice, by William Stuntz

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America’s criminal justice system has led to extremely high incarceration and crime rates in many poor and working-class neighborhoods. William Stuntz’s final book, The Collapse of American Criminal Justice, suggests ways to improve America’s system of criminal justice. My review compares Stuntz’s view of American criminal justice with the views of empirical social scientists Mark Kleiman and David Kennedy, whose work is used around the country in successful social experiments to reduce crime. Stuntz believed that changes in law and society delegate too much power to prosecutors and not enough to judges, juries, and average citizens. Accordingly, reform in America’s criminal justice system needs to focus on rebuilding the rule of law and local democracy. In contrast, Kennedy and Kleiman believe that criminal justice reform should focus on increasing the swiftness and certainty of punishment. Kennedy and Kleiman’s ideas have been used to combat gang violence, eliminate open-air drug sales, and increase the effectiveness of probation for drug-using probationers. Overall, The Collapse of American Criminal Justice is a well-written, insightful, and important book, but a comparison with the empirical work of Kennedy and Kleiman strongly suggests that several of Stuntz’s recommendations to improve American criminal justice are impractical or unwise. Reforms in policing and probation are likely to be more successful than Stuntz’s proposed changes to criminal law and procedure.

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Albert Monroe is a Ph.D., Economics at Harvard University; J.D., Yale Law School.

Two-Level Games of International Environmental NGOs in China

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Acknowledging profound environmental and social consequences tied to three decades of rapid economic growth, Beijing increasingly encourages non-governmental organizations (NGOs) to assist in relatively noncontroversial development-related fields, such as environmental protection. Attention to this emerging Chinese civil society is growing, especially literature with a focus on local or indigenous Chinese NGOs and the unique breed of government-organized NGOs (GONGOs) within China. Little work, though, exists when it comes to analyzing the role of international environmental NGOs within China. This is a noted deficiency, particularly considering Robert Putnam’s two-level games where forces at both the domestic and international level shape government policy. Within this context, our analysis examines international NGOs but argues they are most effective when they target not the Chinese state but rather the general public—especially domestic NGOs.

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Dr. Michael Gunter is a Cornell Distinguished Professor at Rollins College in Winter Park, FL, USA, where he also directs the Rollins International Relations Program. Ariane Rosen is a Master of Philosophy student in international relations at the University of Cambridge.

The Securities and Exchange Commission and the Ownership Narrative

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In 2010, the Securities and Exchange Commission introduced Rule 14a-11, which was intended to facilitate the rights of shareholders to nominate directors on corporate boards as part of the Commission’s response to the 2008 financial crisis. Recently, the District of Columbia Circuit of the U.S. Federal Court of Appeals vacated the rule, in Business Roundtable and Chamber of Commerce of the United States of America v. Securities and Exchange Commission, citing that “the Commission acted arbitrarily and capriciously for having failed once again . . . adequately to assess the economic effects of the new rule.” I argue that the rule, which placed a downward negative pressure on the Commission’s reputation and legitimacy as both a regulator and an enforcer of securities legislation in the U.S., is the result of factors that can be summed by the (potentially bold) argument that the Commission does not appear to have a clear grasp of the nature of public corporate ownership in the U.S. The concept of ownership is a principal consideration guiding the Commission’s approach to the regulation of the federal proxy process, the regulation of which is one of the Commission’s original responsibilities delegated to it by Congress; hence, the identification of any policy-based errors vis-à-vis the concept also rests on the Commission’s shoulders. Descriptively, relying on historical accounts and socio-legal and investment theory explanations, I trace the Commission’s failure to come to terms with the nature of public firm ownership to views and cognitive constructs of the concept held by the architects of the Securities Exchange Act of 1934. The views introducing distortions into the regulatory framework governing the securities markets in the U.S. were embedded into the fabric of the framework and carried forward to the present day. The normative implications of the ownership distortion are analyzed using institutional, organizational, and risk regulation approaches. From an institutional perspective, I show that the failure to recognize the ownership distortion by the Commission resulted in the failure to introduce efficiency into the U.S. capital markets. From an organizational perspective, I show that the Commission’s failure to recognize the ownership distortion resulted in the failure to display organizational learning and to protect the Commission’s reputation. From a risk regulation perspective, I show that the Commission, rather than display an ability to deal with matters of risk, has become a source of an endogenous type of risk affecting the regulatory framework, the integrity of which it is supposed to guard.

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Aviv Pichhadze is a Fellow at Critical Research Laboratory in Law & Society, Osgoode Hall School of Law, York University, Toronto, Canada