(CN) - The Dodd-Frank Act's anti-retaliation provision does not extend overseas to protect foreign employees of companies traded on U.S. exchanges, a federal judge ruled, dismissing a case brought by a Taiwanese employee of Siemens China.
Meng-Lin Liu worked as a division compliance officer for Siemens China, a subsidiary of the German medical equipment company publicly traded on the New York Stock Exchange.
Liu claims the company routinely made inflated bids to sell medical imaging equipment to public hospitals in North Korea and China, then sold the equipment through intermediaries, who paid a portion of the money to the officials who accepted the bids.
In 2009, he received a negative performance review after noting the inconsistency between the bid price and the money Siemens actually received from the third-party intermediaries.
The following year, after Liu continued to agitate for stricter compliance, Siemens China removed his authority to oversee any approval and compliance issues, limiting his position to training and process improvements, he claimed.
On his own time, he compiled evidence of the discrepant bids, finding that markups on medical equipment ranged from 25 to 133 percent.
But when he presented this evidence to Siemen China's CFO for healthcare, Stefan Mueller, and publicly stated that compliance was low at a Siemens town hall meeting in Shanghai two weeks later, Liu was told not to return to work for the three months remaining on his employment contract.
Liu sued Siemens under the Dodd-Frank Act's anti-retaliation provision, but U.S. District Judge William Pauley dismissed the complaint with prejudice, ruling that the Dodd-Frank Act does not protect foreign employees against retaliation.
"The Dodd-Frank Act does have some extraterritorial application, which reinforces the conclusion the Anti-Retaliation Provision is purely a domestic concern," the 14-page opinion said.
While an overseas whistleblower can be eligible for a whistleblower award, "the fact that a person outside the United Stated may be a 'whistleblower' under Dodd-Frank does not compel the conclusion he is protected by the anti-retaliation provision," the judge said.
Other sections of the Dodd-Frank Act expressly permit the Securities and Exchange Commission to bring enforcement actions for conduct that occurs outside the U.S.
But in this case, "there is simply no indication that Congress intended the anti-retaliation provision to apply extraterritorially. Liu urges that it would be illogical for the overseas employees of publicly-traded companies not to be protected for whistleblowing activities, but the Supreme Court has warned against 'divining what Congress would have wanted if it had thought of the situation before the court,'" Pauley said, citing Supreme Court precedent.
In addition, Liu does not qualify as a whistleblower, because he did not report any alleged violations of securities laws to the SEC until after he was fired from Siemens China.