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Laying Breach of Foreign Law Bare Isn’t Protected

(CN) - A Colombian who exposed a U.S.-traded company's violations of tax law in his country cannot claim whistle-blower protections here, the 5th Circuit ruled.

William Villanueva, a Colombian national, was an employee of Saybolt de Colombia Limitada, an indirect affiliate of Core Laboratories, a Netherlands company publicly traded in the United States.

In 2008, he expressed concern to several employees of both Saybolt and Core Laboratories that Saybolt was underreporting its taxable revenue to Colombian authorities by paying 10 percent of contract revenues to Core Lab Sales, an affiliate located in the Dutch Antilles.

Though the payment purported to cover contracting services, Core Lab Sales did not procure the contracts or perform any services.

Villanueva claims that his exposure of this transfer-pricing impropriety led Saybolt to pass him over for a pay raise and eventually fire him.

The U.S. Department of Labor dismissed Villanueva's complaint, however, and a three-judge panel of the 5th Circuit affirmed last week, ruling that the Corporate and Criminal Fraud Accountability Act applies only to whistle-blowers who reveal violations of U.S. law.

"We conclude that Villanueva did not provide information regarding conduct that he reasonably believed violated one of the six provisions of U.S. law enumerated in § 806; rather, he provided information regarding conduct that he reasonably believed violated Colombian law," Judge James Dennis wrote for the court (italics in original).

Section 806 prohibits publicly traded companies from firing, demoting, threatening, or otherwise discriminating against a whistle-blower.

The law protects employees who provide information regarding violations of any six categories of U.S. law, but Villanueva does not qualify as a protected whistle-blower, according to the ruling.

"In this case, the 'specific conduct' that Villanueva asserted was illegal was Saybolt Colombia's underreporting of taxes due to the Colombian government," Dennis wrote. "In his reply brief, Villanueva claims that he repeatedly objected to the conduct of Core Labs officials in Houston, sufficient to satisfy Welch [v. Chao]'s point about notice to the employer, but the conduct to which he objected was the supposed orchestration of violations of Colombia tax law, not the violation of U.S. mail or wire laws to effectuate those purported Colombian law violations." (Italics in original.)

Because Villanueva's complaint does not meet this initial requirement, it is not necessary to decide whether the statute applies extraterritorially, the court said.

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