US court throws out whistleblower's plea against Siemens China

A US district court in New York has refused to entertain a lawsuit accusing German medical equipment giant Siemens AG of funnelling kickbacks to Chinese and North Korean hospital officials.

In a ruling that has ramifications for entities using US courts to sue for violations outside the country, District Judge William Pauley on Monday said the anti-retaliation provision of the 2010 Dodd-Frank financial reform law, which shields whistleblowers reporting alleged violations by their employers, did not apply to conduct outside the United States.

Meng-Lin Liu, a former compliance officer at Siemens China's healthcare unit, had alleged that Siemens routinely inflated bids for medical imaging equipment sales to public hospitals, before selling the equipment at lower prices to intermediaries who gave kickbacks to hospital officials.

Liu, a Taiwan resident, had claimed this business practice violated the Foreign Corrupt Practices Act (FCPA) that barred companies with US-listed securities from bribing foreign officials.

He also said this practice violated terms of Siemens' compliance obligations under its $1.6-billion settlement with US and German regulators of bribery charges in 2008.

According to Liu, he first raised his concerns in October 2009, but was later stripped of his responsibilities, and fired in March 2011. His firing was illegal under Dodd-Frank, he said, and sought twice his back pay plus other damages.

But judge Pauley concluded that while Dodd-Frank covered some non-US activity, including in cases brought by the Securities and Exchange Commission, the Act did not provide whistleblower protection.

"There is simply no indication that Congress intended the anti-retaliation provision to apply extraterritorially," the judge pronounced.

The judge further rejected Liu's request for protection under the Sarbanes-Oxley Act of 2002, saying the relevant provision of that law did not apply outside the United States and did not "require or protect" disclosures of FCPA violations.

Siemens has US-listed American depositary receipts.