The chief financial officer of a puny bank in a rural Virginia town appears to be the first individual to get back his job under the new whistleblower rules mandated by the Sarbanes-Oxley Act.
On Jan. 28, Stephen L. Purcell, Administrative Law Judge for the Department of Labor, published an order that David Welch be reinstated as chief financial officer at Cardinal Bankshares without loss of seniority and without loss of any benefits to which he was entitled prior to his discharge on Oct. 1, 2002.
Welch will also receive back pay and interest and all costs and expenses, including attorney fees.
"This is the first case that the Administrative Law Judge has ruled there is a violation," confirms John Robert Spear, Director, Office of Investigative Assistance, Department of Labor, Occupational Safety and Health Administration (OSHA).
Welch claims he was fired after he had raised questions about the bank's accounting policies and internal controls.
The company, based in Floyd, Va., a rural town that reportedly had just 432 residents according to the 2000 U.S. Census, argued that Welch was suspended and later discharged solely because he refused to meet with Cardinal attorney Douglas Densmore of the law firm Flippin Densmore, and Michael Larrowe, an accountant whose firm was Cardinal's external auditor, without a personal attorney.
Fired For Disclosure
In his report, Purcell noted that "proximity in time between Welch's protected activity and the adverse action is itself sufficient to create an inference of unlawful discrimination." He added that Welch "demonstrated by a preponderance of the evidence that he was fired because he complied with his duty to disclose information governed by the Act."
Purcell also stressed that he did not need to rule whether Welch's allegations were correct. "All that Sarbanes-Oxley requires is that the Complainant reasonably believed Respondent engaged in such conduct, he disclosed that conduct to the Federal government or his employer, and, as a result, he suffered an adverse employment action," the law judge added.
The Act also requires that any employee who prevails in an action under the whistleblower provision of the statute "shall be entitled to all relief necessary to make the employee whole."
Welch's case is certainly not the first to come before the Labor Department. According to the Department of Labor's Office of Administrative Law Judges, there were at least 24 whistleblower decisions alone in 2003, and there have been another six so far this year.
However, most of these cases were either dismissed or withdrawn, presumably because they were settled.
Under Sarbanes-Oxley, whistleblowers may file a complaint with the Secretary of Labor within 90 days of the alleged discrimination.
What Happens?
Sarbanes-Oxley "authorizes an award to an employee of make-whole relief, including reinstatement with the same seniority status that the employee would have had but for the discrimination, back pay with interest, and compensation for any special damages
sustained, including litigation costs, expert witness fees and reasonable attorney's fees."
Here's how the process works:
When there is a complaint, it is investigated by OSHA. It then issues a preliminary finding.
OSHA could either determine there was no violation and dismiss the case, or issue a preliminary order for some sort of relief.
Either party can reject this finding and get a hearing from the Administrative Law Judge, who then issues his or her recommending decision.
The ALJ's decision in Welch's favor, for example, was the first of its kind.
Cardinal has publicly promised to appeal. So, the decision will now be reviewed by the five-member Administrative Review Board that was appointed by Labor Secretary Elaine Chao.
This Board's decision will then be the Final Order. However, the loser can then take the case to the U.S. Court of Appeals.
Meanwhile, Welch told The Roanoke Times he plans to return to Cardinal after giving adequate notice to his current employer, Buchanan Health Care, where he is an administrator.
I'm sure his former bosses will be looking forward to that day.
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