Houston Texas Business Lawyer

Record-Setting Verdict in Sarbanes-Oxley Whistleblower Case

Sarbanes-Oxley (SOX) provides whistleblower protection for employees of publicly-traded companies who come forward with reports that Securities and Exchange Commission (SEC) rules have been violated. SOX also prohibits employers from retaliating against or discriminating against employees in any terms or conditions of employment based on the employee reporting violations of federal fraud statutes or fraud against shareholders. batch-of-dollars-666147-m

Recently, a former employee of Playboy Enterprises was awarded a record-setting verdict against the company for wrongfully terminating her in violation of SOX protections for whistleblowers. The case was a unique one not just because of the large verdict but also because Playboy argued that the plaintiff wasn't entitled to whistleblower protections because she had failed to allege a reasonable belief of an existing violation of securities law.

The court allowed the case to go forward even though it was the first one to address this particular question under the whistleblower laws. Like most whistleblower cases, it was a complicated legal matter. A   whistleblower attorney can help those who believe they have evidence of fraud or wrongdoing to take legal action.

Whistleblower Case Leads to Record-Setting Award

The Playboy whistleblower case arose from allegations that the plaintiff was discriminated against and fired for refusal to participate in what she believed was fraud against shareholders. Playboy had reportedly wanted the plaintiff to prepare $1 million in bonuses for top executives without first having the bonuses properly approved according to SEC requirements.

When she refused, she alleged that she was ostracized from meetings and discussions, the CFO stopped talking to her, and crucial information needed to carry out her duties was purposely withheld. This, in turn, set her up to fail and prompted her termination.  She was 56-years-old at the time and was serving as an account executive for Playboy when she was fired in 2012.

Because she refused to prepare the bonuses, they were not paid out at that time by Playboy. Playboy argued that the plaintiff should not be entitled to whistleblower protections because she only alleged that she believed the company would have committed violations against shareholders if she hadn't acted. The company did not actually commit such a fraud. The Ninth Circuit addressed this question for the first time in this case.

The court ruled that the whistleblower protections found in Section 806 of SOX were designed to protect and encourage greater disclosure and to prevent potential fraud in its early stages, not just fraud that had already been perpetrated. The case could be heard.

Once the plaintiff's case went forward, the jury determined that Playboy had acted wrongfully and awarded the plaintiff $6 million in damages. Punitive damages had not yet been factored into the award, which thus could become larger.

Prior to the Playboy case, the next largest verdict was a $4.6 million award against a gambling software company. That ruling is still being appealed by the company.  Playboy has also indicated that the company disagrees with the $6 million verdict and may consider options for appeal.

Contact a whistleblower attorney if you believe you have evidence of fraud. Call Brewer & Prichard P.C. today at 800-445-8710  or visit https://www.bplaw.com to schedule a consultation.