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An accountant who had questioned payment requests could not bring a claim of retaliation under the Sarbanes-Oxley Act (SOX) when he was fired after several co-workers accused him of sexual harassment, the 3rd U.S. Circuit Court of Appeals ruled.
Tyco Electronics employed Jeffrey Wiest for approximately 30 years, most recently as an accounts payable manager in its finance department. In 2008, Wiest was presented with two separate requests for payment by the wireless business unit with which Wiest took issue. One expense reimbursement in June 2008 involved $56,000 for an annual recognition event for sales associates and independent dealers in the Bahamas. Wiest asked for additional information relating to this reimbursement request. In reviewing the request and the information provided, the chief financial officer determined that it was not properly reimbursable, but would be paid to employees as a taxable benefit.
The second request was for payment for a wireless business unit review meeting at the Wintergreen Resort in Virginia. The finance department received a request in October 2008 to make a $100,000 down payment for the Wintergreen event. Wiest helped coordinate the payment, which exceeded the initial down payment amount, for a total cost of $355,000. The wireless business unit’s director of accounting stated that the CEO would have to authorize the payment, but Wiest noted that no authorization had been requested from the CEO. Wiest thus forwarded the request to his supervisor, “leav[ing] it to [his] discretion” how to obtain authorization from the CEO. Shortly after raising each of these issues, Wiest received a substantial bonus and a very positive employment review.
In August 2009, several female employees accused Wiest of making sexually charged statements. These included alleged double entendres and boasts of sexual prowess by Wiest, as well as alleged claims of past sexual relationships with colleagues. In investigating the complaints, Tyco's HR department obtained Wiest's statement and then decided to terminate his employment based on the interviews it had conducted. However, before the HR department could take any action, Wiest departed on short-term disability leave due to the resulting stress. Wiest exhausted his disability leave on March 31, 2010, and his employment ended when he could not return to work.
Wiest had filed a claim of retaliation under SOX in November 2009 with the Department of Justice (DOJ). After completing the DOJ process, Wiest filed claims in federal court against Tyco, including a SOX retaliation claim. These claims were initially dismissed, with the exception of the two accounting issues Wiest raised regarding payments made in the summer and fall of 2008. After discovery was completed, Tyco filed a motion for summary judgment to dismiss this SOX retaliation claim before trial in the district court, which was granted.
On appeal, the 3rd Circuit found insufficient evidence of causation to support Wiest’s retaliation claim. By Wiest's own admission, he suffered no negative repercussions as a result of his questions about the payments until at least 10 months later, which was after a stellar performance review and a bonus. The court found that Wiest was not actually discharged until 2010, a year and a half after the accounting issues were raised, further distancing the decision from any whistle-blowing activity. Tyco also proved that it had a legitimate reason for the discharge (that is, its findings concerning sexual harassment) by clear and convincing evidence.
Wiest v. Tyco Elecs. Corp., 3rd Cir., No. 15-2034 (Feb. 2, 2016).
Professional Pointer: SOX gives employees of publicly traded companies and their subsidiaries protection against retaliation for raising a wide range of potential fraud concerns. While the protections are substantial, they will not apply where discipline occurs much later than the protected conduct or is preceded by legitimate reasons for the discipline.
Jeffrey L. Rhodes is an attorney with Doumar Martin PLLC in Arlington, Va.
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