An administrative law judge at the U.S. Department of Labor ruled that a whistleblower’s duplication and removal of confidential information from his employer was a protected activity under the Sarbanes-Oxley Act (SOX) — and that it was neither unlawful nor a valid reason for firing, as his employer had claimed.
In his decision, Judge Clement J. Kennington found that chemical giant Celanese Corp. illegally retaliated against employee Matthew Vannoy for, among other things, rejecting expense forms submitted by Celanese’s then-CEO David Weidman.
Mr. Vannoy had complained multiple times about the company’s payment of millions of dollars in undocumented credit-card expenses from employees, saying the practice ran afoul of federal regulations. Ultimately he reported the matter to the U.S. Internal Revenue Service, applying for a whistleblower bounty and sending that agency a raft of internal Celanese files to back up his story. He also copied some internal files to a computer disk, which he brought home as a safeguard.
Dallas-based Celanese claimed that Mr. Vannoy’s transfer of the confidential files — some of which contained personal information about Celanese employees, including credit card numbers and social security numbers — was illegal, reckless, and against company policy. When it fired Mr. Vannoy in early 2008, it cited his disclosure of this personal information, which it also reported to local police; the company subsequently paid for credit protection services for all employees who were affected.
Judge Kennington found that Celanese’s rationale was just a pretext, however, noting that the company never alleged any illegal use of the personal information. Indeed, the judge found that Mr. Vannoy’s supervisor fabricated the specific incident for which the whistleblower was supposedly fired — although Mr. Vannoy did transfer confidential files on other occasions.
The ruling ordered Celanese to pay Mr. Vannoy more than $350,000 in back- and front-pay; attorney fees, costs, and expenses; plus $25,000 for the distress he suffered.
The judge’s decision came after the case was kicked back to him by the Labor Department’s Administrative Review Board (ARB), which was the first body to suggest that SOX might protect a whistleblower who removed confidential files.
Passed in 2002 in the wake of the Enron scandal, SOX sets strict standards for financial behavior by public companies and protects employees against retaliation for blowing the whistle on violations. The Labor Department enforces this retaliation provision via its cadre of administrative judges.
Judge Kennington originally had granted summary judgment in favor of Celanese, saying that the disclosure of employees’ personal information was a valid reason to fire Mr. Vannoy. But the ARB reversed him, essentially saying that the judge must determine whether Mr. Vannoy’s actions were a legitimate attempt to provide the government with information it needed.
After hearing further evidence — and after disqualifying Mr. Vannoy’s original attorney, who had been disbarred in two states for misconduct in unrelated matters — Judge Kennington found that the whistleblower’s actions did, indeed, “constitute protected activity under SOX.”
He said that a significant factor in the decision was the lack of credibility of Celanese officials, whom he lambasted for fabricating evidence; for failing to investigate Mr. Vannoy’s complaints; for shielding Celanese executives from scrutiny; for reporting Mr. Vannoy to Dallas police without proper evidence; and for “snickering and laughing” after Mr. Vannoy was fired.
Judge Kennington explicitly linked Mr. Vannoy’s firing to his repeated rejection of expense reports from a HR vice president and from Mr. Weidman, the former Celanese CEO — whose last expense rejection came just two weeks before Mr. Vannoy’s dismissal.
“These pretextual and temporal facts cannot be ignored,” the judge wrote.