Casino-Gaming Company Settles Whistleblower Retaliation Charges
Commentary by Steven Lofchie
The SEC settled charges with a casino-gaming company for allegedly firing an employee with several years of positive performance reviews because he had reported to senior management and the SEC that the company's financial statements might be distorted.
In the agency's second whistleblower retaliation case, the order alleged that the employee raised concerns to his managers, the company's internal complaint hotline and the SEC that the company's financial statements may have been misstated due to its cost accounting model relating to its used parts business. The SEC stated that the company conducted an internal investigation with the assistance of outside counsel and determined that its reported financial statements contained no misstatements. Approximately three months after the whistleblower raised his concerns, the company terminated him, the order noted.
According to SEC Enforcement Director Andrew J. Ceresney:
Strong enforcement of the anti-retaliation protections is critical to the success of the SEC's whistleblower program. This whistleblower noticed something that he felt might lead to inaccurate financial reporting and law violations, and he was wrongfully targeted for doing the right thing and reporting it.
The company agreed to pay a $500,000 penalty.
Commentary
This case puts companies on notice that they need to deal very carefully with the handling of an employee who raises issues internally, even when the issues raised have no basis in fact, and likely even when the employee raises the complaint in an inappropriate manner.
Neither the Order nor the press release provides sufficient information to gauge the seriousness, or the likely basis, of the particular issues raised by the employee. Given that (1) the company conducted an internal investigation based on the employee's complaint, (2) the company did not find any misstatements during the course of its investigation, (3) the SEC's Order seems to suggest that the company's investigation came to the right result, and (4) the Order also suggests that the employee may have acted in an obnoxious manner, perhaps the decision to fire the employee could be justified.
The SEC's response to this presumably would be that the employee had previously received favorable job reviews. While the existence of a previously favorable job review likely does insulate a government employee from dismissal for a considerable period, the standards of job performance in the private sector tend to be higher than in the public one. Based on the facts presented in the Order issued by the SEC, a reasonable reading of the narrative is that the employee in question: (i) initially did a good job, got positive reviews and was rewarded with a promotion to a better job; (ii) in his new job, made allegations that turned out to be false, did so in an obnoxious manner, and was eventually fired. Under that narrative, which is wholly consistent with the storyline in the SEC's Order, the employee's dismissal might be very well-deserved.
Whatever the business world reality may be, under the law as set forth in this settlement, the lesson seems to be that it is dangerous to fire employees who make complaints, even if the complaints are not justified and even if unjustified complaints are made in an obnoxious or disruptive manner. While that may be the law, it is not as obvious that it is good public policy.
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