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SOX Whistleblower Awarded $1.2 Million on Retaliation Claim

May 31, 2013

In Barrett v. e-Smart Technologies, Inc., the Administrative Review Board of the Department of Labor (“DOL”) found that a technology firm retaliated against its newly hired COO in violation of the Sarbanes-Oxley Act because he criticized and opposed what he believed to be a misleading Form 10-K annual report draft.  The Board upheld an award of $1.2 million.  For more, click here.  The employee was hired in May 2007 as the Chief Executive Officer.  He was complimented on his performance in July of that year.  The employee was asked to rewrite a portion of the company’s 10-K.  In August, he provided significant edits to the 10K because he felt the draft contained misrepresentations regarding the company’s financial position as well as the status of the firm’s technological developments.  Ultimately, his changes were not accepted.  He asked to have his name removed from the final document because he felt that there were still misrepresentations.  Within a week, he was informed that all of his duties were being reassigned.  His phone calls to his boss were refused.  By September, his paychecks came late, and by October not at all.  After he missed his October 1 and 15 paychecks, he sent a “resignation” email on October 17 claiming constructive discharge, which the company denied.  The employee filed a Charge with OSHA claiming retaliation for engaging in Sarbanes-Oxley Act (“SOX”) protected activity.  The OSHA investigator found cause, and the employer requested a hearing.  The administrative law judge found that the employer violated the whistleblower provision of the SOX and awarded damages of $1.2 million and attorney’s fees.  The employer appealed to the Administrative Review Board of the Department of Labor, which upheld the finding and award of damages.