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Proskauer Whistleblower Defense

OSHA Awards $1.9 Million To SOX Whistleblower

Posted in OSHA Administration

On September 30, 2013, OSHA awarded more than $1.9 million to a former CFO of Clean Diesel Technologies, Inc. (the Company) (based in Ventura, California) who is not identified in OSHA’s press release.  This award is based on OSHA’s finding that the Company violated Section 806 of SOX by discharging the CFO in retaliation for his warning the board of directors about financial concerns raised by a proposed merger. 

Background

In late March 2010, the former CFO allegedly provided information to the Company’s board of directors based on his/her belief that there was a conflict of interest involving the chair of the board of directors.  According to OSHA, the CFO believed a proposed merger was detrimental to the Company, important financial information was withheld from board members, and the conflict of interest violated internal controls and the Company’s code of ethics.  The CFO filed a SOX whistleblower retaliation complaint with OSHA in April 2010, a week after he/she was discharged.  OSHA’s investigation found the complaint to be meritorious. 

The Relief OSHA Ordered

In its September 30 Order, OSHA ordered the Company to:

  • pay the complainant more than $486,000 in lost wages, bonuses, stock options and severance pay;
  • pay over $1.4 million in compensatory damages for pain and suffering, damage to career and professional reputation, and lost 401(k) employer matches and expenses;
  • post OSHA’s findings in a Form 8-K submission to the SEC;
  • expunge all files and computerized data systems of disciplinary actions related to the complainant’s termination;
  • post the order and a notice to workers at all Company locations and on its internal website; and
  • pay reasonable attorney’s fees.

Implications

OSHA’s press release expresses its intent to “send a clear message to publicly traded companies that silencing those who try to do the right thing as unacceptable.”  The sheer size and range of relief OSHA seeks to require through its preliminary order exposes that goal in a loud and clear way.  Query what implications including OSHA’s findings in a Form 8-K may have, and whether the Company will appeal this preliminary order.  We will keep our readers updated as events unfold.