Latest Step in First SOX Reinstatement Case

Posted 4:05 PM by Michael Fox

If you have been following the saga of David Welch, who was one of the first whistleblowers to be the "beneficiary" of a reinstatement order, you know that it has been a long and arduous path. Here briefly is the timeline before last Friday's latest ruling:

• October, 2002 -- Welch is terminated
• February 4, 2003 -- OSHA denies his complaint
• April 29, 2003 -- Welch files an appeal with the Office of Administrative Law Judges
• August 25-26, 2003 -- Hearing before an Administrative Law Judge
• January 28, 2004 -- ALJ issues Recommended Decision and Order, ordering reinstatement with damages to be decided by supplemental order
• February 3, 2004 -- ALJ issues an Erratum, making it clear that January 28, 2004 is not appealable
• February 5, 200 -- Cardinal appeals to the Administrative Review Board
• May 13, 2004 -- Appeal dismissed as premature by ARB
• June 30, 2004 -- Cardinal files appeal with Fourth Circuit Court of Appeals
• September 3, 2004 -- Fourth Circuit dismisses appeal, no jurisdiction
• February 15, 2005 -- ALJ issues Supplemental Recommended Decision and Order, ordering reinstatement and damages
• August 5, 2005 -- Welch files Motion for Sanctions with ALJ
• August 9, 2005 -- ALJ denies Motion, enforcement of reinstatement lies with United States District Court
• August 30, 2005 -- Welch files Motion to Enforce in District Court for Virginia
• January 4, 2006 -- Virginia District Court denies the Order saying too much confusion over what has been ordered
• January 26, 2006 -- Virginia District Court clarifies its Order, saying it has no clear Order from ARB
• March 31, 2006 -- ARB enters order that ALJ's Order was clear on reinstatement, that it is in effect, but given the confusion has given Cardinal 10 days to seek a stay of the order of reinstatement

Friday, the Administrative Review Board held that there was no basis for a stay and that Welch should be reinstated. They did offer some concessions to the bank holding company which was objecting to having a CFO who did not have the trust of the Board thrust on them. Among the options were using his skills productively by a "variety of other means," or as it suggested more than once "economic reinstatement" where he receives his pay and benefits, but does not work. Welch v. Cardinal Bankshares, Inc. (ARB Case No. 06-062, 6/9/06) [pdf].

All of the above and still no ruling on the merits. Maybe it is because it is the first case, but clearly it has not been as smooth as the drafters of the legislation and implementing regulations would have hoped. Given what has happened before, it would not be shocking if this stage of the litigation was not over yet. Certainly, there will be much more to come on the merits.

Update (7/4/06): Not too surprisingly, Cardinal Bankshares has declined to reinstate Welch and will instead wait for him or the DOL to file some sort of enforcement action. I would expect that soon. For more details on the costly fight over the first reinstatement ($400,000 in attorneys fees so far for the relatively small bank holding company) see Cardinal Refuses to Reinstate CFO from the CFO.com website.

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