Whistleblower Still Whistling in the Dark

Posted 2:08 PM by Michael Fox

Back from an extended holiday, nice to note that some things haven't changed, including the inability of the first whistleblower ordered reinstated under Sarbanes Oxley -- David Welch -- to get reinstated. Instead he has lost round two before federal district judge Glen Conrad of the Western District of Virginia. CFO.com has the story, Judge Won't Enforce Whistle-blower Ruling.

A concise overview:

Welch's case seems to be caught in a perpetual game of legal ping pong. In 2004, two years after he was fired, Cardinal appealed a "recommended decision and order" by DoL Administrative Law Judge Stephen Purcell to reinstate Welch as CFO and award him back pay. The bank's appeal was denied in June by DoL's administrative review board.

Judge Conrad's opinion is that he does not have authority to force Cardinal Bankshares to reinstate Welch because there is no "final administrative order." Although his refusal to act is based on the limited jurisdiction of a federal court, he does note the problems that could be caused if a district court were allowed to intervene: “immediate enforcement at each level could cause a rapid sequence of reinstatement and discharge, and a generally ridiculous state of affairs.”

Judge Conrad agrees his ruling does not result in the speedy resolution intended by Congress, but he lays the fault at the DOL's door. He also notes Welch is not totally without remedy in this situation as he could file suit in district court, but with the unfortunate result that the review would be de novo. Technically true, but given Welch is currently seeking to uphold a favorable decision -- starting afresh is really only a Hobson's choice.

If Judge Conrad is correct, that means one of the early enforcement mechanisms of Sarbanes Oxley is of little significance. This is clearly not the last word, certainly not on Welch's case, or even on how the statute will ultimately be interpreted, but federal courts seem to guard their jurisdiction zealously, so it is by no means certain that Judge Conrad's view will not carry the day.

For a more detailed overview of Welch's frustrating journey see this earlier post, Latest Step in First SOX Reinstatement Case.

Labels: whistleblower

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