Semi-Sorta-Kinda Whistle Blower Protection

Federal Labor Board Upholds SOX Whistleblower Ruling But Allows Appeal

While holding up the SOX protection for whistle blowers, the labor board leaves open a door for appeal and retaliation against the whistle blower should the appeal be decided in favor of the Big Business entity. Doesn't this set a chilling effect into motion for the next whisltle blower? You bet it does.

It also sets a dual dyanmic of cognitive dissonance. SOX actually requires accounting and financial professionals to adhere to higher standards and report irregularities found in the process of accounting, financial analysis or audits... but it now appears that anyone that does follow those rules could be held accountable in the long-run. Something is wrong with this ruling.

A federal labor board, weighing a closely watched test case of the nation's new law to protect corporate whistleblowers, has upheld an order to a tiny Virginia bank to reinstate a fired executive, while giving the company a chance to appeal.

The ruling prolongs a more than three-year battle of wills pitting Cardinal Bankshares Corp. -- a holding company for the Bank of Floyd in southwest Virginia -- against David Welch, the former chief financial officer fired by the company after he criticized its accounting practices.

In 2004, Welch became the first person to win protection as a whistleblower under the Sarbanes-Oxley Act, passed by Congress in 2002 after corporate scandals at Enron, WorldCom and other firms.

Cardinal has refused to take Welch back. For the moment, the ruling by the Labor Department's Administrative Review Board, issued March 31 but not delivered until Friday, does not change that.

The board, noting that "Cardinal's arguments against Welch's motion have no merit," affirmed a 2005 judge's order that Welch be reinstated. But, citing unusual circumstances, it also ruled that Cardinal be given 10 days to appeal. A lawyer for the bank said Friday it intends to do so.

The ruling does not settle the standoff. But a lawyer for Welch said Friday that although the executive is still not back in his job, the labor board's ruling had advanced his cause.

The ruling "gave us everything that we wanted. I couldn't have asked for anything more," said Bruce Shine, the lawyer representing Welch, of Bedford, Va.

Shine said giving the bank a window to appeal assures that it cannot later argue that it had no such chance. Up to now, the case has remained tied up on such details.

A lawyer for the bank, Laura Effel, said the ruling focused only on procedures and technicalities without deciding who was right.

"I don't know that they've (the review board) made up their minds. I believe this is a technical decision and not a decision evaluating the merits of Mr. Welch's claim."

Effel said the bank plans to file an appeal with the board within the 10 days allotted.