SOX Win Shows Strong Need For Whistleblower Protections
The U.S. Department of Labor (DOL) recently awarded $1.9 million in damages to a Sarbanes-Oxley whistleblower in a decision that clarifies several key aspects of SOX whistleblower protection and underscores the importance of providing strong protection to corporate whistleblowers.
On Nov. 9, 2016, Administrative Law Judge Christopher Larsen ruled in Becker v. Community Health Systems Inc., that the Rockwood Clinic violated SOX by constructively discharging Gregg Becker, Rockwood’s CFO, for his refusal to lower his projection of the company’s losses by $8 million. Rockwood is part of Division IV of a subsidiary of a subsidiary of respondent Community Health Systems Inc. (CHSI), a Tennessee-based corporation that comprises a massive group of hospital and clinic operators. This appears to be the largest damages award in a SOX case adjudicated at DOL.
As CFO of Rockwood, Becker was responsible for projecting the clinic’s earnings before interest, taxes, depreciation and amortization for 2012 and then applying that projection to Rockwood’s strategic business plan. In October 2011, Becker projected an EBITDA of negative $12.8 million for 2012.
Three weeks after Becker made his projection, a Division IV financial manager directed him, via email, to change the projection to negative $4 million. The email did not include any information about where the negative-$4 million figure came from — and Becker’s review of Rockwood’s actual operating results through August 2011 revealed that the clinic could not reasonably meet that projection. So Becker alerted Rockwood CEO Dr. Craig Whiting that Division IV’s demand was impossible.
Then, the harassment began.
That same month, Debra Herrin, director of financial operations for division IV, was sent to Rockwood’s office to “improve” Becker’s projection. Through November and December 2011, Herrin and others in Division IV corresponded daily with Becker, demanding that he change his work and even changing it themselves. Becker refused their demands and reversed their changes.
Division IV thereafter sent Becker hundreds of emails demanding immediate responses, questioning his “critical thinking, work ethic and reading skills,” and accusing him of failing to justify his incorrect results. Herrin’s supervisor, Stephanie Moore, emailed Becker in November 2011: “Your critical thinking skills are extremely concerning to me. Thanks!” (emphasis in original). A few days later, Maria Caruso, also from Division IV, emailed Becker CHSI’s “preliminary budget trended income statement” for Rockwood and stated: “NR AND EBITDA MUST TIE TO YOUR TARGETS. NO EXCEPTIONS!!!!!!” (emphasis in original).
The deluge of emails also pressured Becker to wrap up the “project” quickly because it had “taken too long.” In mid-November 2011, Moore emailed Becker that “every day this drags on becomes a bigger black eye to you and your staff. Thanks!” And when Becker submitted spreadsheets with the negative-$12.8 million projected EBITDA, Division IV replied that “[t]hese are not the numbers we want to see.”
Becker refused to bend to his colleagues’ whim, so they undermined him. Without notice, someone changed Becker’s EBITDA projection to negative $5.2 million in a presentation that he was to give to CHSI and Rockwood in mid-December 2011. During a break in that meeting, Moore took Becker to her office and admonished that if he did not project an EBITDA of negative $4 million, then his job would be in jeopardy. She then took Becker to Herrin’s office, where Herrin stated that she was “building a file” on Becker and that he would be fired if he did not provide the negative-$4 million projection.