CDF E-Alerts

"Whistle-Blower Gets His Own Attorney"

Does Sarbanes-Oxley entitle a whistle-blower to bring his own attorney to a company’s internal audit committee investigation meeting?  Most attorneys have concluded that the answer is no.  However, an administrative law judge in Virginia ruled YES, on January 28, 2004.  See Welch v. Cardinal Bankshares Corp. No. 2003-S0X-15.

The case involved a small-town bank holding company and its chief financial officer.  The bank’s internal audit committee was investigating a possible insider-trading matter raised by the CFO; and the committee asked the CFO to meet with the committee to answer questions being investigated.  The CFO refused to meet unless he could bring his own attorney; and the bank refused to allow attendance of the outside attorney; and the bank fired the CFO for not attending the committee meeting.

The administrative law judge held that the firing was in retaliation for the CFO raising concerns about the company’s financial activities, which retaliation is in violation of Section 806 of the Sarbanes-Oxley Act.

The decision is expected to be appealed.

For more details go to:  http://www.abanet.org/journal/ereport/f13sarbanes.html

We thank Hugh Friedman for bringing this case to our attention, from the ABA Journal eReport.