Monday, July 10, 2017

Merely working for a public company is insufficient to trigger Dodd-Frank whistleblower protection

By Joanne Cursinella, J.D.

A CPA who was terminated from Grant Thornton, LLP, allegedly for reporting fraudulent activity, could not sustain her whistleblower protection claim because working for a public company, without more, is insufficient to trigger Dodd-Frank whistleblower protections (Reyher v. Grant Thornton, LLP, July 6, 2017, Brody, A.).

Recruited. According to the court, Ann Marie Reyher is an experienced CPA who was recruited in 2016 to work for defendant Grant Thornton, LLP as a managing director in its Philadelphia office. Despite “numerous assurances that her responsibilities at Grant Thornton would be limited to her area of expertise,” individuals and trusts, she was assigned a client list that only included corporate clients. In any case, Reyher began work for her assigned clients. Reyher said expressed her distress about this to two of Grant Thornton partners, to no avail.

Accounting irregularities. Reyher claimed that she found “accounting irregularities,” during her work and alleged that Grant Thornton employees knowingly included inaccurate information in client tax documents. She complained to firm administrators about this activity, which she said “amounted to bank fraud, mail fraud, wire fraud, and/or fraud against shareholders.” Her complaint, in fact, cited specific violations as to four clients, none of which were alleged to be public companies, and in fact, the court noted, from the descriptions, the opposite was probably true.

Terminated. Reyher was terminated seven weeks after beginning employment with Grant Thornton. According to the court, she was told at her termination meeting that she was being let go for being “disruptive” and “not a good fit for our culture.” Reyher, however, alleges that she was terminated in retaliation for her complaints about accounting irregularities and her refusal to engage in illegal activity, and claimed whistleblower protection was suitable under Dodd-Frank.

No Dodd-Frank protection. Reyher argued that her termination violated Section 922 of the Dodd-Frank Act. That section prohibits an employer from discharging an employee in retaliation for that employee having engaged in certain types of protected whistleblowing activity, the court said. Reyher claimed that her internal complaints regarding her clients were disclosures that are protected under Sarbanes-Oxley Act of 2002 and by extension under Dodd-Frank, which incorporated existing SOX whistleblower protections and added incentives to bolster existing protections for whistleblowers. She argued that Grant Thornton’s work for publicly traded companies was sufficient to bring her case within the scope of SOX and, therefore, by incorporation, Dodd-Frank protection.

The court noted that Reyher did not allege that there was any connection between Grant Thornton’s work for publicly traded companies and her internal complaints regarding her clients. There were no allegations that she performed any work on behalf of publicly traded companies. Further, there were no allegations that any of the practices she complained of implicated publicly traded companies or that the clients themselves were public companies or consisted of public companies. She argued instead that Grant Thornton’s unrelated work for publicly traded companies was in itself sufficient to bring her case within the scope of whistleblower protection.

The court disagreed, however, saying that a purported whistleblower employed by a private company cannot invoke the whistleblower protections of SOX and Dodd-Frank merely because her employer happens to contract with public companies on matters unrelated to the alleged whistleblowing. The connection between Grant Thornton and its public company clients is little more than a coincidence as far as Reyher’s clients were concerned, the court said, and she did not adequately plead that she engaged in conduct that is protected under SOX (or Dodd-Frank).

The case is No. 16-cv-1757.