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Whistleblower Law Blog

The Week in Whistleblowing

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Wells Fargo continued to dominate whistleblower news, releasing on Monday a 110-page report from Shearman & Sterling that said the independent law firm hasn’t yet “identified a pattern of retaliation against [bank] employees who complained about sales pressure or practices” in its fake-accounts scandal, despite plenty of media documentation of such a pattern. The update was buried in a footnote on page 87 of the report, which described the firm’s investigations so far — clearly and admittedly incomplete. The big headline, meanwhile, was the bank’s clawback of $75 million in compensation from its disgraced former CEO and its former head of community banking, both of whom it said had turned a blind eye to fraud. At the Los Angeles Times, columnist Michael Hiltzik was convincing in his condemnation of the report as “a whitewash.”

One Wells Fargo manager who alleged retaliation for reporting fake accounts back in 2011 was Claudia Ponce de Leon, featured in a Reuters story last year about unbelievably sluggish investigations at the U.S. Department of Labor, which handles whistleblower complaints under the Sarbanes-Oxley Act (SOX), among other anti-retaliation statutes. American Banker reported that Ms. Ponce de Leon soon may be ordered reinstated at Wells Fargo — which would follow another high-profile reinstatement ordered last week by the Labor Department, of an unnamed Wells Fargo banker who was awarded $5.4 million in damages and fees for being fired after reporting fraud, the largest such award under SOX.

Another bank with whistleblower woes: Barclays PLC, which said it would reprimand and slash the pay of CEO James “Jes” Staley for trying to identify an anonymous tipster who flagged previous erratic behavior by another Barclays executive. Hunting down whistleblowers is prohibited in both the U.S. and the United Kingdom, where Barclays is based; Mr. Staley claimed to be unaware of this. Bloomberg’s “Gadfly” columnist, Lionel Laurent, recapped the matter and concluded that the CEO “has dealt Barclays’s and his own personal credibility a big blow.” The Boston-born Mr. Staley, profiled in The Guardian as an avid sailor and Red Sox fan, now awaits the judgment of authorities in both countries.

Troubles may just be beginning for insurance company AmTrust Financial Services, whose stock plummeted this week on a report by The Wall Street Journal (paywall) that it’s being probed by the SEC in connection with information supplied by Harry Markopolos, the professional whistleblower who first alerted the agency to Bernie Madoff’s infamous Ponzi scheme. According to the WSJ, an accountant for AmTrust’s former auditor wore a wire as part of the SEC investigation. Regulators ignored Markopolos’ repeated tips about Madoff; nowadays they pay attention.

Finally, a wrongheaded decision this week from the U.S. Court of Appeals for the Fifth Circuit, which ruled in Cabral v. Brennan that a workplace retaliation claim can be dismissed under Title VII of the Civil Rights Act of 1964 even if the employee was suspended without pay — because such a suspension isn’t necessarily “materially adverse,” as the law requires. Instead, said the court, the employee must plead additional facts to show “that his suspension exacted a physical, emotional, or economic toll” in order to proceed.

As its authority the Fifth Circuit cited Burlington Northern & Santa Fe Railway Co. v. White, a U.S. Supreme Court decision from 2006 that confirmed a jury’s verdict — not a court’s summary judgment, as the Fifth Circuit stated — that a 37-day unpaid suspension counted as retaliation, even though the victim was ultimately given back pay, as the plaintiff in Cabral was, too.

The suspension in Cabral undoubtedly was less onerous than the suspension in White, and Javier Cabral evidently wasn’t the most sympathetic plaintiff. But whether the two-day unpaid suspension “might have dissuaded a reasonable worker from making or supporting a charge of discrimination,” the White standard for Title VII retaliation, requires some fact-finding — a process that, in White, went all the way to the jury. Certainly Mr. Cabral’s claim, which on its face involves at least temporary economic harm, shouldn’t be dismissed on the pleadings.

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