Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, December 16, 2014

Whistleblower's retaliation claim against Dow will proceed

By Rodney F. Tonkovic, J.D.

A former employee of Dow Chemical Company has successfully pleaded a claim for retaliation under the Sarbanes-Oxley Act, a district court has found. Kimberly C. Wood alleged that her employment at Dow was terminated in retaliation for reporting violations of the federal securities laws, an activity protected under the SOX whistleblower provision. The court found that Wood sufficiently alleged the elements of a claim under SOX Section 1514A (Wood v. The Dow Chemical Company, December 15, 2014, Ludington, T.).

Background. Wood worked for Dow for 25 years before being terminated in October 2013. She holds a master's degree in accounting and is a certified fraud examiner. Since 2001, Wood had been a fraud investigator tasked with conducting internal investigations and reporting her findings to her supervisors.

Wood claimed that she assisted in several investigations into conduct that she believed violated SEC rules and regulations, the securities laws, and Dow's code of conduct. Wood identified seven specific instances of conduct that she reported to her superiors, including personal expenses of Dow's CEO that were paid by Dow but which went unreimbursed; the CEO's excessive use of the Dow corporate jet; improper accounting practices and financial statement fraud; and, payments by Dow, at the CEO's direction, to charities. According to Wood, after reporting this conduct, Dow's CEO and general counsel began a pattern of retaliatory conduct ending with her termination.

Wood claimed that she was fired in retaliation for reporting suspected violations of the securities laws. Dow argued that Wood failed to state a claim under SOX Section 1514A against either Dow or any of the individual defendants. The court found that Wood sufficiently pleaded a claim for relief.

Protected activity. The court first found that Wood adequately alleged that she engaged in a protected activity.  According to the court, Wood, who had "a great deal of experience" in fraud investigation and accounting, was familiar with fraudulent activity and the law and reasonably believed that the conduct she investigated violated federal law. Moreover, the court continued, the allegations directly implicated activity that a reasonable person would believe to be a violation of federal law.

Employer's knowledge. Wood also claimed that the CEO and general counsel directed her termination in retaliation for her protected activity. The defendants asserted that Wood failed to allege that the two executives knew of her protected activity or participated in any retaliation. The court noted that Wood needed only to sufficiently allege that the CEO knew of her protected activity and played a role in her termination. Because Wood's investigations focused on the CEO himself, and led to the CEO reimbursing Dow for certain personal expenses, the court concluded that she sufficiently alleged knowledge on the part of the CEO. Similarly, Wood's "reporting relationships" with the legal department, headed by the general counsel, were sufficient to show the counsel's knowledge.

Adverse employment action. Next, Wood adequately alleged a constructive discharge as a result of the aggregate effect of the “unfavorable personnel actions” she suffered. Specifically, Wood claimed that she was subjected to threatening and harassing statements, but the only statement the court gave any weight to was her being informed that her employment would be terminated as of October 31, 2013. This statement, taken together with her supervisors repeatedly informing her, over her protest, that she would be provided a severance package, was sufficient to state a claim of constructive discharge, the court concluded.

Contributing factor. Finally, Wood sufficiently alleged a causal connection between the protected activity and her termination. The defendants contended that over three years had passed since some of the reports reference by Wood were made and her termination. At least one of the allegedly protected acts, however, occurred the day before Wood was told that she would be fired. This, the court said, established a sufficiently close temporal proximity between the protected activity and Wood's constructive termination to state a claim for relief.

The case is No. 14-cv-13049.

Attorneys: James H. Mathieu (Mathieu & Lee Attorneys at Law) for Kimberly C. Wood. Edward J. Bardelli (Warner Norcross & Judd LLP) for The Dow Chemical Co.

Companies: The Dow Chemical Co.

MainStory: TopStory MichiganNews SarbanesOxleyAct WhistleblowerNews

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.