Washington Mutual Inc. has been ordered to reinstate a fired loan executive under the whistle-blower provisions of the Sarbanes-Oxley Act, according to press reports.
The Department of Labor ordered the Seattle-based thrift — the nation’s largest — to rehire Theresa Hagman, who had served as a vice president and national manager of the company’s custom-home construction-loan disbursement center, reported the Seattle Post-Intelligencer.
Hagman observed that insufficient due diligence by the ban had led to a sharp increase in loan defaults. Beginning in late 2003, she raised concerns with Washington Mutual management that “the bank was not following its written policies as required by law and therefore loans were being funded and underwritten without proper documentation or other safeguards,” stated the Labor Department’s ruling, according to the newspaper.
She was fired three months later, reported the Post-Intelligencer, which added that according to the bank, her departure was due to poor performance and a need to “flatten management.”
In May 2004, Hagman filed a complaint with the Labor Department, charging that Washington Mutual had violated the employee-protection provisions of Sarbanes-Oxley, according to The Wall Street Journal. Last week, added the paper, the department ruled in her favor, finding that “she reasonably believed the bank was engaged in illegal activity and that this activity could expose its shareholders to financial risk.” Said Hagman: “Washington Mutual’s policies, procedures, and lending practices were really the heart of my issue and fundamental to what we did as a lender for our borrowers. They were broken, and that was my issue.”
The finding also noted that “several credible witnesses” shared her concerns but weren’t as vocal about them, the Journal further noted.
Alan Gulick, a Washington Mutual spokesman, told the paper: “We strongly dispute the allegations by our former employee. At the time the allegations were raised, we took them very seriously and began an immediate investigation.” The company found them without merit, he added.
Washington Mutual was ordered to rehire Hagman and to pay back wages, attorneys’ fees, and other compensation totaling more than $167,000. The company has 30 days in which to appeal.