Five Years Out of Work

Five years after being the first to file for whistle-blower protection under Sarbanes-Oxley, former CFO David Welch has lost the family farm and his savings, and still doesn't have a job.

When David Welch became the first person to win protection under the whistle-blower provision of the Sarbanes-Oxley Act back in 2002, the former CFO of Cardinal Bancshares figured he would be back at work shortly.

“I thought everything would be fine when I filed the complaint,” he recalls. “I just wanted my job back. I enjoyed being a CFO.”

Nearly five years later, Welch is still unemployed, despite a Department of Labor ruling ordering the Floyd, Virginia-based bank to reinstate him. Last fall a U.S. district judge decided not to enforce the ruling.

Cardinal did not respond to multiple requests for comment on this story.

Welch claims he was fired from Cardinal after he raised questions about the bank’s accounting policies and internal controls, and subsequently refused to certify its financial results. The bank argued that Welch was suspended and later discharged solely because he refused to meet with Cardinal attorney Douglas Densmore, of law firm Flippin Densmore, and Michael Larrowe, an accountant whose firm was Cardinal’s external auditor, without a personal attorney.

In 2004, two years after Welch was fired, Cardinal appealed a “recommended decision and order” by DoL Administrative Law Judge Stephen Purcell to reinstate Welch as CFO and award him back pay. The bank’s appeal was denied last June by the DoL’s administrative review board.

Even so, the bank refused to comply with the DoL reinstatement order, because the original “recommendation” by Purcell to reinstate Welch was not a final order as defined by the Labor Department, according to Cardinal’s outside counsel Laura Effel at the time. Therefore, the bank would wait and see whether the DoL or Welch would take action against the company in U.S. District Court in Roanoke.

Last July Welch’s case was advanced slightly by a DoL motion to intervene that included a 13-page memorandum in support of his application for reinstatement. The support from the DoL did not seem to make a difference to the Roanoke court, however: Judge Glen Conrad said he did not have the authority to enforce the ruling by the DoL’s administrative review board since it was a preliminary action. Welch is now appealing the ruling in the 4th U.S. Circuit Court of Appeals.

In a telephone interview from his home in Huddleston, Virginia, Welch spoke to CFO.com contributing editor Stephen Taub about his five-year experience as the first Sarbox whistle-blower.

How have you been affected by this ordeal? Have you lost a lot of money?

Well over half a million dollars. We obliterated our savings and life insurance.

Did you lose your house?

We sold the family farm. It was my wife’s grandparents’ house, which we had bought. We then moved into a rental property in Huddleston. We recently bought an old farmhouse that was ready to be bulldozed. We spent the last couple of years renovating it ourselves.

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