By ADAM GELLER AP National Writer
© 2006 The
NEW YORK — A tiny Virginia bank, at the heart of a closely watched case testing
the nation's protection of corporate whistleblowers, must reinstate an
executive it fired after he criticized accounting practices, a federal labor
board has ruled.
The
ruling by the Department of Labor's Administrative Review Board, is far from
the final word in the long-running dispute between Cardinal Bankshares Corp. and
David Welch, its former chief financial officer. But it is an important step,
both for the two sides and for many companies that have followed the case
closely.
The ruling, dated June 9 but not made public until late Tuesday, denies a
request by Cardinal _ a holding company for the Bank of Floyd in southwest
Virginia _ to stay a Labor Department judge's earlier order that it take Welch
back.
In 2004, Welch became the first worker to win protection as a whistleblower
under the Sarbanes-Oxley Act, passed by Congress in 2002 after corporate
scandals at Enron Corp., WorldCom Inc. and other companies. Cardinal has
refused ever since to reinstate Welch.
"We anticipate that Cardinal can productively use Welch's skills while
his case is being litigated," the ARB said in its decision. "Welch
has waited more than 3 1/2 years to have his pay and benefits restored."
Welch's lawyer, Bruce Shine of
"It is a great case for Dave Welch. I think it is a great case for the
whole whistleblower concept under Sarbanes-Oxley," Shine said. "It
shows that this act (Sarbanes-Oxley) has meaning and substance."
Under the law, the bank is now supposed to reinstate Welch to his job on an
interim basis or offer him payment instead of reemployment, while the
Administrative Review Board takes times to examine the case in full. But if the
bank does not do so, enforcement of the order would be left up to a federal
district court.
A lawyer for Cardinal, Laura Effel, said the bank will not bring Welch back
until it is compelled to do so by the court.
"We're defending the case and we're defending the attempt to put him
back before the end of the case and so we would not voluntarily comply with
this. We will defend an attempt to have this enforced in the district
court," Effel said.
While that may take time, the ruling that the company must take Welch back
is an important step, said Jason Zuckerman, a
"What's so important about having him back in the workplace is that it
will send a signal to other employees that they can blow the whistle and they
keep their jobs," Zuckerman said.