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Chief Financial Officer Awarded $1.9 Million in SOX Whistleblower Accounting Claim

Rockwood Clinic’s former chief financial officer awarded $1.9 million this week after ruling the company pushed him to

November 11, 2016

Litigation Summary

Gregg Becker v Community Health Systems Inc. and Rockwood Clinic P.S. SOX Whistleblower

On Nov. 10, 2016, former Rockwood Clinic P.S. Chief Financial Officer Gregg Becker was awarded $1.9 million dollars for a successful Sarbanes Oxley whistleblower retaliation claim against Tennessee based Community Health Systems Inc. and Spokane subsidiary Rockwood Clinic P.S. Department of Labor Administrative Law Judge Christopher Larsen’s 46 page written ruling followed an extensive trial in January 2017.  The award may be the largest damages award in any whistleblower case litigated at the Department of Labor. Gregg Becker was represented by attorney Mary Schultz of Mary Schultz Law P.S.,,  in Spokane, Washington.

ALJ Larsen found that Rockwood Chief Financial Officer Gregg Becker repeatedly refused to overstate Rockwood’s projected earnings for Community Health System’s use in the face of repeated demands. Community Health Systems, Inc. financial personnel subjected Mr. Becker to a barrage of harassment, denigration and insults, and ultimately placed him on a “performance improvement plan” threatening him with job termination if he did not represent  CHS’s fictional number as Rockwood’s projection within seven days. After Mr. Becker’s continued refusal even then to represent fictional numbers for Rockwood, Attorney Mary Schultz wrote directly to CHS’s attorney in Tennessee, telling CHS counsel that Mr. Becker would have no choice to resign if its financial personnel continued to require Mr. Becker to falsify earnings projections--a violation of the Sarbanes Oxley law. CHS counsel “accepted Mr. Becker’s resignation.”  Judge Larson found that act to be a constructive discharge.

In a holding with potentially national implications for CHS, Judge Larsen also found that Mr. Becker’s belief that CHS’s illegal behavior was a violation of SOX was a reasonable one. While CHS uses a “bewildering array of related business entities,” its financial division demands were being imposed on CHS outlying subsidiary CFOs across the country in a “top down” approach; that is, CHS’s Chief Financial Officer decided on the numbers CHS would “push down” onto the local CFOs in the outlying facilities, and demand that the local CFOs report back the selected number to CHS as that facility’s achievable projected earnings for the next year, supporting the figure with spreadsheets, even if the CFO believed the number and the spreadsheet were entirely fictional. Financial personnel in Tennessee would then upload those mandated “projections” into CHS’s corporate shared database, which CHS would then use for its own purposes, including for its use in SEC investor filings. Mr. Becker argued that CHS was essentially using its underlying facility Chief Financial Officers to very CHS’s own fictional earnings projections for CHS corporate headquarters to give the appearance of the legitimacy of the projections. The judge found this belief to a reasonable one supported by Mr. Becker’s evidence.      

Because of his refusal to participate in these perceived SOX violations, and resultant discharge, Mr. Becker was awarded four years of back pay in the amount of $341,380, plus statutory interest since February 2012. Mr. Becker was also awarded fifteen years of lost future wages totaling $1,499,986 through his projected retirement age of 66. But for the conflict over his protected activity, said ALJ Larsen, Mr. Becker would likely have worked for Rockwood until retirement given his loyalty to his company and his competence as its chief financial officer. Mr. Becker was awarded another $15,000 as additional noncompensatory damages.

Because he prevailed on his SOX claim, an additional judgment remains to be entered against Community Health Systems and against Rockwood for Ms. Schultz’s attorney fees, litigation costs and expert fees. 

In addition, Mr. Becker has a state court claim also pending against Community Health Systems and Rockwood for wrongful termination in violation of public policy. His state claim has already traveled up to and successfully down from the Washington State Supreme Court, where, in September 2015, the state Supreme Court upheld his legal theory as a valid one for trial. That claim was returned to the Spokane County Court, and is now poised for a jury trial in the year 2017.

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