Feds Back Sarbox Whistle-blower

Late Thursday, the Department of Labor filed a motion to intervene in what is reportedly the first Sarbanes-Oxley whistle-blower case to go to trial. The motion, along with a 13-page memorandum in support of former Cardinal Bankshares CFO David Welch's application for reinstatement, was released by the DoL, the federal agency that investigates and has jurisdiction over whistle-blower cases.

Welch claims he was fired in retaliation for disclosing accounting problems at Virginia-based Cardinal. He now has the "flag and seal of the United States" on his side, noted his attorney Bruce Shine in response to the DoL filing.

Welch, a corporate-finance veteran, has not held a permanent job since being fired from Cardinal in October 2002. In his suit, he is requesting to be reinstated and awarded back pay.

Last week, Cardinal refused a DoL judge's recommended order to reinstate the former CFO. Cardinal's outside counsel, Laura Effel, argued that the original "recommendation" by Judge Purcell to reinstate Welch was not a final order as defined by the department, and therefore, the bank would wait and see whether the DoL or Welch brings an action against the company in U.S. District Court.

Now the bank faces both prospects. Earlier on Thursday, Welch filed a complaint in U.S. District Court in Roanoke, Virginia, to force Cardinal to comply with the judge's order of reinstatement.