Five Years Out of Work

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.

How did you manage without your income for five years?
First, I got 13 weeks of unemployment. I didn't come close to breaking even there. We learned to cut more on our spending. We used to go to nice restaurants. We don't do it anymore. I drive a car with 270,000 miles — a 1996 Subaru.

Does your wife work?
Yes. She is a national bank examiner.

What would you do if you didn't have her income?
I would have had to drop the process or go bankrupt. We have to pay our attorneys. They have to eat, too. At some point, if you need some more money, you can't continue. If you are a whistle-blower and you have no money, you have to stop. The deep pockets of corporations can starve out an unemployed whistle-blower. If Sarbanes-Oxley had a provision that at any stage a whistle-blower's employer must reinstate you economically, you would see more cases ending quicker. Then the employee would have money to pursue the case and the employer is writing a check every two weeks.

Have you looked for a new job through all this?
Yes. I have had numerous interviews that went very well. Then, when prospective employers began to check references, it was the end. The bank told them I was a whistle-blower. Prospective employers assumed I am not to be trusted. I have a black eye in the accounting and banking industry.

Is it your impression from these prospective employers that they're hearing negative reports about you from Cardinal, or do you think they avoid you simply because you're a whistle-blower?
A great deal of it was being a whistle-blower. If I am an employer, and both candidates have their CPA and master's degree but one person is a whistle-blower and the second person is not a whistle-blower, I would want someone with a clean history. It's like there is a bull's-eye painted on you.

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