SOX Whistleblower Gets CPA Support
CPAs rally 'round CFO who was fired for raising accounting issues in first test of Sarbanes-Oxley powers.

Rick Telberg/At Large
for the AICPA Insider


CPA David Welch may not have realized he had so many friends in the profession.

But after we reported here that the bank that sacked Welch was ordered by a judge to reinstate him with back pay, interest and legal costs, CPAs from across the nation responded with messages of support and encouragement.

The Welch case may be the first test of the whistleblower provisions of the Sarbanes-Oxley Act.

'This is a great case because it goes to the heart of whistleblowing and why such laws need to be applied to professionals, like accountants and attorneys,' acceding to Art Berkowitz of Orange County, Calif. 'If there is anything we have learned from the corporate scandals, it is that there have usually been people at the companies who knew something improper was going on, but were unable to do anything about it.'

Welch v. Floyd involves the tiny Bank of Floyd in the farming community of Floyd, Va. The bank has barely 600 shareholders and the town has 432 residents. Of course, the final verdict isn't in; the bank's parent company, Cardinal Bancshares, is appealing, and it could take months or years for the last chapter to be written. Indeed, the bank denies all of Welch's charges.

The critical ingredient under SOX is that the case hinges not on whether Welch's allegations are correct, but on whether he "reasonably believed" that a violation of law or SEC regulations was taking place, and whether the bank had punished him for voicing those concerns.

"Sarbanes-Oxley was expressly enacted by Congress to foster the disclosure of corporate wrongdoing and to protect from retaliation those employees, officers and directors who make such disclosures," the judge wrote in his ruling.

"My hat is off to Mr. Welch," said Linda Maxwell, finance director at a Long island, N.Y., nonprofit. "It took a lot of guts to stand up for what he believed. Too often over the course of my career I witnessed board chairmen determining the earnings for a quarter and accounting departments creating journal entries to achieve the designated result. Maybe SOX will encourage CPA's to find their backbones. Until then, I remain in non-profit where the numbers are real."

"In my former employment with a multinational corporation," said one woman who asked to remain nameless, "I saw many things I questioned. I was an accounting student at the time and working as a lowly accounts receivable clerk. I too was intimidated by a superior, but I had no hope of confronting the 6-foot-2, 280-pound, blustering vice president of accounting. Now that I have a little auditing experience behind me, I know that I was correct in my analysis. I hope to see Sarbanes Oxley invoked successfully and often."

Some, like "Alan," wrote to say they too often see accounting rules bent, especially at smaller companies. "After working for a number of small private businesses, I'm no longer amazed at how many owners and managers think if no one is looking over their shoulder, then it's really o.k. to do the unethical and/or illegal. I feel for Mr. Welch. He was caught between the devil and the deep."

"Too many executives," added "John," "think they have the right to order variations from good 'proper' accounting. Maybe this occurrence in a small bank will get the attention of the larger company execs." In fact the Welch v. Floyd case is already reportedly becoming a subject of bank board meetings.