On March 5, 2014, a California jury awarded $6 million to a former accounting executive at Playboy Enterprises Inc. (the “Company”), finding that the Company discharged the former employee in violation of Section 806 of SOX. The case is Zulfer v. Playboy Enterprises Inc. et al., No. 2:12-cv-08263 (C.D. Cal.). The award is reported to be the largest verdict awarded to date under Section 806 of SOX.
Plaintiff Catherine Zulfer (“Plaintiff”), a former senior vice president who worked for the Company for nearly 30 years, alleged that she was discharged after refusing the demands of the Company’s CFO to set aside $1 million in executive bonuses that had not been approved by the Board of Directors. She alleged that the Board had always approved discretionary bonuses before they were accrued or paid, and the CFO and CEO were scheduled to receive the majority of the money that she had been asked to set aside. After allegedly refusing to set aside the $1 million on several occasions, Plaintiff asserted that she informed the General Counsel and outside counsel that she believed that executives were trying to side-step internal accounting controls in violation of SEC rules. Plaintiff’s employment was terminated thereafter, and she filed suit under Section 806 of SOX. The jury awarded Plaintiff $6 million, finding that the Company violated Section 806 of SOX by discharging her for refusing to improperly allocate executive bonuses. Employers should take note of this sizeable award, particularly given that it may lead to a spike in whistleblower retaliation claims.