Financial Sector, Whistleblower Case

Financial Whistleblowing By Los Angeles Controller

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Plaintiff began working for Defendant on or about January 29, 2007 through an employment agency and was permanently hired on or about April 23, 2007 as Defendant’s controller.

Plaintiff made a series of complaints about conduct that he reasonably believed constituted suspicious, illegal conduct that, amongst other things, could subject him to criminal or civil prosecution.

On or about April of 2007 through the end of his employment, between 25-50 times Plaintiff complained to Deaf Ears Manager, Defendant’s CFO and Plaintiff’s immediate report, that Defendant engaged in inurement practices that violated the law. These inurement practices including excess and unnecessary compensation to past and former employees.

Between approximately February of 2009 until the end of his employment, Plaintiff complained more than ten times to Deaf Ears Manager that overtime was not being properly paid to non-exempt employees, nor were meal breaks. This was a particular concern to Plaintiff because payroll was his department.

February of 2008 until the end of his employment, Plaintiff complained to Deaf Ears Manager that IRS regulations were being violated by providing employees and executives with vehicles, but failing to report it as income on their w-2s. At a certain point, Plaintiff was informed that the CFO asked the treasurer of Defendant about this issue and was told that the CEO can do whatever he wants, and if he does not want to cause the employees of the organization to have to report this perk as income they do not have to.

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From late 2008 until he was terminated, Plaintiff complained to Corrupt Outside Auditor, an outside CPA about various issues that he believed were suspicious circumstances, illegal conduct that, amongst other things, could subject him to criminal or civil prosecution. These are the same issues described in Paragraphs 7-9 of this financial whistleblower lawsuit. Plaintiff is informed and believes that Corrupt Outside Auditor discussed these issues with the CEO and CFO of Defendant. On or about the Spring of 2009, one of these complaint sessions occurred while in the presence of Corrupt Outside Auditor, the CEO, and CFO of Defendant.

Plaintiff complained to CEO non-exempt employees were not being properly paid overtime or meal breaks.

On or about September or October of 2009 when the outside C.P.A. firm was present for an audit, Plaintiff raised his issues about overtime, meal breaks, inurements, and vehicles, as described in the lawsuit. Corrupt Outside Auditor and Defendant’s CFO then berated Plaintiff for raising these issues in front of the CEO of Defendant. During this session, in front of the CEO and CFO, Plaintiff said that he felt that he was participating in the activities and would be get in trouble himself, including, but not limited to, the fact that he was running the payroll department. Defendant’s CFO explained it was wrong to raise these issues in front of the CEO because he would not change his practices, and it was unlikely anybody outside the organization would ever see evidence of these practices. Afterwards, Plaintiff was rarely spoken to by the CFO.

On or about March 4, 2010 Plaintiff utilized the whistle blower complaint process at Defendant. Plaintiff put into writing his various complaints, and sent it to Useless Board Member, Chairman of Defendant’s Board. The writing stated some non-exempt employees worked more than eight hours a day and were not paid overtime, and were not given meal breaks nor paid one hour for not having a meal break. The writing indicated company vehicles were being used by employees for transportation and there was a failure to reflect this on their w-2s.

Following Plaintiff’s white blower complaint, he was written up in a serial fashion beginning March 11, 2010 when Plaintiff had not been written up before.

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On or about March 17, 2010 Plaintiff wrote Defendant’s human resource manager a rebuttal to the first write-up. In the rebuttal, he mentioned that an auditor hired by the City of Lawndale had stated it was insurance fraud to have an ex-employee and her spouse on the Defendant’s health insurance policy. This was also an issue Plaintiff had raised with Defendant’s CFO.

On or about May 14, 2010 Plaintiff was terminated for pretextual reasons.

The Plaintiff is informed, believes, and based thereon, alleges Defendant to this cause of action terminated the Plaintiff in violation of public policy by terminating the Plaintiff for making complaints about what he reasonably believed violated the law, and does violate the law according to the following statutes that affect society at large:

  • a. terminating the Plaintiff because Plaintiff complained of conduct violating California Business and Professions Code Section 17200 concerning Defendant by engaging in unfair, false, and deceptive trade practices by deceptively, fraudulently, and unfairly attempting to keep worker’s compensation rates low by failing to report overtime wages and the keeping of a non-employee on a group health insurance plan;
  • b. California Insurance Code Section 11760 which makes it unlawful, and imposes penalties, to make or cause to be made any knowingly false or fraudulent statement of any fact material to the determination of the premium rate, or cost of any policy of workers’ compensation insurance for the purpose of trying to reduce the premium and cost of the insurance which in this case was Defendants’ failure to report overtime wages and the keeping of a non-employee on a group health insurance plan;
  • c. California Insurance Code Section 676 which sets forth a public policy against fraud or material misrepresentations in order to obtain insurance which occurred when Defendants failed to report overtime wages which had the effect of keeping Defendant’s worker’s compensation premiums lower and the keeping of a non-employee on a group health insurance plan;
  • d. California Insurance Code Section 338 which sets forth a public policy against insureds providing fraudulent omissions to insurance companies and thereby giving the insurance carrier the right to cancel a policy if that occurs. Plaintiff’s complaints about Defendant’s failure to report overtime wages to their workers compensation carrier was a complaint of a failure to properly pay for workers compensation insurance based upon the true wages of the employer with overtime compensation which is used as a rate multiplier and the keeping of a non-employee on a group health insurance plan even though that employee ceased to work for Defendant years before;
  • e. California Civil Code Sections 1572, 1709-1710 for making false representations to Defendant’s workers compensation carrier about a lack of overtime worked by Defendant’s employees, perks (automobiles supplied to employees) yet w-2s were not issued which was fraud to the Franchise Tax Board and IRS, and fraudulent representations that persons were employed who were not so they could be on a group health insurance plan;
  • f. California Insurance Code Section 1879, 1879.2, et. seq. declaring insurance fraud a public policy and making it a crime to make a false insurance claim which includes claiming somebody is still an employee for health insurance benefits;
  • g. Defendant wanted Plaintiff to violate public policies relating to the prompt payment of wages including Labor Code Sections 222-224 and California Code of Civil Procedure Section 487.020 as Phillips v. Gemini Moving Specialists, 63 Cal.App.4th 563, 570, 74 Cal.Rptr.2d 29, 33 (2nd App. Dist. 1998) held, and which Gould v. Maryland Sound Industries, 31 Cal.App.4th 1147, 37 Cal.Rptr.2d 718 and Gantt v. Sentry Ins., 1 Cal.App.4th 1083, 1095, 4 Cal.Rptr.2d 874 (1992) held California courts have long recognized that wage and hour laws concern the health and safety of workers and the general public health and general welfare of society;
  • h. California Labor Code Section 226.7 provides that employers may not require their employees to work through meal periods without paying them an hour of their normal hourly wage because California Labor Code Section 512 entitles non-exempt employees to meal breaks;
  • i. Plaintiff was refusing to work in an environment in which California Labor Code Sections 558 and Section 226 were violated, and he had personal liability under Section 558 because he was the one in charge of the payroll department that was causing employees not to be properly paid overtime or for meal breaks;
  • j. 26 U.S.C.A. 501 and particularly 501(c)(3) that prohibits non-profit corporations from giving inurements to their employees which Plaintiff contended occurred through excess pay, health insurance benefits after the employee ceased to work for Defendant, automobiles that were not reflected on w-2s, and lucrative severance and other payments given after employees no longer worked for Defendant.
  • k. Federal Tax Regulation 31.3121 defines wages and this definition is incorporated into Internal Revenue Code Section 3231e stating that compensation paid to employees is taxable. However, Defendant gave their employees generous car allowances and did not tax their employees on those benefits.