- Confusion Over Sarbanes-Oxley Procedures Delays Reinstatement Of Terminated Bank Executive
- February 27, 2006 | Authors: Melissa Raphan; Michael Iwan
- Law Firm: Dorsey & Whitney LLP - Minneapolis Office
As follow-up to an item reported in the March 16, 2005, eUpdate, the United States District Court for the Eastern District of Virginia recently refused to enforce that portion of a Sarbanes-Oxley decision from the Office of Administrative Law Judge requiring a bank immediately to reinstate its former chief financial officer, an order the court described as a first of its kind under Sarbanes-Oxley. See Welch v. Cardinal Bankshares Corp., No. 05-00546 (E.D. Va. Jan. 26, 2006).
Citing "impreciseness," "confusion," and "uncertainty" in the overlapping administrative and judicial enforcement process under Sarbanes-Oxley, the court determined that the bank did not receive sufficient notice of the process to challenge the reinstatement order, which required both an appeal of the OALJ's decision to the Administrative Review Board and a separate application to the ARB for a stay of reinstatement. The court also noted uncertainty as to whether the OALJ's decision constituted a final, recommended, or preliminary order under the reinstatement provisions of Sarbanes-Oxley. See 29 C.F.R. § 1980.1110(b). The court of course, did not conclude that the chief financial officer should not be reinstated, only that the bank should not be precluded from challenging the OALJ's reinstatement order for failing to follow the complex procedural requirements of Sarbanes-Oxley.
Obviously, employers have grown familiar with the substantive elements of Sarbanes-Oxley compliance. This case, however, exemplifies the "next wave" of Sarbanes-Oxley challenges facing employers, as complaints brought pursuant to Sarbanes-Oxley begin to wind their way through the complicated enforcement process, making even more acute the need for counsel who know not just what the law proscribes but also what procedures companies must follow to protect and enforce their rights.