Morrell v. DLH Holdings Corp. (agency decision, September 23, 2024)

Plain-English summary

Eileen Morrell, an experienced financial-planning and government-contract accounting employee, alleged that DLH Holdings eliminated her position in retaliation for internal accounting complaints. The Board agreed that she genuinely believed some of the challenged accounting practices violated securities law, but held that substantial evidence supported the judge's finding that those beliefs were not objectively reasonable. The workers' compensation accrual change was disclosed, the EBITDA and fringe-benefit issues reflected supported accounting judgments, the bank reporting occurred within the cure period, and general personnel disputes were not tied to a covered SOX violation. The Board also upheld the alternative finding that DLH would have terminated Morrell anyway because her position had been selected for a planned reduction in force before her alleged protected activity, and its duties were later absorbed by other positions. It affirmed dismissal of the complaint.

Decision snapshot

• Cited authorities: 18 U.S.C. § 1514A; 49 U.S.C. § 42121; 29 C.F.R. § 1980.109(b)
• Outcome: Dismissal affirmed because no objectively reasonable protected belief was shown and the employer proved its same-action defense.
• Key point: A genuine accounting concern is not SOX-protected unless a similarly trained and informed person could reasonably connect it to a covered violation.

Full text (DOL official public release)

    U.S. Department of Labor          Administrative Review Board
                                      200 Constitution Ave. NW
                                      Washington, DC 20210-0001

    IN THE MATTER OF:


    EILEEN MORRELL,                               ARB CASE NO. 2023-0030

                COMPLAINANT,                      ALJ CASE NO. 2020-SOX-00005
                                                  ALJ MONICA MARKLEY
         v.
                                                  DATE: September 23, 2024
    DLH HOLDINGS CORP.,

                RESPONDENT.


Appearances:

For the Complainant:
      Eileen Morrell; Pro Se; Adairsville, Georgia

For the Respondent:
      Vincenzo M. Mogavero, Esq., Catelyn Stark, Esq.; Becker & Poliakoff,
      LLP; New York, New York

Before HARTHILL, Chief Administrative Appeals Judge, and WARREN,
Administrative Appeals Judge


                               DECISION AND ORDER

WARREN, Administrative Appeals Judge:

      This case arises under the whistleblower protections of Section 806 of the
Corporate and Criminal Fraud Accountability Act of 2002, Title VIII of the
Sarbanes-Oxley Act (SOX), as amended, and its implementing regulations.1 Eileen
Morrell (Complainant) filed a complaint with the U.S. Department of Labor’s
Occupational Safety and Health Administration (OSHA) alleging that DLH
Holdings Corporation (Respondent) violated the SOX by terminating Complainant’s


1       18 U.S.C. § 1514A; 29 C.F.R. Part 1980 (2024).
                                           2


employment in retaliation for engaging in protected activity.2 On March 27, 2023,
the Administrative Law Judge (ALJ) issued a Decision and Order Dismissing
Complaint3 finding that: (1) Complainant did not engage in protected activity
because it was not objectively reasonable for her to believe that she had reported
SOX-related violations prior to her termination, and (2) even if Complainant had
established she engaged in protected activity, Respondent demonstrated by clear
and convincing evidence that it would have taken the same adverse employment
action against Complainant absent that activity.4 Complainant appealed. Because
substantial evidence supports the ALJ’s decision, we affirm.

                                     BACKGROUND

      Complainant, who has over thirty years of experience in financial planning,
financial analysis, and government contract accounting,5 began working for
Respondent on June 20, 2011.6 Her initial job duties included performing
accounting work on government contracts, reviewing financial statements,
preparing earnings releases, preparing budgets, and preparing presentations for the
Board of Directors.7 In December 2012, Respondent’s Controller resigned and
Complainant inherited that position’s public reporting duties, which included
reviewing 10-K and 10-Q reports filed with the U.S. Securities and Exchange
Commission (SEC).8 In July 2016, Respondent increased Complainant’s salary and
promoted her to the role of Director of Financial Planning and Analysis.9

      In mid-2015, Respondent initiated the process of acquiring a company called
Danya.10 In early 2016, to prepare for the acquisition, Respondent began planning a
reduction-in-force (RIF) and identified positions that could be eliminated.11 The
acquisition of Danya closed in May 2016.12 Zach Parker, Respondent’s President
and CEO, testified that Complainant’s position was selected to be included in the
RIF in April or May 2016 because Complainant’s job duties were going to be

2     Decision and Order (D. & O.) at 1.
3     Id. at 1.
4     Id.
5     Id. at 4, 17.
6     Id. at 4.
7     Id. at 4, 17.
8     Id. at 4, 8, 16-18.
9     Id. at 5.
10    Id. at 14.
11    Id. at 39.
12    Id. at 6, 11.
                                          3


integrated into a new Controller position.13 Kathryn JohnBull, Respondent’s CFO,
also testified that DLH selected Complainant’s position to be included in the RIF in
early 2016 for the same reason.14

       Respondent decided to seek a new Controller and began recruiting for the
position in February 2016.15 JohnBull began interviewing candidates in March
2016.16 At the same time, Complainant proposed new positions for herself within
the company but did not apply for the Controller position.17 In August 2016,
Respondent hired Norm Toma as the new Controller18 and transferred some of
Complainant’s job duties to Toma.19

       During the last three months of 2016, Complainant complained that Toma
was not providing timely and accurate financial statements, took issue with an
updated valuation model, and disagreed with JohnBull on showing earnings per
share on the adjusted expected earnings before interests, taxes, depreciation, and
amortization (EBITDA).20 On January 24, 2017, Complainant emailed Parker
regarding a reduction in workers’ compensation accruals.21 On February 11, 2017,
Complainant formally filed an internal whistleblower complaint by emailing
Frederick Wasserman, the Chairman of the Board of Directors, and Victor DiGioia,
outside legal counsel.22 In response, Respondent’s outside counsel initiated an
investigation.23

       While the investigation was pending, Complainant continued to attempt to
craft a new position for herself and inquired about open positions for a Director of
Contracts and Corporate Compliance, and Vice President of Corporate




13    Id. at 39-40.
14    Id.
15    Id. at 17.
16    Id. at 10, 17.
17    Id. at 5, 18-19, 25, 40.
18    Id. at 14, 18, 26, 40.
19    Id. at 14, 18.
20    Id. at 40.
21    Id.
22    Id. at 5, 40.
23    Id. at 36, 40.
                                         4


Compliance.24 In an email to DiGioia, Complainant acknowledged that she would
likely be terminated from her position.25

       On March 27, 2017, Respondent’s outside counsel concluded that
Complainant’s complaints had no merit and submitted the results to the Audit
Committee of the Board of Directors.26 While the Audit Committee accepted the
results, it decided to have an outside accounting firm and an independent auditor
review the complaints.27 Both the outside accounting firm and the independent
auditor concluded that Respondent did not engage in any illegal conduct.28

       On March 31, 2017, Respondent terminated Complainant’s employment as
part of the planned RIF.29 Parker testified that, upon hiring Toma, it was his
expectation that Complainant’s job duties would be transferred to Toma in a
cooperative process until the company terminated Complainant’s position as part of
the RIF.30 After Respondent terminated Complainant’s employment, her position
was indeed eliminated, and her job duties were absorbed into the Controller
position and the Director of Financial Systems role.31

       On August 15, 2017, Complainant filed a whistleblower complaint with
OSHA alleging that Respondent unlawfully terminated her employment in
retaliation for her engaging in protected activity.32

1. Procedural Background

      On October 4, 2019, OSHA dismissed the complaint.33 Complainant timely
requested an ALJ hearing, which was held on May 3-4, 2021.34 On March 27, 2023,
the ALJ issued a D. & O. Dismissing Complaint.35 Complainant filed a timely


24    Id. at 40.
25    Id.
26    Id. at 36-37.
27    Id. at 37.
28    Id.
29    Id. at 11.
30    Id. at 16.
31    Id. at 16, 22.
32    Id. at 1.
33    Id. at 1-2, 13.
34    Id.
35    Id. at 1.
                                            5


petition for review with the Administrative Review Board (Board or ARB), alleging
that she engaged in protected activity across several emails and a formal internal
whistleblower complaint.36 Those alleged protected activities are as follows:

      1. Complainant reported concerns that Respondent reduced its workers’
         compensation accrual to show a small net gain instead of the loss shown
         prior to the adjustment.
      2. Complainant reported concerns that Respondent made improper
         accounting adjustments on financial reports to hit EBITDA targets.37
      3. Complainant disagreed with Respondent’s allocation of fringe benefits on
         government contracts because it reduced expenses in public disclosures
         and was misleading to investors.38
      4. Complainant alleged that Respondent was not compliant with a bank
         reporting covenant that resulted in default.
      5. Complainant made complaints pertaining to Respondent’s business and
         personnel decisions.

2. ALJ Decision

       The ALJ found that Complainant established she held a subjective belief that
Respondent violated securities laws and/or regulations specifically regarding the
takedown of the workers’ compensation accrual and fringe benefits allocations on
government contracts.39 The ALJ, however, questioned Complainant’s motivation
for raising allegations about Respondent’s accounting practices and determined that
Complainant’s complaints were a mix of objections to accounting decisions and
general objections to her compensation and position within the company.40 While
the ALJ indicated it seemed as though Complainant’s complaints “were asserted at


36    Id. at 34-35.
37      More specifically, after Respondent acquired Danya, Complainant alleged that
internal financial controls weakened, and the EBITDA were reduced to half the amount
Respondent had planned when it acquired Danya. D. & O. at 5. JohnBull elected to
amortize this loss over a period of ten years. Id. Complainant disagreed with JohnBull’s
approach and raised her concern that Respondent was underrunning its amortization and
violating accounting principles. Id. Complainant felt it was misleading and not in
compliance with SEC rules. Id. at 6, 28. She proposed another measure, which Respondent
adopted. Id. at 6.
38    Complainant alleged that in early March 2017, she reported her concerns regarding
Respondent’s allocation of fringe benefits on government contracts via emails to Parker,
Wasserman, and DiGioia. D. & O. at 30, 35. She argues that Respondent’s cost-shifting on
Danya government contracts intentionally misallocated fringe benefits. Id. at 35.
39    Id. at 35-36.
40    Id. at 36.
                                           6


least in part due to her being disgruntled with her position title and salary,”41 the
ALJ concluded a secondary motivation did not undermine her subjective belief in
accounting irregularities.42

       However, the ALJ found that Complainant did not establish an objectively
reasonable belief that Respondent violated the SOX on any of the alleged protected
activities.43 The ALJ found significant that even though Complainant reported her
“concerns to a plethora of individuals, no one else found her complaints to have a
foundation.”44 For this and other reasons further explained below, the ALJ
concluded that “a reasonable person in the same factual circumstances with the
same training and experience” would not believe that any of Complainant’s
allegations rose to the level of a SOX violation.45

       Regarding the workers’ compensation accrual, the ALJ found that
Complainant’s allegation was without merit because the change was appropriately
disclosed and was part of the normal first quarter reassessment of accruals.46 The
ALJ also credited the investigation into Complainant’s internal claim, which found
that there were no errors or illegal actions, and there was no fraud with respect to
Respondent’s accounting and disclosure of its workers’ compensation accrual.47

       Next, the ALJ found that Respondent’s EBITDA reports and financial data
did not contain any inaccuracies or information presented in a misleading way.48
The ALJ credited JohnBull’s testimony that she performed normal monthly
diligence during the closing process and her explanation that the estimated annual
rates used for the budget were subject to review based on actual performance and
updated facts, and that she adjusted accordingly.49 Further, the investigation into
Complainant’s internal claim confirmed that Respondent’s accounting of fringe
benefits for the contracts in question was correct.50




41    Id.
42    Id.
43    Id.
44    Id.
45    Id. at 36-39.
46    Id. at 36, 39.
47    Id. at 37.
48    Id. at 36-37.
49    Id. at 38.
50    Id. at 37-38.
                                         7


       Regarding the allocation of fringe benefits, the ALJ found that the financial
data did not contain any inaccuracies or information presented in a misleading way,
and Respondent’s methodology in allocating fringe benefits was consistent with
industry standards.51 The ALJ credited JohnBull’s testimony that, to the extent
that she and Complainant disagreed on the fringe benefits rate, she requested
Complainant use the rate that was already disclosed to and approved by the
government until a new rate was approved for the 2017 fiscal year.52 The ALJ also
credited outside counsel’s investigation, which confirmed that Respondent’s
methodology was correct.53

      Regarding Complainant’s allegation that Respondent defaulted on a bank
covenant, the ALJ found that JohnBull informed the bank that certain financial
statements would be late, and Respondent complied within the cure period.54 The
ALJ also credited the investigation that found Respondent compliant with its
applicable bank loan covenants.55 The ALJ concluded that there was no default, nor
would the situation ever result in default.56

       Lastly, the ALJ found that Complainant’s other complaints regarding
JohnBull’s operation of the Finance Department, Complainant’s job security, and
her issues with Toma, did not allege any SOX-protected activity.57 Rather,
Complainant’s complaints involved “differences of opinion on processes that were
not deficient, inaccurate, or misleading; properly disclosed changes in normal
processes; acceptable delays that would not result in default; and complaints
regarding personnel and compensation that did not allege illegality under SOX.”58
The ALJ credited JohnBull’s testimony that “any disagreement that Complainant
had with [JohnBull] on accounting issues was not a matter of fraud, but showed
simple differences of professional opinion.”59 The ALJ concluded that an individual
in Complainant’s position would have deduced that she and her supervisor had
differing opinions on procedures that could have been appropriately addressed in
different ways.60

51    Id. at 36-37.
52    Id. at 38.
53    Id. at 37.
54    Id. at 38.
55    Id. at 37.
56    Id. at 36.
57    Id. at 37.
58    Id.
59    Id. at 38.
60    Id. at 39.
                                              8



       The ALJ concluded that because Complainant had not established that she
had an objectively reasonable belief that she reported a violation, she failed to
establish a necessary element of her retaliation claim, protected activity, and thus
her claim failed.61 In the alternative, the ALJ found that, even if Complainant had
established she engaged in protected activity, Respondent demonstrated by clear
and convincing evidence that it would have taken the same adverse employment
action against Complainant absent the alleged protected activity.62

3. Parties’ Positions on Appeal

       On appeal, Complainant broadly contends that the ALJ erred in finding that
she did not engage in protected activity and that Respondent established by clear
and convincing evidence that it would have terminated her employment in the
absence of protected activity.63 Specifically, Complainant reiterates her argument
that Respondent’s workers’ compensation accrual and EBITDA adjustments violate
the SOX.64 In addition, Complainant contends that, up until the last three months
of her employment, she received outstanding feedback, a salary increase, stock
option awards, and a large bonus.65

       Respondent contends that the ALJ’s decision is supported by substantial
evidence,66 and that the ALJ correctly found that Complainant’s beliefs were not
objectively reasonable based on evidence to that effect, including that JohnBull,
outside counsel, independent accountants and auditors, and Respondent’s Audit


61     Id.
62     Id.
63     See Complainant’s Brief (Comp. Br.).
64      Id. at 10, 12-13. Complainant additionally moves to present new exhibits before the
Board. When determining whether to consider new evidence on appeal, the Board relies on
the regulations governing OALJ hearings that specify “no additional evidence may be
admitted unless the offering party shows that new and material evidence has become
available that could not have been discovered with reasonable diligence before the record
closed.” Trivedi v. Gen. Elec., ARB No. 2022-0026, ALJ No. 2022-SOX-00005, slip op. at 3
(citing 29 C.F.R. § 18.90(b)(1)). Complainant has not explained why she meets this
standard. We therefore will not consider this new evidence on appeal. See Childs v.
DimensionalMechanics, Inc., ARB No. 2021-0001, ALJ No. 2017-LCA-00008, slip op. at 4
(ARB Sept. 30, 2021) (rejecting newly submitted evidence as the complainant was unable to
show that it could not have been discovered with reasonable diligence before the record
closed); Aityahia v. Air Line Pilots Ass’n, ARB No. 2019-0037, ALJ No. 2018-AIR-00042,
slip op. at 3 n.2 (ARB May 19, 2020) (same).
65     Comp. Br. at 10.
66     Respondent’s (Resp.) Br. at 21-30.
                                              9


Committee and Board of Directors all concluded that Complainant’s beliefs had no
merit.67 Respondent asserts that Complainant’s concerns related to differences of
opinion and do not support an allegation of fraud or any other violation under the
SOX.68 In the alternative, Respondent contends that it would have terminated
Complainant’s employment absent the alleged protected activity as shown by
Respondent’s decision to include Complainant’s position in the RIF before
Complainant lodged any complaints.69

                          JURISDICTION AND STANDARD OF REVIEW

       The Secretary of Labor has delegated authority to the Administrative Review
Board to review ALJ decisions under SOX.70 The ARB reviews questions of law de
novo but is bound by the ALJ’s factual determinations if they are supported by
substantial evidence.71 “Substantial evidence” is “such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.”72 Because an
ALJ observes all witnesses throughout a hearing, the Board will defer to an ALJ’s
credibility determinations unless they are “inherently incredible or patently
unreasonable.”73

                                       DISCUSSION

       The SOX prohibits covered employers from discriminating against an
employee who provides information or otherwise assists in an investigation
regarding conduct “which the employee reasonably believes constitutes a violation
of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and
Exchange Commission, or any provision of Federal law relating to fraud against
shareholders . . . .”74 A SOX claim is governed by the burdens of proof set out in the



67    Id. at 23.
68    Id. at 23-25, 33-37.
69    Id. at 25-28, 31.
70     Secretary’s Order No. 01-2020 (Delegation of Authority and Assignment of
Responsibility to the Administrative Review Board (Secretary’s discretionary review of ARB
decisions)), 85 Fed. Reg. 13,186 (Mar. 6, 2020).
71     Schaefer v. New York Cmty. Bancorp, Inc., ARB No. 2022-0050, ALJ Nos. 2018-SOX-
00048, -00051, slip op. at 12 (ARB June 22, 2023) (citing to Cerny v. Triumph
Aerostructures-Vought Aircraft Div., ARB No. 2019-0025, ALJ No. 2016-AIR-00003, slip op.
at 5 (ARB Oct. 31, 2019)) (additional citations omitted).
72    Id. (citing to Cerny, ARB No. 2019-0025, slip op. at 5 (citations omitted)).
73    Id. (citation omitted).
74    18 U.S.C. § 1514A(a)(1) (citing 49 U.S.C. § 42121(b)).
                                               10


Wendell H. Ford Aviation Investment and Reform Act for the 21st Century
(AIR21).75

      To prevail, a SOX complainant must establish by a preponderance of the
evidence that: (1) they engaged in activity that SOX protects; (2) the respondent
took an unfavorable personnel action against them; and (3) the protected activity
was a contributing factor in the adverse personnel action.76

       An employee engages in protected activity when the employee “provide[s]
information” to the government or a supervisor “regarding any conduct which the
employee reasonably believes constitutes a violation of section 1341 [mail fraud],
1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or
regulation of the Securities and Exchange Commission, or any provision of Federal
law relating to fraud against shareholder . . . .”77 Although “[a] complainant need
not cite a specific code provision she believes was violated to engage in protected
activity, but [a complainant] nonetheless has to complain or provide information
about conduct that she reasonably believes concerns one of the six specifically
enumerated categories in the statute . . . .”78

1. Substantial Evidence Supports the ALJ’s Decision That Complainant Did
   Not Engage in Protected Activity

     A. Substantial Evidence Supports the ALJ’s Finding That Complainant Had a
        Subjectively Held Belief That Respondent Violated the SOX

      In order to establish protected activity, a complainant must establish a
“reasonable belief” that they disclosed illegal activity, which has both a subjective
and objective component.79 To satisfy the subjective component, the employee must
have actually believed that the conduct constituted a violation of relevant law or
was likely to.80


75      18 U.S.C. § 1514A(b)(2)(A) (citing 49 U.S.C. § 42121(b)).
76     Schaefer, ARB No. 2022-0050, slip op. at 13; see also 29 C.F.R. § 1980.109(a); 18
U.S.C. § 1514A(b)(2)(A) (citing 49 U.S.C. § 42121(b)).
77   18 U.S.C. §1514A(a)(1); see also Leviege v. Vodafone US, Inc., ARB No. 2019-0058,
ALJ No. 2016-SOX-00001, slip op. at 3 (ARB Mar. 19, 2021) (citations omitted).
78      Leviege, ARB No. 2019-0058, slip op. at 4 (citations omitted) (“A complainant need
not cite a specific code provision she believes was violated to engage in protected activity”).
79     Sylvester v. Parexel Int’l LLC, ARB No. 2007-0123, ALJ Nos. 2007-SOX-00039,
-00042, slip op. at 14 (ARB May 25, 2011) (citations omitted).
80     Sylvester, ARB No. 2007-0123, slip op. at 14 (citing Harp v. Charter Commc’ns, 558
F.3d 722, 723 (7th Cir. 2009)), 16.
                                            11


       Substantial evidence supports the ALJ’s finding that Complainant had a
subjective belief that Respondent violated the SOX.81 Specifically, Complainant
established that she actually believed that Respondent violated the SOX in the way
it calculated its workers’ compensation accrual based on her emails to Parker,
Wasserman, and DiGioia, which stated that Respondent’s change in its estimation
practice should be disclosed because it made the difference between reporting net
income instead of net loss.82 Complainant also established that she actually believed
that Respondent was misleading its investors regarding its allocation of fringe
benefits based on emails expressing her concern to coworkers, Parker, Wasserman,
and Digioia.83 We therefore affirm the ALJ’s findings that Complainant subjectively
believed that Respondent violated the SOX based on substantial evidence in the
record, satisfying the first component of a reasonable belief.

     B. Substantial Evidence Supports the ALJ’s Ruling That Complainant Did Not
        Establish an Objectively Reasonable Belief That Respondent’s Workers’
        Compensation Accrual Constituted a SOX Violation

       Complainant also bears the burden of showing that “a reasonable person of
similar experience, training, and factual knowledge would objectively believe that a
violation has occurred.”84 To demonstrate a reasonable belief that she was reporting
violations, a complainant “need not prove an actual violation of law, but they ‘must
do more than speculate, argue theoretical scenarios, or share mere beliefs that some
corporate activity is wrong and may theoretically affect the corporation’s financial
statements and its shareholders.’”85

        Here, Complainant’s first concern related to a theoretical situation that did
not occur. In this situation, Complainant alleged that Respondent permissibly
decreased its workers’ compensation accrual, but it needed to disclose the change in
its estimation practice—otherwise it could mislead investors and would violate SEC
recordkeeping requirements.86 However, the change in Respondent’s estimation

81      The ALJ did not make a specific finding on whether Complainant had a subjective
belief that Respondent violated the SOX regarding its EBITDA reports, the timeliness of its
bank reporting covenants, defaulting on its bank reporting covenants, or via any of
Complainant’s HR concerns. See D. & O. at 35-36. Because we find that Complainant did
not have an objectively reasonable belief that any of these activities violated SOX, infra
Part 1(E) to 1(F), her subjective belief is moot and the ALJ’s omission was harmless error.
82      D. & O. at 12, 28-29, 35.
83      Id. at 16, 30, 35-36.
84      Schaefer, ARB No. 2022-0050, slip op. at 13-14 (quoting Leviege, ARB No. 2019-0058,
slip op. at 4)).
85      Id. at 14.
86      D. & O. at 35.
                                        12


practice was appropriately disclosed in Respondent’s Form 10-Q and was part of the
normal first quarter reassessment of accruals.87 In the “Commitments and
Contingencies” section of the notes of Form 10-Q, Respondent explained that,
regarding workers’ compensation accrual, “[w]e accrue workers compensation
expense based on claims submitted, applying actuarial loss development factors to
estimate the costs incurred but not yet recorded.”88 In addition, the form also
included a section on the use of estimates, which explained,

             Significant estimates include . . . measurement of loss
             development on workers’ compensation claims . . . . We
             evaluate these estimates and judgments on an ongoing
             basis and base our estimates on historical experience,
             current and expected future outcomes, third-party
             evaluations and various other assumptions that we believe
             are reasonable under the circumstances. The results of
             these estimates form the basis for making judgments about
             the carrying values of assets and liabilities as well as
             identifying and assessing the accounting treatment with
             respect to commitment and contingencies. We revise
             material accounting estimates if changes occur, such as
             more experience is acquired, additional information is
             obtained, or there is new information on which an estimate
             was or can be based.[89]

      Moreover, although Complainant felt the disclosure was too inconspicuous,
she acknowledged that the change was addressed on both Form 10-Q and financial
statements.90 Complainant further acknowledged that, by the time she emailed
Wasserman and DiGioia, Respondent had publicly filed the 10-Q report.91

       Thus, as Respondent did disclose that it decreased its workers’ compensation
accrual, Complainant’s concern related to a theoretical situation—a lack of
disclosure that never transpired. Complainant was a financial planning and
government accounting professional with over 30 years of accounting and SEC
reporting experience and knowledge.92 A reasonable person with Complainant’s
experience would not have objectively believed that a SOX-protected violation had


87    Id. at 12, 36, 38.
88    Id. at 32.
89    Id.
90    Id. at 12.
91    Id.
92    Id. at 4
                                             13


occurred since the change in Respondent’s estimation practice was disclosed.93 By
comparison, and providing support for the ALJ’s finding, JohnBull also had over
thirty years of experience in the finance industry and government services,94 and
did not believe there were any SEC violations.95 Complainant has not pointed to
contrary (or indeed any) evidence in the record that demonstrates her belief was
objectively reasonable. Thus, we affirm the ALJ’s ruling that Complainant did not
have an objectively reasonable belief that Respondent’s workers’ compensation
accrual methodology constituted a violation.

     C. Substantial Evidence Supports the ALJ’s Ruling That Complainant Lacked
        an Objectively Reasonable Belief That Respondent’s EBITDA Reports Violated
        the SOX

       Substantial evidence in the record supports the ALJ’s finding that
Complainant’s reports regarding Respondent’s EBITDA reports were likewise not
objectively reasonable. Complainant had reported that JohnBull made improper
accounting adjustments on financial reporting in order to hit EBITDA targets.
However, in an email from JohnBull to Toma dated February 23, 2017, JohnBull
stated that she was not trying to meet a predetermined adjusted EBITDA, but
rather was attempting to estimate where she thought they would come out in order
to have an early indication if the update appropriately reflected the adjustments.96
Further, JohnBull testified that this email reflected a normal, standard monthly
diligence of the closing process.97 She also testified that estimated annual rates
were formed during the budget cycle and were later subjected to review based on
actual performance and updated facts, and that it would not have been appropriate
to continue to use estimates throughout the year.98 Finally, the internal
investigation into the matter found no inaccuracies.99

     Complainant has not cited record evidence to support her argument that
Respondent’s accounting adjustments on the EBITDA reports violated the SOX.

93     See Allen v. Stewart Enters., Inc., ARB No. 2006-0081, ALJ Nos. 2004-SOX-00060,
-00061, -00062, slip op. at 14 (ARB July 27, 2006), aff’d Allen v. Admin. Rev. Bd., 514 F.3d
468, 478-79 (5th Cir. 2008) (finding that it was not objectively reasonable for complainant, a
licensed CPA, to believe that internal financial documents did not comply with securities
law because complainant knew the internal documents were not submitted to the SEC and
knew the documents did not have to be compliant).
94      D. & O. at 17.
95      Id. at 19-21.
96      Id. at 24.
97      Id.
98      Id. at 24, 38.
99      Id. at 36-37.
                                         14


Rather, as the ALJ found, Complainant’s argument rests on speculation and reflects
a difference of opinion.100 Given Complainant’s lengthy experience and training,
substantial evidence supports the ALJ’s determination that a reasonable person of
similar experience, training, and factual knowledge to Complainant would not have
believed that a violation had occurred. Thus, we affirm the ALJ’s ruling that
Complainant did not have an objectively reasonable belief that Respondent’s
EBITDA reports were a violation under the SOX.

      D. Substantial Evidence Supports the ALJ’s Ruling That Complainant Did Not
         Establish an Objectively Reasonable Belief That Respondent’s Method of
         Allocating Fringe Benefits Violated the SOX

       Substantial evidence in the record also supports the ALJ’s finding regarding
Complainant’s report of concerns about Respondent’s allocation of fringe benefits on
government contracts. Complainant asserted that JohnBull made a $100,000
reduction in Danya fringe benefits costs that should have equally applied to both
administrative expenses and direct costs, but which was applied entirely to
administrative expenses.101 Complainant alleged this allocation reduced these
expenses in reporting and public disclosures and was misleading to investors.102
JohnBull testified that this was ultimately an immaterial issue because it did not
impact revenue recognition.103 Parker testified that he did not recall having a
reaction to Complainant’s concern because it was normal practice that Danya had a
different way of treating these indirect costs.104 In addition, an outside accounting
firm reviewed Respondent’s methodology and confirmed that Respondent’s
accounting of fringe benefits was correct and consistent with industry standards.105

       Given that Complainant has over thirty years of experience in financial
planning, analysis, and government accounting, the ALJ permissibly found based
on witness testimony and the results of the outside counsel investigation, that a
reasonable person of similar experience, training, and factual knowledge to
Complainant would not have objectively believed that Respondent’s method in
allocating fringe benefits violated the SOX. Moreover, Complainant has not cited to
evidence in the record that would demonstrate that the ALJ’s ruling is not
supported by substantial evidence. Thus, we find that substantial evidence supports



100      Id. at 37.
101      Id.
102      Id.
103      Id. at 24.
104      Id. at 16.
105      Id. at 37.
                                              15


the ALJ’s finding that no objectively reasonable person could believe that
Respondent’s method in allocating fringe benefits violated the SOX.

      E. Substantial Evidence Supports the ALJ’s Ruling That Complainant Lacked
         an Objectively Reasonable Belief That Complainant’s Alleged Non-compliance
         with a Bank Reporting Covenant Does Not Support Protected Activity

      Complainant alleged she engaged in protected activity on February 11, 2017,
when she expressed concerns about Toma’s delays in sending her data she needed to
prepare financial statements for a bank.106 She claimed the delay resulted in a late
financial statement which could violate Respondent’s covenant with the bank.107

       Regarding Complainant’s allegations about Respondent’s non-compliance
with a bank reporting covenant, substantial evidence supports the ALJ’s
determination that an investigation showed that Respondent complied with the
reporting within the cure period.108 JohnBull communicated to the bank that
certain financial statements would be delivered after the normal due date, and the
bank accepted the proposed reporting date.109 In addition, JohnBull testified that
one of Complainant’s job duties was to prepare these financial statements, and that
late delivery of financials typically would not result in default, but rather was a
routine administrative requirement.110

        Complainant has not cited to any record evidence to support her allegation
that Respondent defaulted. Rather, Complainant’s concern relates to a theoretical
situation that may have occurred if Respondent had not complied within the cure
period—and, if it had occurred, Respondent would have been required to report
it.111 But again, none of this happened. As the ALJ found “there was no default, nor
would the situation have ever resulted in a default.”112 Thus, we hold that
substantial evidence supports the ALJ’s finding that no reasonable person of similar
experience, training, and factual knowledge to Complainant would have objectively
believed that a violation occurred.


106      Id. at 12, 36
107      Id. at 12.
108      Id. at 36.
109      Id.
110      Id. at 20, 36.
111    See Schaefer, ARB No. 2022-0050, slip op. at 14 (complainants “must do more than
speculate, argue theoretical scenarios, or share mere beliefs that some corporate activity is
wrong and may theoretically affect the corporation’s financial statements and its
shareholders.”) (inner quotations omitted).
112      D. & O. at 36.
                                               16



      F. Substantial Evidence Supports the ALJ’s Ruling That Complainant’s
         Additional Complaints Were Not Protected Activity

        Complainant raised several complaints about Respondent’s business and
personnel decisions. She complained of Toma’s competence, JohnBull’s treatment of
her after reporting concerns, Respondent’s labor charging practices, and having to
inform one of Respondent’s Human Resources representatives that she intended to
file a SOX complaint if her internal complaint was not accepted.113

       “General assertions of wrongdoing untethered from [the SOX’s] enumerated
categories are not protected . . . .”114 Here, rather than reporting a SOX violation,
Complainant merely cited disagreements over the ways in which JohnBull operated
the Finance Department, differences of opinion on business and personnel decisions,
and concerns about her job security.115 Complainant has not alleged any connection
to a violation under SOX regarding these concerns. In addition, Complainant’s
concern that her internal complaint would not be accepted was rendered moot
because Respondent not only fully investigated her complaint but also had an
outside accounting firm independently investigate the claim.116 Thus, we find that
substantial evidence supports the ALJ’s finding that no objectively reasonable
person would believe that these generalized personnel and compensation concerns
alleged violations under SOX.117

      Accordingly, we affirm the ALJ’s finding that Complainant has not
demonstrated that she had an objectively reasonable belief that she engaged in
protected activity on any of the aforementioned grounds. Again, the ALJ’s
overarching conclusion regarding whether Complainant held an objectively
reasonable belief was based primarily on the fact that “even though she reported
her concerns to a plethora of individuals, no one else found her complaints to have
foundation,” which was supported by substantial evidence. Because Complainant
has not established that she engaged in protected activity, she has failed to meet
her burden to establish her whistleblower claim by a preponderance of the evidence
and her claim fails.




113      D. & O. at 34-35.
114      Leviege, ARB No. 2019-0058, slip op. at 4 (citations omitted).
115      D. & O. at 37.
116      Id. at 37-39.
117      Id.
                                          17


2. Substantial Evidence Supports the ALJ’s Finding That Respondent
   Established by Clear and Convincing Evidence That It Would Have
   Terminated Complainant’s Employment Absent Any Alleged Protected
   Activity

        If a complainant meets their burden of proof, the employer may avoid liability
if it proves its affirmative defense, which requires demonstrating by clear and
convincing evidence that it would have taken the same adverse action in the
absence of any protected activity.118 The ALJ found, assuming that Complainant
had established that she engaged in protected activity, that Respondent
demonstrated that it would have taken the same adverse employment action
against Complainant absent that activity.119 Complainant contends that
Respondent did not meet their burden of proving by clear and convincing evidence
that it would have terminated Complainant’s employment absent protected activity
because Respondent did not memorialize the list of employees who were to be
included in the RIF until mid-March 2017.120

        Although Respondent did not memorialize the list of employees included in
the RIF, the record substantially supports the ALJ’s ruling that the testimony of
Parker and JohnBull made it evident that Complainant’s position was included in
the RIF nearly a year before Complainant engaged in her alleged protected
activities. Respondent began planning a RIF in early 2016, once it was apparent
that Respondent was going to successfully acquire Danya.121 Parker specifically
testified that Complainant’s position was included in the RIF in April or May of
2016.122 JohnBull testified that Complainant’s position was included in the RIF in
early 2016.123

       Notably, Complainant’s job duties were absorbed by either the Controller
position or the Director of Financial Systems.124 JohnBull testified that, prior to the
acquisition of Danya, Respondent committed to implementing a new accounting
system.125 Respondent previously had a Controller until 2012, at which point



118   29 C.F.R. § 1980.109(b).
119   D. & O. at 39.
120   Comp. Br. at 16.
121   D. & O. at 39.
122   Id. at 14, 39.
123   Id. at 17, 39.
124   Id. at 18, 40.
125   Id. at 17.
                                         18


Complainant took on several of that position’s job duties.126 As part of the
restructuring process, JohnBull reestablished the Controller role, began recruiting
for the position in February/March 2016, and hired Toma in August 2016.127 Parker
testified that it was his expectation that Complainant’s job duties would be
transferred to Toma in a cooperative process leading up to the RIF.128 After
Respondent terminated Complainant’s employment, Complainant’s position was
eliminated.129 This evidence provides support for the finding that Respondent
eliminated Complainant’s position because her job duties were going to be absorbed
by the Controller, and would have done so absent Complainant’s alleged protected
activity.

       In addition, although Complainant received a salary increase in July 2016,130
other employees included in the RIF also received salary increases in 2016.131
Parker testified that compensation adjustments did not influence whether an
employee was selected to be included in the RIF.132 Parker stated that, like
Complainant, the Director of Health Technology also received a bonus in 2016 but
was later included in the RIF because that position was also absorbed by another
position.133 Thus, evidence that similarly situated employees received salary
increases and were still part of the RIF, supports the ALJ’s finding that Respondent
planned to terminate Complainant’s employment prior to her alleged protected
activity and does not present a contradiction to the ALJ’s determination.

      Therefore, we affirm the ALJ’s finding that Respondent established by clear
and convincing evidence that it would have terminated Complainant’s employment
absent the alleged protected activity.




126   Id. at 16.
127   Id. at 18, 40.
128   Id. at 16.
129   Id. at 22.
130   Id. at 5.
131   Id. at 14, 41.
132   Id. at 14.
133   Id.
                                            19


                                      CONCLUSION

       For the foregoing reasons, we AFFIRM the ALJ’s D. & O.134

              SO ORDERED.




                                          ____________________________________
                                          IVEY S. WARREN
                                          Administrative Appeals Judge



                                          ____________________________________
                                          SUSAN HARTHILL
                                          Chief Administrative Appeals Judge




134    In any appeal of this Decision and Order, the appropriately named party is the
Secretary, U.S. Department of Labor, not the Administrative Review Board.