Fired Auditor Awarded $2.6-Million Judgment : Workplace: The damage amount may be a record for a plaintiff who was employed for less than three months.

A fired internal auditor won a whopping $2.6-million wrongful-termination judgment against Summit Health Ltd., a Burbank-based hospital and nursing home concern, late Wednesday in what may be a record-setting case.

The auditor, Ron Kaufman, alleged in his suit that he had been fired after less than three months at Summit solely because he uncovered financial irregularities in Summit’s books. Summit maintained that Kaufman was simply incompetent.

A Los Angeles Superior Court jury said Summit must pay Kaufman more than $2.6 million in damages, including $2.5 million for emotional distress. Kaufman was earning $53,000 a year as Summit’s director of internal audit.

“It is an astounding verdict, an incredible verdict,” said Judd Osten, senior vice president of legal affairs at Summit. “We are very disappointed that the jury decided to award $2.6 million to an employee who was with us less than six months before he was terminated.”

Osten added that Summit is currently “reviewing” its options and may attempt to appeal or have the award overturned.

The award was not the largest in history, but it was highly unusual, said James Dertouzos, senior economist at the RAND Corp.’s Institute for Civil Justice. And, if ranked by employee seniority, it may, indeed, break records.

“The big-money suits are usually for people who have been with the company for a long time and who can prove that their careers have been ruined,” Dertouzos added.

There have only been a handful of multimillion-dollar wrongful-termination judgments, according to a 1988 study by the RAND institute. The median payment to the plaintiff was only $74,500, according to the study. The average award, which is skewed by a handful of multimillion-dollar payments, was $650,000, the study said.

However, the jury was swayed in this case by public policy issues, said Tim Wheeler, a partner at Greene, Broillet, Taylor & Wheeler who represented Kaufman in the case.

“Basically, what the jury said was they weren’t going to stand for a company squashing the little guy who is only standing up for the integrity of the financial statements,” Wheeler said.

The case revolved around what Kaufman said he discovered in his 2 1/2 months at Summit. Within a month of joining the company, he said he discovered that Summit was overstating its financial health by not putting enough money in reserve for potential losses on receivables and contractual allowances.

Kaufman said he called the problem to the attention of Summit’s then-president, William Pierpoint, but Pierpoint failed to act. Later, Kaufman asked to address the company’s board or its audit committee to talk about the problems, and that’s when he was fired, Wheeler said.

Osten said there was no evidence that Kaufman ever talked to Pierpoint about the problem. Both Pierpoint and Summit’s chief financial officer were ousted from Summit in 1989, but Osten said that had nothing to do with Kaufman’s case.

Osten said Kaufman was fired because his performance was substandard. Kaufman’s reports on Summit’s long-term care group were “too vague,” Osten said, which was why he was fired.

Two years after Kaufman left, Summit took a special $17.2-million writedown to provide for potential losses on some of its businesses, Wheeler said. Summit said that adjustment was unrelated to Kaufman’s claims.

“We think Mr. Kaufman has taken advantage of a situation to try to justify his termination on the basis of something that did not exist at the time,” Osten said.

But Wheeler said that two months before the writedown was announced, Kaufman had stated in a deposition that Summit would need to take a special charge of between $8 million and $15 million.

Wheeler said Kaufman was particularly disturbed by the accounting problems because they were uncovered only months before Summit offered $85 million in bonds to the public.