A former Washington Mutual Inc. vice president, who claimed that she was retaliated against after raising questions about loan-funding practices, has been awarded $1.24 million in damages by the Labor Department.
The decision, issued Tuesday, is believed to be the first in a Sarbanes-Oxley whistle-blower case in which an employee won so-called front-pay damages from an employer instead of reinstatement, said attorney Marc Susswein, who represented the former vice president, Theresa Hagman of Moorpark.
Under the Sarbanes-Oxley Act, passed in 2002 to tighten standards for corporate reporting of financial statements, front-pay damages are awarded when a judge decides that such bad blood exists between an employee and an employer that returning the worker to the same workplace would be counterproductive.
That was the reasoning behind Administrative Law Judge Gerald Etchingham's order that granted Hagman $643,000 in front pay, plus $430,000 in other compensation and attorneys' fees. She had been awarded $167,000 in back pay.
The judge said he found in Hagman's favor "based on the hostility" exhibited toward Hagman by Washington Mutual's managers and "the likelihood of a dysfunctional work environment upon reinstatement."
Seattle-based Washington Mutual, one of the nation's largest banking firms with a large presence in California, declined to say whether it would appeal. "We are presently reviewing the decision and have no comment at this time," company spokesman Alan Gulick said.
Hagman, who was unavailable to comment for this story, was hired by Washington Mutual as a vice president and manager of a construction lending unit in Chatsworth in 2001. She consistently received stellar performance reviews and was offered a promotion, according to the judge's written decision.
Beginning in December 2003, Hagman noticed that about 30 loans hadn't been completely funded and had gone into immediate default, something that had occurred only twice the year before. When she raised her concerns with a supervisor, he became angry and, Hagman said, was physically and verbally threatening.
She reported the confrontation to other managers and to the employee relations department, which Hagman said did nothing. She also reported her concerns about the loans and an internal investigation was opened, which eventually vindicated Hagman and found that procedures weren't followed.
In the meantime, Hagman was due for her annual performance review. This time, her supervisor gave her sub-par marks. The poor review was then cited by the company when it fired her March 31, 2004.
Hagman filed a complaint with the Labor Department, citing violations of the Sarbanes-Oxley Act. A department investigation found that her complaints had merit, Susswein said.
The Labor Department ordered that Hagman be reinstated and awarded her $167,000 in back pay.
Washington Mutual didn't argue with the finding and agreed to take back Hagman. But she balked, fearing retaliation.
Instead, Hagman appealed the reinstatement, asking for front-pay damages.