So-called Enterprise bill would weaken protections for whistleblowers
This article first appeared in the St. Louis Beacon, March 25, 2011 - When legislators or lobbyists talk about a bill in the Missouri General Assembly that would weaken protection for whistleblowers, they often call it the "Enterprise bill."
The reason is that Enterprise Rent-a-Car of Clayton has made it a top legislative priority for the past five years, ever since the firm lost a whistleblower lawsuit filed by its fired corporate comptroller, Thomas P. Dunn.
The Senate-passed version of the whistleblower provision is expected to come up in the House soon after the members return from recess. The bill would remove whistleblower protection from an employee who warned a company it was about to violate a law. Under the bill, whistleblower protection would kick in only after the company had actually violated the law. So a whistleblower would not be protected while trying to prevent illegal conduct.
"Why would anyone want to wait until a nuclear plant melts down or Deepwater Horizon blows up before extending protection to a whistleblower who could prevent a disaster like that?" asked Matthew Ghio, one of the lawyers who represented Dunn. "Dunn blew the whistle (at Enterprise) before any of the accounting scandals at Enron or WorldCom that involved Arthur Andersen. There still would be an Arthur Andersen today if Tom had worked there."
Dunn testified that he was fired after taking the position that Enterprise was not following the accounting principles required of a public company. At the time of the dispute, Enterprise was planning to go public, although it later decided against that course. To go public, it needed Dunn to attest to the company's adherence to generally accepted accounting principles. If the legislation now favored by Enterprise had been law when Dunn challenged his firing, Enterprise would have won the case.
Lawyers and lobbyists familiar with the court case and subsequent legislative proposals from the firm say that some Enterprise executives took the case personally.
Friends and associates of Lisa VanAmburg, Dunn's main lawyer at the time, say that Donald L. Ross, president of Enterprise Rent-A-Car Canada Limited, opposed VanAmburg for a judgeship because of her role in the case. Ross is a member of Missouri's Appellate Judicial Commission.
Raymond T. Wagner, vice president of government and public affairs for Enterprise, has led the company's effort to pass the bill during the past several legislative sessions, lawyers and lobbyists say.
Neither Ross nor Wagner was available for comment. Gordon Reel, assistant vice president for government and public affairs, said the company's main aim was to "clarify the law in regard to whistleblowers and set the right standards for public policy."
Reel said that Missouri's whistleblower protections are based on case law decided by the courts, not statutory law passed by the legislature. He maintained that the court in the Dunn case had departed from the legal interpretation that had prevailed in previous decades.
"Recent court decisions had been all over the map, not setting out clear standards. We felt like ... we should settle this once and for all."
Reel said critics try to "sensationalize" the issue by citing examples of a nuclear reactor meltdown or the Deepwater Horizon disaster. If either a nuclear company or BP committed illegal acts before meltdowns or explosions, a whistleblower would be protected under SB 188 for blowing the whistle before disaster struck, he said.
Reel said he was unable to comment on Ross's later encounter with VanAmsburg relating to the judgeship.
Ghio, Dunn's lawyer, said the Dunn decision, not the Enterprise bill, was consistent with past law on whistleblowers. "He cannot point to one Missouri public policy case prior to Dunn that held a whistleblower was only protected if the crime had occurred or the violation of a statute, rule or regulation had happened," he said. "Nearly all whistleblower protection statutes use a reasonable or good faith belief standard to afford the whistleblower protected status."
Refusing to Sign off
The Enterprise case predates the famous accounting scandals of the past decade. Here is the sequence of events based on a 2005 opinion by Judge Booker T. Shaw of the Missouri Court of Appeals for the Eastern District:
In 1999, Enterprise was making preparations to go public. This required Dunn, the corporate comptroller, to attest that Enterprise was complying with the generally accepted accounting principles required of all public firms.
At the time, Enterprise was depreciating its cars at the rate of 2 percent per month. That rate, which overstated the depreciation, was permissible for privately held firms like Enterprise, but it did not meet generally accepted accounting principles required of public companies.
John O'Connell, Enterprise's chief financial officer and Dunn's boss, told Dunn that Jack Taylor, the company's founder, and his son, Andy, the president and CEO, were not going to change the depreciation policy. Dunn maintained that because of the depreciation policy he could not give the needed compliance statement. Shortly thereafter, Dunn was put on probation. He was fired in January 2001 and then sued for being discharged for his whistleblowing activities.
Company executives testified at the trial that Dunn had been a domineering boss, unpopular with his subordinates and had been fired for that reason. His actions relating to the accounting policies had nothing to do with it, they maintained.
A key issue was whether the accounting issue came up at a late 2000 board meeting at which the public offering was discussed. The meeting occurred just before Dunn was fired. Enterprise officials testified that the issue did not come up and minutes of the meeting appeared to back up that view.
But lawyers for Dunn found an outside director who contradicted this testimony. He was Byron Trott of the Chicago office of Goldman Sachs.
Ghio recalled it this way in a recent email: "They all (Enterprise executives) said the accounting issues weren't discussed but Trott had notes from the meeting - that he attended by conference call because he was snowed in in Chicago and could not travel to STL for the meeting -- where the three accounting issues that Tom had been fighting for a year were discussed. He even produced the power point slides for the board to prove it."
VanAmburg gave a tough closing argument in which she said that Enterprise officials, including Ross, had not told the truth about the board meeting. A jury returned a $4 million verdict, later set aside by the trial court for technical legal reasons.
The case was appealed to the state court of appeals, which ruled against Enterprise's theory of the law. Enterprise maintained that, because Dunn never had violated the law and the company never had gone public, he could not claim to have been discharged for whistleblowing. An illegal act must occur if a discharged employee is to claim whistleblower status, it maintained.
Judge Shaw disagreed, concluding that an employee fired for objecting in advance to practices he reasonably believes violate a public policy - such as security law - should be protected from firing.
The case would have gone back for a new trial, but the company settled. The terms of the settlement are confidential and Dunn agreed to confidentiality as part of the deal.
VanAmburg became a circuit judge not long after the trial. In 2009, she applied for an appellate judgeship. As part of that process, she had an interview with Enterprise's Ross, who had been appointed to the Appellate Judicial Commission by former Gov. Matt Blunt. Ross was a citizen member of the commission, which is part of the nonpartisan court plan.
After that Sept. 15, 2009, meeting with Ross, VanAmburg complained to associates that Ross had cited the Enterprise case as a reason he would not support her for the judgeship. She told legal associates that Ross complained that her closing argument was unethical and unfounded and occurred when Ross's wife was sitting next to him in the courtroom. Ross vowed that even though he was only one vote on the judicial commission he would fight like hell to block her, VanAmburg told her friends.
Van Amburg declined comment. She did say, however, that "I can say I intend to apply again and I am considering asking him to recuse himself."
The 'Enterprise Bill'
Year after year since the 2005 settlement, a bill supported by Enterprise has been introduced in the legislature to enact Enterprise's view of the law.
Sharon Jones, director of government relations for the Missouri Association of Trial Attorneys, said in an interview that her organization was asked by one sponsor, Sen. Rob Mayer, R-Dexter, to negotiate with Enterprise to try to come up with a compromise bill.
"It has been a one-company bill since 2005," said Jones.
Former State Sen. Joan Bray, D-University City, agreed. ' "It was called the 'Enterprise bill,'" she said. "The motivation was very well known."
Mayer did not respond to a request for comment.
In addition to having to wait until the illegal act is committed, the bill would weaken whistleblower protections in three other ways:
- The whistleblower would have to prove that the act he complained about was actually illegal, not just that he believed in good faith that it was illegal.
- The whistleblower would have to prove that blowing the whistle was "a motivating factor" in the firing instead of just "a contributing factor." To show it is a motivating factor the whistleblower has to show that it was roughly 50 percent responsible, rather than 33 percent.
- Damages to a successful whistleblower are capped at from $50,000 to $300,000, whereas current law contains no caps.
Reel, the Enterprise vice president, said it was unfair to say that only Enterprise supported SB 188. He noted that the bill, and its House version, HB 205, have the support of 50 business and governmental organizations.
The whistleblower provisions are part of a much broader piece of legislation that makes it harder for victims of discrimination to win suits under the state human rights law.
The Dunn decision is not the only state court discrimination case that would be overturned by the legislation, Reel noted. The bill names several age and disability decisions it would also overturn.
The entire bill has the support of the Missouri Chamber of Commerce, which includes it as one of its "Fix the Six" bills to promote more jobs in the state. A spokesperson for Gov. Jay Nixon said the governor does not comment on bills during the legislative process.
Companies supporting SB 188 and HB 205
American Dehydrated Foods Inc.
Associated Industries of Missouri
Bunge North America
GoJet Airlines LLC
Greater Kansas City Chamber of Commerce
Missouri Cable Telecommunications Association
Missouri Chamber of Commerce & Industry
Missouri Municipal League
Missouri Restaurant Association
Missouri Retailers Association
Missouri School Boards Association
National Federal of Independent Business
Schnuck Markets Inc.
Shop 'N Save Warehouse Foods INC.
Smurfit-Stone Container Corp.
Springfield Area Chamber of Commerce
St. Louis Regional Chamber & Growth Association
Systems Service Enterprises Inc.
Trans State Airlines LLC
Trans States Holdings Inc.
William H. Freivogel is director of the School of Journalism at Southern Illinois University Carbondale and a professor at the Paul Simon Public Policy Institute.