PwC LLP was justified in firing a former auditor and didn’t retaliate against him for submitting a whistleblower complaint to the SEC alleging the firm was too cozy with its client, a San Francisco federal judge ruled Monday.
Magistrate Judge Alex Tse of the U.S. District Court for the Northern District of California in an opinion said Mauro Botta, a former senior manager at PwC, didn’t qualify for whistleblower protections under the 2002 Sarbanes-Oxley Act after he raised questions about his former firm’s independence from its clients to the Securities and Exchange Commission. Tse found that Botta didn’t prove that PwC had violated any laws, a burden necessary to trigger the protection from retaliation. Sarbanes-Oxley bars auditors from providing certain services to audit clients and related SEC rules require auditors to be independent in both fact and appearance.
Botta sued his former employer in 2018,claiming he was fired in retaliation for sending a whistleblower letter to the SEC. Botta said he was removed from assignments at the request of clients after he questioned internal controls designed to ensure reliable financial reporting.
The decision upholds the firm’s reputation as an independent auditor that thoroughly checks the accuracy of the books and reporting of its public company clients.
“Botta, in the end, simply didn’t put forward enough evidence to prove that his SEC complaint contributed to PwC’s decision to fire him. The temporal proximity between his complaint and his termination generated suspicion, but at trial that suspicion wasn’t confirmed,” Tse wrote.
PwC argued at bench trial, which wrapped in April, that it fired Botta for cause after he admitted to doing work that should have been handled by the client. The firm’s lawyers said in court that the firm fully vetted Botta’s auditing concerns and that he signed off on the final assessments each time. The firm also said it had removed Botta from two audit assignments because of performance issues and his communication style.
The audited companies complained about Botta’s “‘bedside manner,’ reluctance to consider ‘other’s points of view,’ and ‘his lack of ‘sensitivity,’ ‘reasonableness,’ and ‘empathy’,” the judge wrote. An accountant at one of the companies said Botta made her “feel like a criminal,” he wrote.
Evidence supported that Botta did flag potential errors during the audits but Botta “didn’t prove that his doing so contributed to PwC’s decision to remove him from the engagements. His supervisors credibly testified that they generally appreciated when he raised accounting concerns,” the judge ruled.
The audit firm further argued that Botta’s legal team provided no evidence that the firm violated the law—a burden needed to trigger the Sarbanes-Oxley whistleblower protections—claiming that identifying control deficiencies wasn’t enough.
Botta’s lawyers argued in court that PwC “concocted” an excuse to fire him after the SEC began investigating his claims. They also argued in subsequent filings that whistleblowers don’t have to identify specific laws that they believed were violated in order to be covered by the protections under Sarbanes-Oxley.
Botta sought lost wages and bonuses he would have earned, plus punitive damages and reinstatement to his former post as a senior audit manager.
PwC said in a statement that the trial evidence showed Botta was “a disgruntled employee who—despite claiming to be a whistleblower—committed serious misconduct requiring his termination. Far from retaliation, PwC demonstrated the utmost integrity throughout this matter. That integrity is at the heart of who we are and how we operate.”
An attorney for Botta couldn’t immediately be reached for comment.
The case is Botta v. PricewaterhouseCoopers LLP, N.D. Cal., No. 3:18-cv-02615, 6/4/21.