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Former AIG Attorney Fails to Show Firing Was for Whistleblowing

Sept. 26, 2022, 6:13 PM

AIG fired the former head of its legal operations center because he wouldn’t cooperate with the center’s reorganization, not because of his alleged whistleblowing activities, a federal trial court in New York said.

Aaron Katzel sued AIG under the Sarbanes Oxley Act and the Dodd-Frank Act, claiming he was fired in retaliation for blowing the whistle on the company’s violations of federal fraud and securities law.

But Katzel failed to establish a claim for whistleblower retaliation because he didn’t show he was engaged in protected activity or that AIG had knowledge of such activity, the Sept. 23 opinion by Judge Alvin K. Hellerstein of the US District Court for the Southern District of New York said. Nor did Katzel show he was terminated with retaliatory intent, the court said.

Katzel suggested that AIG grow the center and start offering its services managing legal expenses to outside customers, and starting in 2015, the company evaluated the proposal. But the evaluation process, which included input by outside contractors, discovered that the center’s in-office clients weren’t satisfied with its services.

Katzel complained to his superiors that the evaluation process wasn’t properly conducted and that one of the outside contractors had a conflict of interest. An investigation concluded that Katzel’s concerns lacked merit.

When the overall evaluation of the center was complete, AIG rejected Katzel’s proposal and decided that the center needed to be streamlined. Katzel was terminated in May 2017 after refusing to work with the group overseeing that process and he sued AIG in 2020.

Katzel’s whistleblower claims failed because he didn’t show that he was involved in protected activity, i.e., that he subjectively believed that AIG violated federal law, the court said. In 2016, on the company’s code of conduct forms, Katzel certified that he had no knowledge that AIG committed any type of fraud and in his deposition he admitted that he didn’t know of any policy or law that was violated, it said.

Even if Katzel showed that he was engaged in protected activity, his claim would fail because he didn’t show that AIG knew he was involved in protected activity, the court said. His supervisors testified that when he complained about the evaluation process, they didn’t think he was expressing any belief that AIG employees were committing fraud or violating SEC rules or regulations, it said.

Because none of Katzel’s supervisors thought he was engaging in protected activity, he couldn’t have been terminated in retaliation for engaging in that activity, the court also said, granting AIG’s motion for summary judgment.

The Law Offices of Neal Brickman PC represented Katzel. Davis Polk & Wardwell LLP represented AIG.

The case is Katzel v. Am. Int’l Grp., 2022 BL 337975, S.D.N.Y., No. 20 Civ. 7220 (AKH), 9/23/22.

To contact the reporter on this story: Bernie Pazanowski in Washington at bpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Maya Earls at mearls@bloomberglaw.com