OLYMPIA – A former executive of Rockwood Clinic who said he resigned rather than falsify a financial statement can sue his former bosses for wrongful termination in state court, the Washington Supreme Court said Thursday.
Gregg Becker, the clinic’s former chief financial officer, isn’t barred from a state lawsuit by the federal laws that govern publicly traded companies like Community Health Systems Inc., which owns the clinic, the court said in a 6-3 decision.
Becker was in that position in 2011 when he contends he was ordered to alter a financial statement to show a smaller projected loss on the clinic’s operations. The statement was to be included in CHS’s filing with the Securities and Exchange Commission, to be released to investors.
The statement he prepared projected a $12 million operating loss for Rockwood in the upcoming year. When Tennessee-based CHS had acquired Rockwood in 2009 it had told creditors the operating loss only would be $4 million. Becker says his bosses ordered him to change his report to reflect the smaller number, but he refused, saying that would violate federal law and mislead investors.
The company denied that, saying it conducts its operations “with an absolute commitment to business practices.”
Becker said he was given an unacceptable rating in an unscheduled performance review and told part of his improvement plan involved preparing a report that showed the loss as $4 million. He wrote to his bosses saying he was concerned the company was trying to misrepresent the budget and was compelled to resign if they didn’t address those concerns. The next day, the company accepted his resignation. He sued for wrongful discharge.
CHS tried to have the case dismissed, arguing Becker should have filed his claim through federal channels set up under the Sarbanes-Oxley Act to protect whistleblowers. The Spokane Superior Court disagreed; so did the Appeals Court when the company appealed. On Thursday, the Supreme Court sided with the two lower courts, saying the federal process doesn’t prevent Becker from suing Community Health Services, the arm of the parent company that operates Rockwood, in state court.
If Becker’s complaint is true, the high court said, the company was forcing him “to choose between the consequences of disobeying his employer and the consequences of disobeying criminal law,” the court said. A company that fires someone to get around the law “exposes itself to potential liability for wrongful termination.”
The lawsuit to determine if the claim is true can continue, the Supreme Court said, because the lower courts were right to reject the company’s motion to dismiss.