The cards are usually stacked against former Big 4 employees who take one of the firms to court, whether it’s over harassment, discrimination, retaliation, or unfair termination, because of the firms’ army of lawyers and their no-holds-barred approach to winning. Ex-PwC auditor Mauro Botta knew he faced an uphill battle trying to convince a judge that he was fired in 2017 in retaliation for standing up to and exposing auditor misconduct at PwC and for reporting that conduct to the SEC.
“No one has any incentive to speak up especially now that they’ve seen how the firm retaliates against the one who did,” Botta told us during an interview in July 2019. “I personally am seeking justice to what is to me a clear retaliation and violation of existing laws and ethical standards. My reputation has taken a hit as far as being able to find a job as an auditor, which is why I hope this matter will clear my name and justice will be done.”
But nearly five months after the nine-day virtual trial concluded, Magistrate Judge Alex Tse of the U.S. District Court for the Northern District of California ruled in favor of PwC on Monday, saying the firm had not violated whistleblower protections under the Sarbanes-Oxley Act.
Bloomberg Law reported:
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.
Botta declined to comment after the judge’s ruling yesterday afternoon. It is not known yet whether he will appeal the decision.
As Law360 reported on Feb. 23, Botta told Tse he had reason to believe PwC client Cavium, a Silicon Valley-based technology company that would go on to be acquired by Marvell Technology Group for $6 billion, failed to disclose in a quarterly SEC filing that it was the victim of a phishing scam that duped it into wiring $400,000 to an overseas bank account. Botta believed the company also didn’t properly disclose its relationship to startup Xpliant.
When he told a PwC partner about his concerns, Botta recounted being told that Cavium “was just a little sloppy, that they were good people, and that they were not different from many other companies in [Silicon] valley.”
Botta testified that PwC stopped having him audit Cavium at the request of Cavium’s chief financial officer.
“I felt that I was being punished” for following firm protocol, Botta told the judge.
Botta said it “doesn’t seem to be very independent” for a client to decide who will be auditing it.
Botta also testified that he became “deeply worried” about financial information in previous audits of another technology company, Harmonic, but was told by a PwC partner not to make waves because one of Harmonic’s board members also served on the board of Wells Fargo Bank, a potential client, according to Law360.
Botta told us in July 2019: “PwC protects management of companies by fixing their errors without reporting them as such, continuing to get appointed and paid in exchange, thereby damaging shareholders. [PwC] is justifying their behavior by stating everyone else is doing it, so PwC must do it to remain competitive. It seems then that, according to PwC, this issue is systemic, and my hope would be that the system would be changed.”
But PwC’s lawyers told the judge that the firm fully vetted Botta’s auditing concerns and that he signed off on the final assessments each time, Bloomberg reported on Monday. PwC also said it had removed Botta from two audit assignments because of performance issues and his communication style, and painted him as a “disgruntled employee.”
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.
During the trial, PwC’s attorney, John Charles Hueston of Hueston Hennigan LLP, told the judge that Botta pretended to be a crusader who is “trying to do everything to put PwC on some sort of corrective pathway to reform the audit industry and that somehow all that derailed his chances to make partner” at PwC, Law360 reported in February. Hueston made it known that it was Botta’s unprofessional behavior that prevented him from becoming a PwC partner.
Botta was seeking reinstatement at PwC, a place he told us he “loved” working at, as well as $5 million in damages for back pay, lost earnings, and emotional distress.