Lehman Bros. Whistleblower’s Suit Sinks in First Circuit

(CN) - A Lehman Brothers employee who claims she was fired for whistleblower violations after she reported securities violations missed her filing deadline and couldn’t bring her lawsuit in federal court, a First Circuit panel held.

Barbara Newman worked in communications at Lehman Brothers, where she was tasked with “raising the profile” of the investment bank and its then-subsidiary Neuberger Berman.

After observing what she believed to be violations of securities laws, she reported her co-workers on the company’s “alert line,” and was later fired.

At the same time she made the reports, she requested and obtained short-term disability benefits, and was fired while receiving them, according to the ruling authored by Judge Juan R. Torruella.

Newman brought her lawsuit in federal court in Massachusetts, and her various claims against various entities were pared down, dismissed, and moved to other courts.

Her remaining claim involved the whistleblower protections under the Sarbanes-Oxley Act (SOX), which the district court dismissed.

The dispute involved the prerequisites for Newman to bring the SOX claim for workplace retaliation in federal court.

To bring the action, Newman was first required to file a complaint with the Occupational Safety and Health Administration (OSHA) within 90 days of the retaliation. The district court found that she was fired 91 days before she filed that complaint.

Writing for a First Circuit Court of Appeals panel, Torruella agreed with the district court’s conclusion.

“The lack of precision about Newman’s date of termination is no minor factual slip up,” Torruella wrote in the 17-page opinion. “Rather, Newman’s counsel removed from the operative complaint any mention of an exact date of termination and substituted it with a temporally imprecise contention that she was terminated ‘soon after’ filing her complaint to OSHA about her termination.”

Newman sought to bring new evidence on appeal to contradict the conclusion about the date she was fired, including evidence that she was considered a Lehman employee until 2009.

But Torruella concluded that she had that information months before Lehman and the other defendants moved to dismiss her complaint, and it did not qualify as “newly discovered evidence.”

Torruella’s opinion was joined by Circuit Judges Sandra Lynch and William Kayatta.

Just months before Lehman Brothers filed the largest bankruptcy filing in history, Matthew Lee, a senior vice president who oversaw the bank’s global balance sheet, blew the whistle on the bank in a letter to executives.

In the letter, Lee addressed his concerns point by point about the “fundamental flaws” in unsubstantiated balances, and how it was potentially reporting assets in misleading ways.

“The Firm has tens of billions of dollar of inventory that it probably cannot buy or sell in any recognized market, at the currently recorded current market values,” Lee wrote in the letter.

He was fired weeks later.

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