Consumer Fraud

Playboy whistleblower receives record award under anti-fraud accounting law

osha whistle Playboy whistleblower receives record award under anti fraud accounting lawA federal jury in California has ordered Playboy Enterprises to pay a former accounting executive at least $6 million for wrongful termination in what is believed to be the largest compensatory damages verdict given under the 2002 Sarbanes-Oxley law.

Catherine Zulfer, a longtime employee of the company, alleged she was fired after she reportedly refused to accrue $1 million in bonuses for top executives without the board’s approval and for complaining to management about “actual and suspected frauds and improprieties” in the company’s bookkeeping.

Ms. Pachler claimed in her lawsuit that Playboy’s Chief Financial Officer Christof Pachler pressured her to accrue the bonuses for executives in a year that the company experienced “significant losses.” Her complaint explains that much of the bonus money would have gone to Mr. Pachler.

After she reported the alleged fraud to management, her lawsuit alleges, Mr. Pachler excluded her from meetings and set her up to fail in her job by withholding key information she needed to perform her job effectively and forcing her to do the work of 15 corporate accounting positions he had eliminated.

The jury also found that Playboy was guilty of discriminating against Ms. Zulfer because of her age, which was 56 at the time she was fired. Mr. Pachler initiated a money-saving scheme that involved terminating employees who had been with the company longer than 10 years. Ms. Zulfer had been with Playboy Enterprises for 30 years.

The $6 million verdict is likely the largest award ever given under the Sarbanes-Oxley Act, an anti- fraud accounting law with whistleblower provisions that protect employees like Ms. Zulfer from being retaliated against for calling out fraudulent activity and other wrongdoing.

The $6 million in compensatory damages awarded to Ms. Zulfer does not include punitive damages, which the jury will decide at a later date.