A former in-house tax lawyer for investment giant Vanguard Group should have his whistleblower retaliation complaint heard, the U.S. Third Circuit Court of Appeals has ruled.
The appeals court ruled last week that the U.S. District Court in Philadelphia should reconsider David Danon’s lawsuit against his former employer alleging the mutual-fund behemoth fired him for voicing his objections over federal and state income tax underpayments. Mr. Danon says Vanguard’s alleged underpayments amounted to billions of dollars.
Mr. Danon claims Vanguard violated the whistleblower protections under the Dodd-Frank Act of 2010 when it wrongfully terminated him.
Writing for the three-judge panel, Judge Jane R. Roth says Mr. Danon “informed various senior employees of Vanguard” that the company “was violating certain tax and corporate laws” starting in 2011, until his termination two years later. After he was fired, Mr. Danon sued Vanguard in New York State Court and tipped off the Internal Revenue Service and the Securities and Exchange Commission to Vanguard’s alleged tax fraud.
The New York state court decided that Mr. Danon’s position as an in-house lawyer meant he could not seek compensation from Vanguard under the state’s whistleblower law. Mr. Danon then filed his wrongful-termination complaint in a U.S. court in Philadelphia.
The federal judge in Philadelphia also tossed Mr. Danon’s whistleblower complaint, finding that he failed to prove his termination was retaliatory.
The higher court disagreed with that decision and with the New York court’s ruling, saying there were still questions in the case that formed an appropriate subject for further review.
Mr. Danon claims in his lawsuit that Vanguard owes the U.S. $35 billion in unpaid taxes. Two years ago, Vanguard agreed to pay Texas millions of dollars in back taxes after Mr. Danon brought his allegations to the attention of Texas tax officials. He was awarded $117,000 of the back taxes.