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Whistleblower Awarded $6 Million Verdict in Federal Court

A whistleblower was awarded six million dollars by a Federal Court jury in Los Angeles today as plaintiff Catherine Zulfer won a hard-fought case against Playboy Enterprises.  Zulfer, the former controller for the company and a thirty-year employee, alleged that the company violated the whistleblower-protection provisions of the Sarbanes-Oxley Act of 2002 when it retaliated against her for refusing to participate in improper accounting practices on the part of the company. 

Zulfer testified that Christoph Pachler, Playboy's Chief Financial Officer, instructed her to accrue millions of dollars in discretionary bonuses for corporate executives without first receiving approval from the Board of Directors. During her time at Playboy, the Board had always approved discretionary bonuses before they were accrued or paid according to Zulfer.

Zulfer's complaint alleged that she believed that accruing or paying the bonuses without Board approval would be "dishonest to shareholders and violate Playboy governance and GAAP," and she was concerned that Pachler and the Chief Executive Officer, Scott Flanders, were attempting to embezzle the money.

When Zulfer refused Pachler's requests to accrue the bonuses without Board approval, he harassed, badgered and then plotted to have her terminated.

The jury rejected arguments by Playboy's counsel, Todd Theodora, that the company had done nothing wrong and was merely laid off in a corporate restructuring.  Zulfer's lead trial counsel, David deRubertis, was able to convince the jury that the reasons given for Zulfer's termination were a pre-text and that Pachler and the company engaged in wilful misconduct to destroy the thirty-year career of a good and decent woman.

In the next phase of the trial, the jury will determine an appropriate amount of puntive damages to punish Playboy for its wrongful acts and to deter further acts of corporate misconduct and accounting shenanigans as the whistleblower laws are intended to do.

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