The U.S. Department of Labor’s Occupational Safety and Health Administration, aka OSHA, has ordered Clean Diesel Technologies Inc. [Nasdaq: CDTI] to pay $1.9 million to its former chief financial officer who was fired for reporting conduct the former CFO believed was detrimental to the company’s shareholders. OSHA’s investigation found that the company violated the whistleblower provisions of the Sarbanes-Oxley Act when it wrongfully terminated the former CFO for warning the board of directors about ethical and financial concerns raised by a proposed merger.
The OSHA investigator’s findings are “preliminary and not final, and CDTi intends to file objections seeking further review of the matter before an administrative law judge,” CDTi said. “There has been no formal adjudication of the matter and no formal discovery to date. The Company believes the allegations in the complaint are without merit and intends to vigorously defend against the matter through the administrative law process and legal proceedings as necessary.”
In August CDTi, a maker of catalytic converters, announced Q2 revenue of $12.6 million, down -24.9% year-over-year. This resulted in a net loss of $0.19 per share, versus a net loss of $0.31 for the prior year. CDTi is now headquartered in Ventura, California and currently has operations in the U.S., Canada, France, Japan and Sweden.
In late March 2010, the former CFO provided information to the company’s board of directors that there was a conflict of interest involving the chair of CDTI’s board of directors. The former CFO believed that a proposed merger was detrimental to the company, critical financial information had been withheld from board members, and the conflict of interest violated internal company controls mandated by the Securities and Exchange Commission as well as the company’s own corporate code of ethics. After being terminated from employment in April 2010, the former CFO filed a whistleblower complaint with OSHA one week later. OSHA’s investigation found merit to the complaint.
As a result, OSHA has ordered CDTI, formerly headquartered in Stamford, Conn., to pay the complainant more than $486,000 in lost wages, bonuses, stock options and severance pay. In addition, the company must also pay the complainant over $1.4 million in compensatory damages for pain and suffering, damage to career and professional reputation and lost 401(k) employer matches and expenses.
The company must also expunge all files and computerized data systems of disciplinary actions related to the complainant’s termination, pay reasonable attorney’s fees and post the order and a notice to workers at all company locations and on its internal website. In addition, OSHA will inform the SEC of its findings so that it can pursue any other appropriate action. CDTI and the complainant each have 30 days from receipt of the findings to file an appeal with the department’s Office of Administrative Law Judges.
