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Former Wachovia controller files whistle-blower suit

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in Leaders & Managers,Management Training

A former commercial real estate finance executive with Charlotte-based Wachovia Capital Markets has sued the company, claiming he was fired for questioning the bank’s risk-management procedures.

Robert Kraus alleged fraud and misrepresentation in his lawsuit, painting himself as a whistle-blower terminated because he alerted senior executives to “systemic problems” in the bank’s investing, lending and reporting practices. Kraus says top management responded in 2006 by offering a three-month severance package if he resigned. He agreed.

A representative of Wells Fargo Securities—which purchased Wachovia in 2008—claims the company “conducted a timely and thorough investigation of Mr. Kraus’ allegations and each of them was found to be completely without merit.”

Wells Fargo has moved to have the case dismissed, claiming that Kraus gave up his right to sue when he signed the severance agreement.

Note: Unlike severance packages associated with large-scale layoffs, cases like this one are not covered by the Older Workers Benefit Protection Act. One key provision of those agreements is that the employee has the right to examine the agreement and confer with an attorney before signing it.

Advice: Consider building such a review period into all severance packages. If the employee agrees to it on the advice of counsel, it will almost certainly be honored in court. The risk is that the attorney will tell the employee not to sign (but, then you won’t have to pay the severance). Because each case is different, always consult your attorney when proposing any severance package.

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