May 8, 2012
New York Declines To Extend Wieder Exception
The New York Court of Appeals has declined to extend the Wieder exception to the doctrine of at-will employment and affirmed the grant of summary judgment to a defendant hedge fund company and its president, who had fired its chief compliance officer.
The plaintiff had claimed he was fired for reporting misconduct.
The Wieder exception involved an attorney who had been fired from his law firm for reporting unethical conduct.
Chief Judge Lippman dissented:
In the wake of the devastation caused by fraudulent financial schemes - such as the Madoff ponzi operation, infamous for many reasons including the length of time during which it continued undetected - the courts can ill afford to turn a blind eye to the potential for abuses that may be committed by unscupulous financial services companies in violation of the public trust and law. In the absence of conscientious efforts by those insiders entrusted to report such abuses of investors, such behavior can run rampant until a third part outside the company discovers it and takes action. The message that will be taken from the majority's decision is self-evident: if compliance officers (and other similarly situated) wish to keep their jobs, they should keep their heads down and ignore good-faith suspicions or evidence they may have that their employers have engaged in illegal and unethical behavior, even where such violations could cause or have caused staggering losses to their employer's clients. The majority's conclusion that an investment advisor like Peconic has every right to fire its compliance officer, simply for doing his job, flies into the face of what we have learned from the Madoff debacle, runs counter to the letter and spirit of the Court's precedent, and facilitates the perpetration of frauds on the public.
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