Thomas v. Tyco Int'l Mgmt. Co.

• Decision Date: 19 September 2019
• Docket Number: CASE NO. 16-CV-80501-MARRA
• Citation: 416 F.Supp.3d 1340
• Parties: Carolina THOMAS, Plaintiff, v. TYCO INTERNATIONAL MANAGEMENT COMPANY, LLC, Defendant.
• Court: U.S. District Court — Southern District of Florida

416 F.Supp.3d 1340

Carolina THOMAS, Plaintiff,

v.TYCO INTERNATIONAL MANAGEMENT COMPANY, LLC, Defendant.

CASE NO. 16-CV-80501-MARRA

United States District Court, S.D. Florida.

Signed September 19, 2019

Entered September 20, 2019

Raymond C. Fay, Pro Hac Vice, Fay Law Group PLLC, Washington, DC, Cathleen Ann Scott, Scott Wagner & Associates, P.A., Jupiter, FL, for Plaintiff.

Dee Anna Drennan Hays, Kevin Douglas Zwetsch, Ina Franziska Young, Ogletree, Deakins, Nash, Smoak, and Stewart, P.C., Tampa, FL, for Defendant.

ORDER AND OPINION GRANTING MOTION FOR SUMMARY JUDGMENT

KENNETH A. MARRA, United States District Judge

THIS CAUSE is before the Court upon Defendant's Motion for Final Summary Judgment [DE 64]. The Court has carefully considered the entire Court file and is otherwise fully advised in the premises.

Carolina Thomas ("Thomas") has filed a three-count complaint alleging retaliation and termination in violation of the whistle blower protections of the Sarbanes-Oxley Act of 2002 ("SOX"), the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act"), and Florida's Whistleblower Act ("FWA") when she reported what she claims were violations of securities laws. She asserts she became a victim of retaliation when, among other things, she reported that Defendant Tyco International Management Company, LLC ("Tyco") violated the control provisions of SOX due to workflow deficiencies in the accounting "tie-out" process, and when she raised concerns regarding a co-worker's credentials. Tyco denies there were any workflow deficiencies, asserts that Thomas's claims related to her co-worker's credentials were patently untrue,¹ and contends Thomas was properly terminated for violating Tyco's Guide to Ethical Conduct. Thus, Tyco moves for summary judgment on all counts.

Undisputed Material Facts

Some of the key underlying facts of this case require familiarity with the intricacies of complex financial reporting processes and responsibilities of a large international corporation with over $10 billion in annual revenues. This challenge is exacerbated by the parties relying on accounting terms to make their arguments throughout their briefs without defining their meaning. Therefore, the Court conducted its own research to learn the meaning of these terms. The definitions and source are footnoted. See infra footnote 8, 9. This challenge is further compounded by the parties' failure to explain the various reporting processes key to this case in terms that a person unfamiliar with accounting and financial management processes would understand.²

Financial Reporting

1. On or about July 1, 2007, Tyco hired Thomas as Manager, Financial Reporting for Tyco's North America businesses. She had three direct report employees on her team. Thomas's supervisor was Terri Lippman ("Lippman"), and Lippman's supervisor, was Janine Albano ("Albano"). DE 65, Ex. A, DEF-000384.

2. Significant to this case, there was a monthly financial closing process, and a separate financial tie-out process.

3. Albano explains that it "is the Financial Reporting Manager's responsibility to understand and oversee the [monthly reporting] process and ultimately sign-off to provide assurance to the Senior Manager, to me and the Company. The formal sign-off comes with the completion of the GL³ to HFM reconciliation.⁴ The signed reconciliation is used to evidence the review and approval to auditors, both internal and external." DE 69-11.

4. Thomas adds that she was also responsible for the integrity of data in the monthly tie-out, SOX compliance, and was a key contact for external auditors providing assurance that Tyco's financial statements were free of any material errors or weaknesses. DE 69-10 ¶ 3.

5. Monthly financial closing involved loading financial data from the general ledgers of North America into the Hyperion Financial Management system and reviewing the data. Thomas Decl. ¶ 4. The financial closing process involved a review of the financial data by many different people⁵ until everyone agreed that the report was representative of the financial results for the period. Albano Depo. at 148 (DE 65-3 at 9-10).

6. For the financial tie-out process, only Thomas's team provided assurance to the auditors regarding the representativeness of the financial results. Thomas Decl. ¶ 7. "The monthly financial closing has different (review) promotion levels in HFM, but not the financial tie-out process. At quarter end when a public corporation typically reports its financial results, the financial tie-out is critical to ensure that the reported financial statements⁶ are indeed the financial data that resides in the company's general ledger. The financial tie-out is included in the external audit performed by Deloitte & Touche[,] Tyco's external auditor." DE 68 ¶ 12, Thomas Decl. ¶¶ 3-4.

7. Around September 2013, the Financial Reporting Team was instructed to start using/testing⁷ SharePoint⁸ to facilitate the approval process of the top side entries⁹ in HFM. DE 65-2. SharePoint was a shared type of net drive, and putting the tie-out itself on the SharePoint was new. Barney Depo. at 86 (DE 69-12 at 25). The development phase of the SharePoint tie-out process was used to support the monthly tie-out. DE 65-2 at 75. No project team or project documentation existed for the tie-out workflow project. DE 65-2 at 76, DEF-000402.

8. "The new system not only changed the review and approval of the tie-out, but also changed the actual process. Albano replaced HFM and its built-in account mappings and SOX compliance with unsecured job-rolled excel and Monarch applications to perform account mappings and data loading. This part of the process was unreliable and bypassed the built-in security and data integrity of HRM, which is the Financial Reporting application of Tyco." DE 69-10, ¶ 6.

9. John Morales ("Morales"), Senior Reporting Analyst, Financial Reporting, had Site Collection Administrator rights, which enabled him to administer the SharePoint site and allowed him to change the current settings, including the audit trail. DE 65-2 at 73-74.

10. On January 23-24, 2014, and on February 7 and 10, 2014, Thomas reported concerns about a proper segregation of duties in the financial reporting team and pointed out that the same person, Morales, should not be able to submit the tie-out and maintain the approval system. In other words, Senior Analyst Morales had administrative access to the computer and the concomitant ability to manipulate or delete the excel file that reflected tie-out approvals. Thomas believed that this could potentially lead to a situation where "[i]f for some reason a late entry goes in the GL [General Ledger], the excel file could be manipulated to force the tie-out and nobody would ever notice it, perhaps the auditors at a later point." DE 65, Ex. A, DEF000067–68 (pp. 6-7 of 99). Also, in Thomas's opinion, someone above the Director of Financial Reporting, Albano, should be approving the tie-outs. On February 7, 2014, she reported that a workflow was deleted and replaced with a new workflow. Thomas believed that these were systemic failures that violated § 404 of the Sarbanes Oxley Act.¹⁰ DE 65, Ex. A, DEF000073–74 (pp. 8-9 of 99) (e-mail dated 2/7/14); DEF0000083–84 (pp. 10-11 of 99) (e-mail dated 1/24/14); DEF000067-68 (pp. 6-7 of 99) (e-mail dated 2/10/14); Thomas Depo. (July 12, 2017) (DE 69-5, Ex. D) at 291:20–291:23.

11. After an internal investigation into Thomas's complaints, Tyco's own forensic investigators' noted the lack of security settings and backup, and concluded that Thomas's supervisor, Lippman, and Lippman's supervisor, Albano, failed to oversee the workflow tie-out process, lacked understanding of the risks involved in operating finance applications in a development environment as was being done,¹¹ and was not aware of the potential conflicting duties of John Morales, Senior Reporting Analyst Financial Reporting, and SharePoint's Site Collection Administrator. DE 65-2 at 73, 76 of 99 (DEF-000402) (emphasis added).

12. According to Thomas, the tie-out process is the main step of the monthly financial closing. Thomas states she tested the system and noted that the data (e.g. , excel spread sheets) could be changed as the files were not password protected. Thomas maintains that a failed tie-out audit typically translates into material weaknesses in the corporation's financial statements. Thomas Decl. ¶¶ 3, 4.

13. Thomas does not dispute that auditors check the financial reports after her team performs the tie-outs. DE 65, Ex. A, DEF000067-68.

14. Tyco mitigated the risks related to the workflow tie-out approval process for the closing of March 2014. It was agreed that the managers would keep a signed hardcopy of the approval forms and the tie-out file would be maintained on a shared drive. DE 65, Ex. A, DEF000399-403.

15. The new workflow/tie-out system was canceled in part because of Thomas's complaints regarding her perceived impairment to Tyco's financial controls. DE 69-5 at 54-55, 68, 74, 76, 92.

16. Thomas states the whole reason for her complaints regarding the new workflow/tie-out system was to point out its failure of internal controls, which in turn could affect: (1) audit trail; (2) segregation of duties requirements; (3) integrity of the approval process; and (4) cause a failure on the security of the tie-out system. Thomas July 12, 2017 Depo. (DE 69-5, Ex. E) at 54:12-21, 55:1-5, 68:17-24, 74:1-75:9, 76:11-14, 92:20-24. Further, while the data collected in Boca Raton was not directly submitted to the Securities and Exchange Commission ("SEC"), it was directly transmitted to the Corporate offices in Princeton, New Jersey, where Tyco prepared the consolidated reports for all divisions worldwide. Id. at 298:5-9, 322:20-25. The Corporate office prepared the consolidated reports, in part, with data directly provided by the Boca Raton office. Id. at 323:5-324:4, 327:11-329:2, 329:14-20, 330:7-12; Barney Depo. (DE 69-12, Ex. L) at...